15 Apr: Risk mood improves on solid US bank reports; more to come today. US$ heavy. Quiet calendar for FX, Monday.

By | April 15, 2019


Markets closed Friday in a positive mood after sentiment received a boost and sent risk-associated assets higher. First, from China, where expanding credit growth and a jump in money supply indicated that authorities may be scaling back on deleveraging efforts in order to underpin the economy, and then later from the US, where JP Morgan and Wells reported strong earnings for Q1, sending US stocks and bond yields sharply higher.

The US$ ended the week mixed but generally under some downside pressure as the Euro and commodity bloc currencies led the way higher, both of which are squeezing a crowded short position. On the other side of the coin, US$Jpy liked the move up in stocks and yields, and tested the resistance at 112.00/10 where it finished the week. Cable was a yo-yo, but finished near its lows as Brexit drags on.

Elsewhere, the DJI finished +1.03%, S+P +0.66% and the US10Y at 2.57%, liking the positive outlook to reach the highest level in a week. The precious metals were unchanged while the industrial metals were positive, with copper leading the way higher, +1.66%.

WTI rose again on Friday, albeit in a choppy session but finishing up for a sixth-straight week, as threats of disruption in Libyan supplies bolstered an already squeezed market.

The US Baker Hughes oil rig count rose by two units this week, following on from the previous week’s 15-rig climb. In order to ensure that the current strength continues in the oil market, the rig count needs to be kept in check. If that begins to accelerate then WTI will run into stronger headwinds. Note that the Russian Finance Minister said over the weekend that Russia and OPEC could decide to increase oil production to fight for market share with the United States – which would not do the oil price any good. OPEC will meet on June 25/26 to decide whether to extend the current agreement of reducing oil output by 1.2 million bpd for six months, commencing from January 2019.

The next few days will see a pretty thin calendar as we wind down for Easter and Good Friday, at the end of the week, with the US Q1 reporting season likely to be the focus, but with very little on the agenda today. Tuesday’s RBA Minutes may provide a little action, and there is an official China Press Conference due mid-morning in Asia, while later in the day we get the German/EU ZEW Economic Sentiment Survey and some secondary US data. Wednesday will be mostly about inflation, with CPI figures to come from NZ, UK and EU, while the China GDP, Industrial Production and Retail Sales will also be released. The week winds up on Thursday with the Australian, March Unemployment figures, the German PPI, the EU Flash PMIs, UK Retail Sales and finally the US Retail Sales.

Note that the US reporting season gears up this week, with the schedule to include Citigroup, BOA, BNY Mellon, Goldman Sachs and Morgan Stanley. Q1 earnings for S&P 500 companies are expected to fall 2.5% on the year, in what would be the first quarterly decline since 2016, while revenue is expected to rise 4.8%. A repeat of the JPM/Wells results is likely to see the stock indices enjoy a happy Easter. Citigroup and Goldmans will be in focus today. Have a good week.

Economic data highlights will include:

Mon: US New York State Empire Mfg Index, BOE; Haskell Speech, Fed; Evans Speech

Tue: RBA Minutes, China House Price Index, NBS Press Conference, Japan Tertiary Industry Index, UK Unemployment, German/EU ZEW Economic Sentiment Survey, EU Construction Output, US Industrial Production, Capacity Utilisation, API Weekly Crude Oil Stock Inventory, Global Dairy Trade Index

Wed: NZ Q1 CPI, Japan Merchandise Trade Balance, Capacity Utilisation, Industrial Production, China Retail Sales, Industrial Production, GDP, Press Conference, EU Current Account, Trade Balance, CPI,  UK CPI, PPI, RPI, US Trade Balance, Wholesale Inventories, EIA Crude Oil Stocks Weekly Change, Beige Book

Thur: Australian Unemployment, German PPI, EU Flash PMIs, UK Retail Sales, US Retail Sales, Jobless Claims, Philadelphia Fed Mfg Survey, Business Inventories

Fri: Good Friday.

Market moves, in brief:

FX: DXY 96.85 (-0.32%)

Bonds: US10Y; 2.574% (+2.87%), German 10Y; +0.056% (812%), UK 10Y; 1.213% (+5.42%), Australian 10Y; 1.893% (+1.20%), NZ 10Y; 2.030% (-0.49 %), China 10Y; 3.350% (+1.98%)

Stock Indices: DJI; +1.03%, S+P; +0.66%, NASDAQ; +0.44%, EUStoxx50; +0.48%, FTSE100; +0.26%, Shanghai Composite; -0.04%,

Metals: Gold $1290 oz (-0.2%), Silver $17.97 oz (-0.1%), Copper $2.942 lb (+1.66%), Iron Ore $93.79 per tonne (+0.20%),

Oil: WTI $63.77 pb (+0.13%)

EURUSD: 1.1300
Res  1.1320  1.1335  1.1350
Sup  1.1285  1.1270  1.1250
USDJPY: 112.00
Res  112.10  112.40  112.65
Sup  111.80  111.50  111.25
GBPUSD: 1.3072
Res  1.3090  1.3125  1.3160
Sup  1.3045  1.3000  1.2960
USDCHF: 1.0023
Res  1.0045  1.0060  1.0075
Sup  1.0000  0.9980  0.9960
AUDUSD: 0.7173
Res  0.7190  0.7205  0.7230
Sup  0.7155  0.7135  0.7115
NZDUSD: 0.6765
Res  0.6780  0.6795  0.6810
Sup  0.6750  0.6735  0.6715
S&P: 2912
Res  2915  2925  2935
Sup  2900  2890  2880
DJ30: 26416
Res  26435  26510  26600
Sup  26350  26245  26135
SPI200: 6233
Res  6245  6260  6275
Sup  6220  6205  6190
XAUUSD: 1290
Res  1295  1300  1305
Sup  1285  1280  1275
XAGUSD: 14.97
Res  15.05  15.15  15.30
Sup  14.90  14.75  14.60
WTI: 63.75
Res  64.30  64.80  65.70
Sup  63.25  62.40  61.65