Market Update - 5 Feb 2013

 

• Cautious will prevail in the near term as markets begin to question the veracity of the rally in risk assets registered over recent weeks.

• Overnight flows were light. The S&P 500 closed 17 points lower to 1,496 and US rates were significantly lower with the 10 year yield falling 6 bps to 1.96%.

• RBA is meeting today and the expectation of a 25bps cut seems to have dimmed in light of the positive start to 2013 and improving data. AUDUSD seems well supported at 1.0400 but there could be more downside to the pair with the possibility of 25bps cut in the next RBA not all taken out.

• USDJPY was the mover overnight with a swing from yesterday hitting a high of 93.20 and swinging back down towards 92.20 this morning, we could see consolidation around here till 91.80 but larger picture is still for a weaker Yen as this currency war continues.

• USDMYR is also taking a breather with the pair trading back below 3.1000, I reckon overall upside on the pair should still prevail despite much uncertainty over the elections as well as the demand for dollars. Still looking at 3.1300 as next resistance with support coming in at 3.0800 and 3.0500.

• The 30-year Treasury bond extended its gain to a point afternoon as higher yields and a modest stock market retreat from five-year highs drew buyers. Benchmark 10-year Treasury notes were 18/32 higher in price to yield of 1.96 pct. The 30-year bond was up 1-4/32 in price, yielding 3.17 pct. The yield on 10-year Italian government notes rose 15 basis points near 4.50 percent, the highest since late December.
  
  Spain's Rajoy remains under pressure over payment allegations. Merkel says she has confidence in Spanish government and she will support Rajoy's reform efforts.The headlines drove Euro traded 1% lower and good size reversal against the G7 crosses.

• China services' slow uptick highlights mildness of recovery, growth in China's increasingly important services sector rose for the fourth straight month in January, though the slim increase added to evidence that the recovery in the world's second-largest economy remains a modest one.