As traders shake off the holiday fatigue and come back to their terminals, the US docket presents enough economic data to make this shortened-week an interesting one for price action. Fundamentals were already bubbling up on Tuesday with a stronger consumer sentiment survey and yet another weak housing figure; though the real movement may be deferred until the bigger numbers cross the wires later this week.
For price action, EURUSD trade Tuesday morning was a complete 180 from Monday?s market. After trading in an absurdly small 5-point band, the pair took off in the Asian session with a 100 point rally to 1.3520. USDCHF saw the same dramatic anti-dollar move when broke out of its rising trend channel on the way down to 1.22. An early advance for the British pound against the greenback to 1.99 was completely unraveled by mid-day in the US. Finally, USDJPY put in another spike lower only to rally right back to 121.80 range resistance.
The market?s tides swelled this morning, following the utter lack of volatility yesterday, when the Conference Board?s Consumer Confidence Survey crossed the wires. The sentiment gauge for May bested expectations of a modest improvement from the original April reading by printing a 108 read. The bullish tone this indicator provided the dollar was boosted even further when the market picked up on the upward revision to the previous month?s reading. Expectations going into the reading were all over the charts. For those looking for some objectivity in their speculation, the University of Michigan?s earlier released confidence number for the same period proved to be a good guide to today?s indicator. Alternatively, looking at the assorted influences on the American consumer required serious consideration. Optimism was clearly supported by equities? steady advance into record territory and the reliable contribution from steady labor trend improvements. On the other hand, the consistent pain in the housing sector was working to offset labor; while record gasoline prices were presenting consumer?s a new and growing problem. Ultimately, though, with the driving season just beginning, income and employment trends seemingly plateauing and sub-prime restrictions still filtering through the housing market; a considerable drop in sentiment may still be in store for the coming months.
Another indicator that was released this morning, but flew under the radar with the confidence report looming, was the S&P/Case-Schiller housing price composite. While still relatively new to the standard list of notable economic indicators, the gauge effectively confirmed the massive drop in prices through the April new home sales report. While the annual composite measurement has reported deflation since the beginning of the year, the quarterly figure marked its first contraction since 1991 with the most recent wave of data. This should help to temper negative surprises that may come off of Thursday?s House Price Index for the same period.
The major US equity benchmarks sprung higher on the open Tuesday morning on a stream of deal news, though the gains were slowly retracing as the day wore on. By 15:15 GMT, the NASDAQ was in the lead as it held onto its gains with a 0.73 percent rise to 2,575.74. The S&P 500 and Dow were giving back a lot of ground while trading up 0.32 percent at 1,520.63 and up 0.23 percent at 13,537.92 respectively. While there were a few outperforming stocks on analyst recommendations and revised corporate forecasts, the headlines were certainly controlled by ABN Amro. Shares of the European bank slid 0.3 percent to $48.15 despite receiving a $95.5 billion bid from a Royal Bank of Scotland-led consortium that overtook Barclays? initial offer. In the materials sector, Alcan shares were trading 2.1 percent higher at $86.75 as Norsk Hydro and Rio Tinto contemplated putting up offers for the company after seeing Alcoa?s $28.5 billion bid rejected.
Treasury yields found a light breeze this morning from the better than expected consumer confidence report. By 15:15 GMT, the ten-year note was off 6/32nds at 97-00 as its yield ratcheted 2 basis points higher to 4.882. The thirty-year bond slid 5/32nds to 95-30 as its own yield added a single basis point to rise to 5.013.