Market Update - 7 Jan 2013

• NFP in line with consensus at 155k and unemployment rate remained flat at 7.8%. US stocks struggled to register gains and S&P closed only 7 pts higher. Gold fell 2% at one stage but pared losses into the close.

• The December non-manufacturing ISM index jumped to 56.1 from 54.7, above expectations for a smaller increase. Looking at the details, new orders rose to 59.3 from 58.1, although the biggest driver of the improvement was the employment index, which surged to 56.3 – the highest level since March – from 50.3

• Equities closed flat on Friday night and USDMYR opened flat at 3.0450, similar to last Friday’s closing. I think USDMYR will continue to range trade at 3.0200-3.0700 for this week baring any major news on the US fiscal cliff front and also local election news. SGDMYR also dived from 2.5050 to 2.4750 on the back that MAS is selling SGD in the market, this also weights on USDMYR.

• Treasury 10-year yields soared the most since March in the first week of the year after the U.S. avoided the so-called fiscal cliff and Federal Reserve minutes showed policy makers differ over the scope of asset purchases.
  
• The 10-year yield reached 1.97 percent yesterday, its highest level since April 26, before dropping after the Labor Department released a report showing the U.S. unemployment rate was unchanged at 7.8 percent in December.

• Several policy makers thought the Fed should curb its asset purchases, a policy known as quantitative easing, “well before the end of 2013,” according to a record of the central bank’s Dec. 11-12 meeting. The U.S. will sell $66 billion of notes and bonds next week.

• Italian and Spanish notes advanced this week, with yields dropping the most since September, as signs the global economy is recovering spurred demand for higher-yielding assets.
  
• Italy’s two-year yields fell to the lowest in more than two years as U.S. lawmakers agreed a budget deal to avoid the so-called fiscal cliff and reports showed the American job market and German retail sales improved. German 10-year yields climbed to the highest in three months as investor appetite for safer assets waned.

• Economists predict the European Central Bank will keep its key rate at a record low next week to encourage growth.