Market Update - 16 August 2012

I would say markets were pretty uneventful last night despite two headline datas being released in the U.S, but neither came out to be a shocker.

Malaysia’s Q2 GDP data came in well above expectations at 5.4% yoy (OCBC forecast for a 4.0% showing), with Q1 number also revised up from 4.7% to 4.9%. With this latest figure, overall growth for 2012 is likely to be in the upper half of the 4-5% target, above our current forecast for a 4.2% showing.

The key to the Q2 GDP performance was the spike in investment growth, at a record-high 26.1% yoy in the period, and very interestingly, the balance between private and public investment is     roughly equal, although it is without doubt that government’s initiative is behind the drive – also evidenced in the jump of public sector consumption during the period.

USDMYR opened where it closed at 3.1250 with the immediate range of 3.1000-3.1500 pretty much in tact, range trade likely to dominate and sell on rallies towards the resistance and buy on dips towards the support will be the trend we expect for next couple of weeks

U.S Industrial production rose by a stronger than expected 0.6% in July after a downward revised 0.1% in June. The main driver for the month was a pop in auto and mining production while warmer-than-typical weather pushed electrical utility output higher. In all, manufacturing production, which makes up 75% of the headline index, rose by 0.5% m/m with production ex-autos rising by a more subdued 0.2% m/m.

US CPI was the main event overnight and it showed a slowing in price rises across the board  It’s quite a strong hint to show that there could be further QE if thing worsens as inflation is subdue.

The U.S Empire manufacturing index for August was much weaker than expected falling to -5.85 from 7.39, the first negative reading on the headline index since last October.

U.S. Treasury 10-year rates jumped to the highest in almost three months as signs of improvement in the U.S. economy damped speculation the Federal Reserve will expand monetary stimulus. Yields reached 1.79 percent as government reports showed industrial production rose more than analysts estimated.

German 10-year bond yields rose to the highest in more than six weeks after European Economic and Monetary Affairs Commissioner Olli Rehn signaled Spain is weighing a request for a sovereign bailout.

The Standard & Poor’s 500 Index added 0.1 percent to 1,405.53, while the Stoxx Europe 600 Index slipped less than 0.1 percent after falling as much as 0.6 percent.