Equity markets ended their recent bull run yesterday with most bourses down heavily as traders banked profits made over the past 10 days. The FTSE finished 1.3% lower, while the French CAC 40 lost 1.2% and the German DAX dropped 1.3%.

Falls were exacerbated by US Consumer Confidence which surprised to the downside for the second consecutive month, This is in part due to the continued high levels of unemployment and the very weak labour market stateside. Data was mixed with the Case Shiller House Price Index, an index of house prices in the 20 largest metropolitan areas in the US, rose by 0.5% in May. This was the first monthly increase in nearly 3 years and comes on the back of Monday’s strong new home sales announcement.

With stock markets falling and consumer confidence low the risk averse currencies were the winners yesterday with both the USD and JPY the star performers. With expectations of a further pull back on equity bourses the trend maybe very similar over coming trading sessions

It’s not all doom and gloom for the riskier assets in the currency world as AUD moved to a 2009 high against the USD on the belief that the RBA is prepared to hike rates as the economy recovers. The Australian banking/fiscal model has proved to be very effective during this credit crunch and even given the prospects of higher unemployment rate rises look a likelihood. NZD was helped higher by this news and we expect that, like the Aussies earlier this week, they will hold interest rates at their meeting overnight tonight.

Other data measures due today include UK mortgage approvals (09.30), German CPI and US Fed’s Beige Book (19.00)

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