Intraday Market Thoughts

Falling Commodities Nervously Await China Flash PMI

by Adam Button
Dec 15, 2011 0:25

Oil and metals prices were hit hard by a broad wave of risk aversion in US trading. The US dollar was the top performer while AUD lagged. Japans large manufacturers Q4 Tankan at -4 from -2, and the latest 12 NEW Premium trades below ahead of tonights HSBC flash China PMI.

The euro fell after Merkel warned there will be no quick solutions and Greek growth and deficit estimates were lowered once again. EUR/USD touched a low of 1.2945 but rebounded to close out the session at 1.2980. It was the first close below 1.30 since Jan 9.

The worries picked up after Italy sold 5-year note at a record high yield. The US bond market showed the demand for safety is genuine as 30-year bonds sold at a record low 2.92%, mirroring the strength of Tuesdays 10-year sale.

Major damage was done in the commodity space where WTI crude fell more than $5 to below $95. Global growth barometer copper also fell nearly 5%. The drop in gold extended to a third day, falling $59 to $1572.

Downgrades continued late in the day as five European banks, including Frances Credit Agricole were lowered one notch by Fitch. France appears to be preparing the public for the loss of its AAA-rating; the foreign minister downplayed the effects.

The S&P 500 fell 1.1% to 1212.

Asia-Pacific Preview

Japan released its quarterly Tankan survey showing -4 in Q4 vs exp -2 from prev +2, with large manufacturing capex slowing to 1.4% from 3.0% vs. exp 2.5%.

Ashraf offered trades and analysis of the HSBC China PMI for premium subscribers ahead of the 0230 GMT release. The 47.7 reading last month fell from 51.0 in October and sparked a round of risk aversion. A modest improvement is likely here but a reading over 50 will be required to generate any significant risk appetite. Ashrafs latest Premium trades ahead of tonight's China data Non-Subscribers can click here to join:


Latest IMTs