Aussie Jumps on Risk Appetite and Housing Data

Aussie rebounds strongly in Asia today following rebound in risk markets as well as positive housing data. Asian stocks are somewhat lifted by earnings report of Aloca. The company's outlook is seen as a bellwether of economic growth because of aluminium's important role in manufacturing. The company posted a Q4 loss due to sharp decline in aluminium prices but revenue beat expectations. It also posted a positive outlook in demand, expecting 7% growth this year. Asian equities are broadly higher with Nikkei up more than 30 pts at the time of writing. Aussie is further boosted by building approvals data, which rose 8.4% mom in November. EUR/AUD dives to new record low.

China's trade data showed export grew 13.4% yoy in December, inline with expectation but was the slowest since November 2009. Import growth also dropped to 11.8% yoy, much lower than expectation of 17% yoy, lowest rate in more than two years. Overall trade surplus plunged to a three year low of $155b. A former PBoC advisor said that the biggest concern of Chian this year is any "dramatic" fall in the property markets, which accounts for nearly 10% of China's GDP. Though, Yu Yongding said that a housing market collapse is "not warranted" and China won't have a hard landing. Also, markets are expecting China to offer further stimulus to underpin growth.

After Hildebrand's resignation, the SNB Bank Council will hold an emergency meeting in Zurich today to name the successor for SNB governor as soon as possible. Thomas Jordan, the current Vice Chairman, is widely expected to take the role. Back in August last year, Jordan has told a newspaper that a temporary Franc peg would be consistent with SNB's mandate and short after, SNB announced the EUR/CHF floor of 1.2. It's believed that Jordan would continue to maintain the policy of curbing Franc strength with utmost determination and unlimited funds.

At the press conference after the meeting, Germany's Merkel and France's Sarkozy indicated that the new 'fiscal compact' may be concluded by the end of this month, one month ahead of schedule. The leaders again unveiled the idea that a financial transactions tax can be implemented in the Eurozone, if not over the EU. Moreover, both leaders stated that they 'are ready to examine' ways to accelerate capital payments into the European Stability Mechanism (ESM).

Regarding the situation in Greece, Merkel warned at the press conference that there must be 'progress on the voluntary restructuring of Greek debt' before additional financial assistance and 'the second Greek aid package including this restructuring must be in place quickly. Otherwise it won't be possible to pay out the next tranche for Greece'. Yields in Greek debts surged with the 10-year yields soaring 72bps to 35.66%. The market was worried about the Greek PSI which the European Union's Economic and Monetary Affairs Commissioner Olli Rehn said discussions have entered the final stage. According to Rehn, the level of discount to be accepted by creditors (the haircut) was likely to remain at 50% as agreed in October. Under this scheme, investors will voluntarily accept a nominal 50% discount on their Greek bond holdings and receive a mix of cash and new bonds. The market concerned about the eventual size and the acceptance of this scheme as Merkel stated that 'the PSI is the precondition that will bring Greece on its senses', though the PSI alone it is not enough.

On the data front, New Zealand building permits dropped -6.4% mom in November. Australian building approvals rose 8.4% mom in November. UK RICS house price balance unexpectedly improved to -16 in December. BRC sales monitor rose 2.2% yoy in December. Canadian housing starts and wholesale inventories would be released later today.