*AAP Economics: Overnight debt/forex report
By Garry Shilson-Josling
AAP Financial Markets Economist
US Treasuries were weaker early after an encouraging rise in retail trade, but yieldsedged down again as the share market failed to sustain its rally, and ended mostly aboutlevel with Wednesday's closes.
The 2 year note ended at 1.82 per cent, from 1.84 per cent at Wednesday's close, whilethe 10 year note finished the day steady at 4.00 per cent.
Shares price on Wall Street ended lower on average, the Dow Jones Industrial Averagedown by 0.6 per cent, the S&P 500 down by 0.4 per cent but the Nasdaq Composite index0.2 per cent higher.
Retail sales rose by 0.4 per cent in November, in line with expectations, confirmingconsumer have not yet thrown in towel and are supporting growth in the US pending an upsurgein business investment, most likely next year.
Initial unemployment claims jumped by 83,000 last week to 441,00, but the volatilityobscured any useful information that may have been lurking in the figures and the marketignored them. Even so, it seemed to confirm that the falls recorded in the preceding threeweeks were not a true indication of a firming labour market.
Share market moves were more pronounced in Europe, led by French telco giant Alcatel,which fell by 16 per cent on the news it would issue up to EUR 820 of convertible bonds.
The UK's FTSE 100 slipped back by 1.0 per cent, the German DAX 30 fell by 2.6 per centand the French CAC 40 finished 1.7 per cent lower.
The European bond market gained as share prices fell, the UK 10 year gilt closing at4.54 per cent from 4.57 per cent, the German 10 year bund firming to 4.29 per cent from4.35 per cent, and the French 10 year government benchmark ending the day at 4.37 percent after closing on Wednesday at 4.44 per cent.
The Australian debt market ended the overnight session marginally firmer, the December3 year bond futures contract gained 2 ticks to 95.25 (4.75 per cent) and the 10 year firmedby one tick to 94.660 (5.340 per cent) as the December S&P/ASX 200 share price index futurescontract slipped back by 8 ticks (0.3 per cent) to 2,976.
In the foreign exchange market the US dollar fluctuated in line with global share marketsentiment. It dipped from late Asian levels around JPY123.40-50 to the low JPY122.60sin late European trade, then down again to just over JPY122.50 after the US retail tradefigures produced a short-lived bounce to just under JPY123.20. The dollar has since edgedup off its lows to hover around JPY123.70.
Rising international tension, in particular lack of any obvious likely alternativeto a war between the US and Iraq, appeared to weigh on the US dollar as well, and helpedto push the euro higher -- it hit a high of USD1.0196 after stepping up through resistanceat USD1.0100 and USD1.0150-60.
The Australian dollar has drifted up with the euro, peaking at USD0.5668, about halfa cent higher than yesterday afternoon, but after a pullback to around USD0.4645 it hasbeen capped by USD0.5660.
There are no major Australian economic data releases due today.
Later, in the US, investors will have to digest the October business inventories data,along with the November producer price index figures.
According to a survey by analytical firm briefing.com, the consensus is that the producerprice index was unchanged in November (both the headline and core measures), and thatbusiness inventories inched up by just 0.1 per cent, confirming that slow growth and lowinflation remain the order of the day in the US.
US RETAIL AND FOOD SERVICES SALES
Seasonally adjusted
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Month Jul-02 Aug-02 Sep-02 Oct-02 Nov-02
Retail plus food services
$US million 304.218 305.616 301.181 301.421 302.529
Mth pct change 1.2 0.5 -1.5 0.1 0.4
Year pct change 4.9 5.1 5.2 -0.9 2.1
Autos
$US million 76.00 77.02 72.72 71.19 71.16
Mth pct change 4.2 1.4 -5.6 -2.1 -0.1
Year pct change 8.1 9.7 6.4 -15.0 -6.4
Retail plus food services excl. autos
$US million 228.223 228.595 228.464 230.227 231.373
Mth pct change 0.2 0.2 -0.1 0.8 0.5
Year pct change 3.9 3.6 4.8 4.5 5.0
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Source: US Census Bureau
INITIAL CLAIMS FOR STATE UNEMPLOYMENT INSURANCE
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(Thousands)
Week ended 2-Nov 9-Nov 16-Nov 23-Nov 30-Nov 7-Dec
Seas. adj. no. 397 401 382 368 358 441
Change -12 4 -19 -14 -10 83
4 week ave. 404 400 397 387 377 387
Insured jobless
rate pct 2.8 2.8 2.8 2.7 2.6 n/a
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Source: US Department of Labor
OVERNIGHT MARKETS
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US interest rates: Yield changes:
(Late New York) Yield Latest Prev. day
3m T-bill (disc.) 1.19% 0.01% -0.01%
3m T-bill (yield) 1.21% 0.01% -0.01%
2 year note (cash) 1.82% -0.02% -0.05%
5 year note (cash) 3.00% 0.01% -0.07%
10 year note (cash) 4.00% 0.00% -0.06%
30 year bond (cash) 4.87% 0.00% -0.05%
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Australian futures: Yield changes:
Instrument: Price Yield O'night Prev. Day
90 day bills (Dec) 95.16 4.84% 0.00% 0.01%
90 day bills (Mar) 95.31 4.69% 0.00% 0.06%
3 yr bond (Dec) 95.25 4.75% -0.02% 0.00%
10 yr bond (Dec) 94.660 5.340% -0.010% -0.020%
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Foreign exchange: Changes:
Rate: Level O'night Prev. day
AUD/USD 0.5660 0.0043 0.0008
AUD/JPY 69.46 0.16 0.10
AUD/GBP 0.3578 0.0012 0.0000
AUD/EUR 0.5558 -0.0009 0.0008
USD/JPY 122.71 -0.66 -0.01
EUR/USD 1.0185 0.0096 0.0000
EUR/JPY 124.96 0.50 -0.02
GBP/USD 1.5820 0.0069 0.0023
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* Note: The tables of debt and forex prices show the changes between the previous Australianafternoon closes and the end of overnight trading, along with the changes in the preceding24 hours.
AAP
KEYWORD: MORNING REPORT
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