Markets are Correcting Yesterday's Rally
The positive sentiment, triggered by the US budget agreement, continued to push the stocks and the commodities to the upside (although we are seeing a slight pullback from yesterday's optimistic highs). Yesterday, the US ISM Manufacturing PMI slipped over 50 (vs. the previous reading of 49.5) and increased to 50.7, better than the expected 50.2, while overnight the Chinese Non-manufacturing PMI surprised to the upside (actual 56.1 vs. prior 55.6). Amid supportive economic data, the risk sentiment remains positive; yet in select assets we are witnessing a correction in the sharp bullish move of Jan 2nd. The MSCI Asia Pacific index (exc. Japan) added 2.1966% over 2013's first day of trading. The Hang Seng and the Shanghai's composite indexes are up by 0.07% and 1.30% respectively, Taiex index advanced 0.7407%, while Kospi index made a tiny correction of -0.5755%. Amid yesterday's bull market, the gold and silver are trading at two-week-highs, yet correcting to the downside as of this morning. On the currency side, the commodity-linked currencies also made bearish corrections amid yesterday's rally. AUDUSD is currently trading at 1.505, NZDUSD is back down to 0.83 levels while USDCAD advanced over 0.9850. USDJPY keeps climbing to higher levels, and hit 87.36 (highest since August 2010) early this morning. EURJPY tested 116.00 (highest since July 2011) and traded at its highest volume day since June 2008, as reported by Barclay Capital.
On the Eurozone, Greece and Spain started the New Year by strikes in public transportations to protest the austerity measures imposed by the UE. Stiglitz stated that "Europe is the real risk for the World Economy in 2013." The bad news shadowed the optimism over the "cliff" deal. EURUSD failed to break the 1.3300 yesterday, and fell as far as 1.3124 early this morning. Today's calendar consists of the German and Spanish unemployment change, the UK construction PMI (decrease in contraction expected), and the US unemployment claims anticipated to the upside (exp. 356K vs. 350K previously), and the FOMC minutes.