Morning Report: Comments, Positions, News, & Charts
14 July 2014/7:15 a.m. ET
As calm returns to Eurozone periphery bond markets this morning, the euro remains supported despite the relative deteriorating growth backdrop. I’ve talked before about the idea that money remains trapped in the Eurozone as European banking de-levers providing perverse support for the currency. This morning Japanese investors may be making that bet:
TOKYO, July 14 (Reuters) - Japanese investors have been buying most of France's government debt recently in a record surge spurred by expectations that Europe faces the kind of deflation and growth that Japan suffered for decades.
I am still working on the assumption things are different in the Eurozone than they were in Japan, but it is a scenario worth keeping in mind.
Just when everyone was getting excited about gold’s “safe haven” role it gets hit this morning (down $18 now). Below is a chart displaying the 21-day correlation between gold and the US dollar index, now at -76.2%--that is tight and says as gold rallies the dollar index falls and vice versa…
Euro higher this morning, with little change in CAD and Aussie…overall the session is a bit quiet this morning…US stocks looking to pop higher on the open…oil continues to sag…US bonds flat…
Economic Calendar (Dukascopy) & Key Events & News:
BEIJING, July 14 (Reuters) - China's fiscal expenditure surged 26.1 percent in June from a year earlier to 1.65 trillion yuan ($265.84 billion), reflecting government efforts to speed up spending to shore up the economy.
BRUSSELS, July 14 (Reuters) - Euro zone industrial production dropped sharply in May with only the energy sector thriving, another sign that the bloc's economic recovery remains fragile.
Output in the 18 countries sharing the euro dropped 1.1 percent on the month in May, following a 0.7 percent rise in April, data on Monday from the European Union's statistics office Eurostat showed. That was still less than the 1.2 percent monthly fall forecast in a Reuters poll.
Market Briefs (IFR Markets)
• Dollar awaits Yellen's testimony, Draghi may limit euro's gains - Reuters
• Yellen testimony key to market direction this week? – IFR
• World's economy 'is more fragile than before great crash of 2007' - Daily Telegraph Link here
• Stress tests to cause summer of market chaos - Sunday Times
• Yuan falls on corporate dollar demand, seen capped at 6.2/dlr for now - Reuters
• Japan May Industrial output 0.7% vs 0.5% prev
• Japan May Capacity util index change -0.7% m/m vs -2.2%
• BHP likely to smash its iron ore export targets - Sydney Morning Herald
• Australia's David Jones shareholders back $2bn Woolworths takeover - Reuters
• New Zealand June REINZ residential house price index -0.3% m/m, +6.2% y/y
• New Zealand June PSI up to 54.7, May revised 54.1, four of five sub-indices up
• Euro zone May Industrial production -1.1% m/m vs -1.2% exp, 0.8% prev
• Euro zone May Industrial production 0.5% y/y vs 0.5% exp, 1.4% prev
• German Chancellor Merkel considers resigning before end of term – Der Spiegel
• Swiss chocolate maker to buy Russell Stover - Reuters
• EFSG sells part of stake in Banco Espirito Santo to repay loan - Reuters
• Political novice wins in Slovenia, hints at revisiting economic reform plan - Reuters
• Shire says ready to recommend AbbVie's £31bn offer - Reuters
• Junior traders offered immunity in forex probe - FT
Looking Ahead - Economic Data (GMT)
• No significant data releases scheduled
Looking Ahead - Events, Other Releases (GMT)
• 15:00 Fed Outright Treasury Coupon Purchases 02/15/2036 - 05/15/2044, $1.00 - $1.25 bln
• 15:45 Fed Trade operation 30-year Fannie Mae / Freddie Mac, max $1.600 bln
• 18:30 Fed Trade operation 30-year Ginnie Mae, max $700 mln
Chart View Matrix
Chart of the Day
Eurozone pulling up the rear on the “official” CPI race…
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