Market Update - 8 Jan 2013

• A small positive for the Banking sector with Basel III rules relaxed a little. There has been an expansion in the range of assets that can be used to meet liquidity requirements and the timetable for implementation will be slower (full implementation to 2019 from 2015). Some eyebrows raised though as gold was not defined a “high quality liquid asset”.

• Equities were down roughly 0.5% in all major markets. The banking sector outperformed on the news above though.

• USDMYR pretty much trading sideways as we expect the 3.0200-3.0700 range. The pair opened at 3.0400 this morning as the interest in SGDMYR continue to weigh on USDMYR with interest in buying MYR on the back of MAS interventions suspected.

• Italy’s Mario Monti would run for PM in next government but unlikely to accept a FinMin role. Berlusconi officially renewed his alliance with his right wing Northern League coalition partners. This increases the chance of an election with no clear outright winner & mkts pared back risk.

• Eurozone PPI was the only data on the night...printing -0.2% MoM as expected. The YoY figure came in a little unders. Last months figure was a small positive so the reversal probably helps explain EU peripheral spreads push out at the margin. German/Spain +7.5pts, German/Italy +10.5pts.

• No US data or major news. Treasury 10-year note yields were at almost an eight-month high in before the first auction of the securities this year on concern the Federal Reserve may wind down debt purchases earlier than most investors anticipated.
  
• Yields on the benchmark securities soared the most since March last week after minutes from the Fed’s last meeting showed policy makers differed over the scope of purchases and several officials thought the Fed should end quantitative easing before year-end. The U.S. is selling $66 billion of notes and bonds this week, including $21 billion in 10-year debt in two days.

• Fed's Plosser (Non-voting SUPER Hawk):
  Unclear what Fed will do when inflation reaches 2.5% & unemployment at 6.5%. There is a fear people become too focused on the thresholds.

• The recent Chinese stock market bounce is getting some further press. The Shanghai Comp is +18% since Dec 3^rd & the CSI300 index is up 22% over the same time.

• Aussie Iron Ore prices have rallied from $115 to $154 as a consequence in December, in fact they’ve rallied from an $86 low just last September.