Key Market Drivers
PRIOR WEEK JANUARY 3-7, 2011
Rising EU Crisis Anxiety From:
- Swiss National Bank Refusal To Accept Irish, Then Portuguese, Government Bonds as Collateral
- Spiking PIIGS Sovereign and Bank Borrowing Costs
Germany & France Already Want Portugal Bailout (see here)
- EU Commission Considering Mandatory Haircuts For EU Sovereign Bond Holders
US Data: Jobs, Retail, Foreclosure Ruling:
- Early Indicators Suggest Great Results, Boost Markets, USD
- Friday’s Actual Figure A Mild Disappointment, Has The Opposite Effects
- Poor US Retailer Data weighs on stocks, suggest US consumer still struggling
- Massachusetts Court Ruling Endangering Bank Foreclosures Hits Financial Stocks Friday, Revives Uncertainty About Bank Losses From Defaults
USD Soars, EUR Tanks On Combination Of:
- Overall Good US Economic Data
- Tepid EU Data and Above Mentioned EU Crisis News
COMING WEEK JANUARY 10-14, 2011
Indicators Of EU Anxiety:
- Portuguese Bond Sale Wednesday January 12th
- Spain, Italy Bond Sales Thursday January 13th
- ECB, BOE Rate Decisions-Watch For Signs of Anxiety
The big potential market moving news is likely to come from the above bond sale results and whatever the ECB does to attempt to manage rising anxiety about the PIIGS, Belgium, Hungary, etc.
Portugal has said that a 7% yield on their 10 year bond would be too burdensome at would necessitate a bailout. Yields are now at 7.11%. So unless the coming week’s auction can show lower yields without ECB help, then a bailout is now just a matter of time. That would make the Spanish auction all the more critical, as the EU’s bailout fund of € 750 bln is now mostly committed, leaving nothing for Spain.
Estimated funds needed to for the coming years’ bailouts run at around $3 Trillion.
It’s getting worse for the EU.
The weekly chart below of the EURUSD tells much of the story
WEEKLY EURUSD CHART 01jan09 12 H
Note that on Friday the EURUSD decisively broke through:
- The 5-month support level of 1.300
- Both its 20 and 50 day SMA
- Its 50% Fibonacci retracement level dating back to its multi-year low of 1.1940 of early June 2010. In other words, the pair has lost over half its gains since the height of the Greek bailout crisis before the EU/IMG €750 bln rescue plan hit.
US Earnings Q4 2010 Begins, Marquee Names Include:
- Alcoa (AA) Monday
- Intel (INTC) Thursday
- JPMorgan Chase (JPM) Friday
The volume of market moving names picks up the following week but speculation on these could also fuel volatility, as each of the above is considered an indicator of its sector’s health.
While we believe the EU bond auctions noted above, and anything connected to them, are the biggest potential market movers, there are certainly some scheduled calendar events worth noting. Note that US Q4 earnings season starts this week and will compete for market attention along with with the calendar and EU crisis issues.
Big Themes By Region
Overall, the EU crisis remains the most potent source of market moving data.
- US: Retail sales, CPI, industrial utilization, UoM consumer confidence, initial earnings reports and speculation about those to come
- Asia: China trade balance and consumer confidence reports, Australia retail and jobs reports, in addition to any news on flood damage implications or new China tightening
- EU: ECB, BOE rate statements, PIIGS bond auctions noted above (Monday’s Sentix Investor Confidence may take on unusual importance as a leading indicator of how these turn out)
Highlights By Region In Chronological Order
Here are the key events, priority items in boldface.
Monday – Fed's Lockhart speaks
Tuesday – Dec. Jan. IBD/TIPP Economic Optimism, Nov. Wholesale Inventories, weekly ABC Consumer Confidence
Wednesday – Dec. Import Price Index, weekly DOE U.S. Crude Oil Inventories, Fed's Beige Book,
Thursday – Weekly Jobless Claims, Dec. PPI, Nov. Trade Balance, Bernanke Speaks
Friday – Dec. CPI, Dec. Advance Retail Sales, Dec. Industrial Production & Capacity Utilization, Jan. preliminary U. of Michigan Confidence, Nov. Business Inventories
Monday – French Nov. Industrial & Manufacturing Production, EZ Jan. Sentix Investor Confidence,
Wednesday – German 2010 GDP, EZ Nov. Industrial Production
Thursday – EU's Van Rompuy speaks, Jan. ECB Interest Rate Announcement
Friday – German Dec. final CPI, Dec. EZ CPI, Nov. EZ Trade Balance
Tuesday – BRC December Retail Sales Monitor
Wednesday – BRC Shop Price Index, Nov. Trade Balance
Thursday – Nov. Industrial & Manufacturing Production, Jan. BOE Interest Rate Announcement, Dec. NIESR GDP Estimate
Friday – Dec. PPI
Tuesday – Dec. Official Reserve Assets, Nov. preliminary Leading & Coincident Index CI
Wednesday – Dec. Bank Lending, Nov. Current Account, Dec. Eco Watchers Survey
Thursday – Nov. Machine Orders, Dec. preliminary Machine Tool Orders
Friday – Dec. Domestic CGPI
Monday – Nov. Building Permits, 4Q Business Outlook Future Sales, 4Q BoC Senior Loan Officer Survey, BoC Cote speaks
Tuesday – Dec. Housing Starts
Wednesday – Nov. New Housing Price Index
Thursday – Nov. International Merchandise Trade
Australia And New Zealand
Monday – Nov. NZ Trade Balance, Imports & Exports, AU Dec. AiG Perf. of Construction Index, Aussie Dec. Retail Sales
Tuesday – 4Q NZ NZIER Business Opinion Survey, Nov. NZ Building Permits, Nov. Aussie Trade Balance,
Wednesday – Nov. Aussie Home Loans and Investment lending
Thursday – Dec. NZ Business PMI, Dec. NZ Card Spending, Dec. NZ House Prices, Dec, Aussie Employment Report, Dec. NZ ANZ Commodity Price
Monday – Trade Balance
Thursday – Conference Board China November Leading Economic Index
For a full listing of calendar events, their relative importance, previous and forecasted results, see www.forexfactory.com >> calendar tab.
DISCLOSURE & DISCLAIMER: AUTHOR IS SHORT THE EUR FOR PERSONAL PORTFOLIO. THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER