Given it was Martin Luther King Jr. Day in the US, it was a very quiet session overnight. US markets were closed. In Europe, moves were very small and little different from zero. The Dax, for instance, closed down 0.3 per cent, the CaC was off 0.1 per cent and the FTSE100 rose 0.1 per cent. The key news for European markets was company-specific and wasn’t great. Deutsche Bank decided to release its results one week early and reported a €1billion loss in the fourth quarter, partly driven by loan loss provisions which may be in preparation for the ECB’s asset quality review. That stock dropped over 5 per cent as a result and hit sentiment more broadly.
But that was the key news flow and the absence of any other major data or news flow overnight also wouldn’t have helped. Indeed, the major story over the last 24 hours (came out just after lunch in Australia) was that China didn’t have a hard landing yet again and posted stronger, better-than-expected growth. This is all good news: growth in China remains very strong. While many make something of the fact that China isn’t growing at double digit rates anymore, those people forget that China is about four times the size now. It packs more punch for the globe than it ever did when it was growing at 12 or 14 per cent per annum.
Against that backdrop, there is scope for a positive growth surprise from China in terms of the market’s reaction, though this isn’t the time yet. Even the Australian sharemarket closed weaker yesterday, brushing off the results. No real response from commodity markets either and Brent crude was a touch weaker overnight 0 0.1 per cent to $106.3, while in London, copper and nickel were off smalls. The only sign of the stronger-than-expected result was the spike in the Australian dollar, which rose 44pips or so to 0.8803. Then again, the euro was also up about the same to 1.3566 while yen was little changed at 104.67.
Note that the SPI was flat effectively (down 0.1 per cent) while on the rates side, 3s and 10s were off 3 and 1.5 ticks respectively to 97.11 and 95.960.
So then moving on to our session today – and in terms of the data – there really isn’t very much. We’ll see New Zealand consumer prices at 0845 AEDT, which are worth watching as this series can have a close relationship with Australian prices. Other than that we see the German ZEW survey, which is definitely worth keeping an eye on, while in the UK, the Confederation of British industry puts out its survey of business optimism.
Adam Carr is a leading market economist. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.
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