Intraday Market Thoughts

Downgrades and Weak Philly Fed Hammer Sentiment

by Adam Button
Jun 22, 2012 0:56

A sharp decline in manufacturing sentiment combined with broad financial sector downgrades to spark sharp selloffs in risk assets. The US dollar was a strong outperformer while the Australian dollar lagged. Asia-Pacific trading doesnt feature any notable releases. 10 new trades added in Thursday nights Premium Insights, including GBPJPY, EURJPY & EURUSD. See more below.

The US economy continues to show signs of faltering. On Thursday, the Philly Fed plunged to -16.6 from -5.8. The regional manufacturing survey was expected to improve to 0.0 but it was the worst reading since Aug 2011 and the second-worse since the crisis. The sub-indexes were mixed as employment improved slightly while new orders plunged.

Other economic news had a smaller impact including a 0.3% rise in May leading indicators compared to +0.1% expected. The house price index was slightly stronger than forecast while existing home sales were slightly softer. Initial jobless claims were at 387K compared to 383K expected.

Market sentiment deteriorated on rumors of a round of downgrades of the worlds largest banks by Moodys. The rumors were later confirmed as 15 of the largest financials in the world were lowered 1-to-3 notches. The euro fell as low as 1.2530.

The Canadian dollar weakened as retail sales ex-autos fell 0.3% compared to a 0.3% rise expected.

The S&P 500 was hit hard, falling 2.2% to 1325 as Goldman Sachs recommended shorts due to Fed inaction. Oil fell $3 to the lowest since October.

Early Asia-Pacific trading as been muted as risk trades attempt to regain some type of footing. The calendar is absent any meaningful economic data.

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