Danske Daily
Today's Key Points
- The bailout plan to the US car industry failed to pass the Senate.
- US equities, Treasury yields and the dollar are all sharply lower.
- Today's data include industrial production growth for Euroland at 11:00 CET, and US retail sales for November at 14:30 CET.
Markets Overnight
US stocks were pushed significantly lower last night, following another very weak jobless claims report. The jobless claims release reported that claims rose 58k to 573k in the latest week - a 26-year high. Adding to the negative sentiment was the fact that the USD14bn rescue plan to the US car industry apparently lacked votes to pass the Senate - GM and Ford both dropped more than 10% as a result. However, financial shares posted the biggest retreat among 10 industries in the S&P index - S&P500 financials dropped roughly 5%. Overall, the S&P500 fell 2.9%, Dow Jones lost 2.2%, and Nasdaq shed 3.7%.
Flight to quality was the name of the game, and Treasury yields were pushed even lower, as US bond markets rallied, when it became certain that the bill to bail out carmakers failed to get enough votes in the Senate. 2yr yields were thus pushed down to 69-70bp this morning, while 10yr yields fell to 2.49% - roughly 20bp lower than when European markets closed yesterday. Crude oil for January drops to USD45.42/bbl after a few days of rallying prices.
On currency markets, the dollar weakened sharply against both EUR and JPY. Last night EUR/USD moved above 1.33 - now around 1.332. USD/JPY dropped more than two big figures below the 90 mark for the first time in 13 years - currently around 89.7. Speculation that Japan might soon start to intervene to stop exces-sive FX moves is on the rise. Scandinavian currencies are still on the weak side. EUR/SEK rose to 10.66 this morning and EUR/NOK is currently trading at 9.19.
The souring sentiment in markets was amplified in Asian trading, and this bodes for a weak opening in Europe this morning. Nikkei 225 dropped 5.0% and Hang Seng is down a whopping 6.9% as we write
Global Daily
Growth concerns returned to the markets yesterday fuelled by downbeat data for the US labour market and trade deficit. The Senate will be in recess until the new Congress is convened in late January, meaning that voting on a potential new version of the rescue package will have to wait until then. The auto industry will now try to seek an emergency loan via the Treasury's USD700bn TARP fund.
Today's data calendar starts with industrial production growth for Euroland due at 11:00 CET. We expect Eu-roland growth to mirror the weak German data released earlier this week and look for a decline of 1.3% on the month. Later in the day, attention will turn to US retail sales for November due at 14:30 CET. The release is likely to add to the string of downbeat economic data received over the past few weeks. Car sales have fallen further, and while retail sales around Thanksgiving appear to have been reasonable, this was on the back of major price cuts. We expect sales to have fallen by 2.2% m/m and by 2.1% excluding autos, which is some-what below consensus.
Market focus today will be on the failed relief package for the US auto industry and the effects of a potential bankruptcy on the economy. European bond markets are thus set for a positive opening this morning and with more downbeat data likely to arrive later in the day, markets are likely to stay bond bullish
Danske Bank
http://www.danskebank.com/danskeresearch
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