Risk assets soured overnight despite fresh hopes for another round of Fed easing and slightly stronger than expected US and Eurozone data. The S&P500 fell 0.7% with the earlier weak HSBC China PMI cited as a more important catalyst as well as comments from an EC spokesperson that no negotiations were taking place with Spain for a sovereign aid program. Comments from St. Louis Fed President Bullard (hawkish, non-voter) that yesterday's FOMC minutes, 'are a bit stale' was also reportedly behind today's weakness, even as Evans (Chicago Fed, dovish) called for more easing in earlier Asian trading.
AUD and NZD tracked US equities lower, AUD shedding 0.6% while NZD fell 0.4%. AUD is trading at 1.0445 into the close while NZD is at 0.8135. AUD/ NZD fell to 5 week lows of 1.2835. EUR/USD bucked the trend overnight, grinding higher from 1.2530 to 1.2565
Economic wrap
US new home sales rose 3.6% in July, reversing June's 3.5% fall. With revisions the 3.6% gain saw an annualised sales pace of 372k, just a whisker away from our 371k forecast. A clear sales uptrend is now in place since August last year when sales were running a 292k pace. A separate report from the FHFA showed house prices up 0.7% in June, the fifth straight gain.
US initial jobless claims rose 4k to 372k, just above our high end 370k forecast. At this level, claims are in the middle of the recent 352k-392k range that has prevailed since April.
Euro zone composite PMI advance edges up from 46.5 to 46.6 in August. The German services PMI weaker (lowest since mid 2009) but the factory was higher; French services was higher but factory about flat. That saw the Euro zone factory PMI rise from 44.0 to 45.3 in Aug while the services PMI slowed from 47.9 to 47.5. The composite has been below 50 for 11 of the past 12 months, consistent with the mild recession in Europe since then.
Euro zone consumer confidence drops from –21.5 to –24.6 in Aug advance report, much weaker than any forecast and back at post-Lehman Bros collapse levels in late 2008.
German GDP unrevised at 0.3% in Q2; exports were the driver, up 2.5%.
UK CBI retail survey for Aug showed reported sales dropping from 11 to –3, suggesting Olympics buzz did not extend to the high street. Separately, the BBA reported 28.4k new mortgages in July, reversing much but not all of the dip from 30.0k in May. June was weighed down by the Jubilee bank holidays
