It has been a rather mixed session to start the week. The US$ is generally rangebound but mildly firmer, underpinned by stronger yields (US10Y; 2.49%), which in turn took comfort from the upbeat manufacturing data coming from China in yesterday’s Asian session, and was followed up by some better than expected manufacturing figures coming from the US (ISM Mfg PMI +55.3 vs exp 54.5). The real winners have been the stock markets, which climbed by 1.0/1.2% on Monday as global growth concerns eased a little, along with oil which is up by 2.4% to 61.50 (WTI).
In the FX space, US$Jpy headed higher, in tracking bond yields, and while sentiment remains generally positive, a sense of caution is capping further gains after the disappointing US retail sales for February, which dropped -0.2% mm, below expectation of +0.3% mm. Ex-auto sales dropped -0.4% mm versus expectation of 0.4% mm.
The Euro remained heavy after the release of the EU PMIs. The Eurozone PMI manufacturing was finalised at 47.5 in March, revised down from 47.6 and down from February’s 49.3. This was the lowest level since April 2013, and the second straight months of sub-50 reading. Germany’s PMI manufacturing was revised lower to 44.1, an 80-month low, while Italy’s PMI figure came in at 47.4, 70-month-low and France was revised down to 49.7.
Sterling squeezed shorts in climbing a bit higher as traders prepared for parliament to vote yet, again, on various Brexit options, hoping that the current uncertainty will end in a softer Brexit than Theresa May’s previously defeated withdrawal agreement. A general election looks an increasingly possible option which should cap further gains.
In early Asian trade the Kiwi has dropped sharply following the poor Q1 business Confidence reading (-29 vs -17 previously), taking the Aud$ down with it, while Cable is now lower after the UK parliament again rejected all 4 Brexit alternatives. Where to from here? Who knows?
Looking ahead, Tuesday will kick off with the Australian Building Permits (exp -3.3%), and then later in the Asian session we will see the RBA Interest Rate Decision – at which no change is expected although a dovish outlook is likely, which could allow the Aud$ to move lower. Later in the day, Europe will look to the EU Unemployment (exp 7.8% – Feb), PPI (exp -0.4%mm – Feb, +1.9%yy) and the UK Construction PMI (exp 50) for guidance, while the main focus for the US will be on the Durable Goods (exp -1.2% – Feb) along with the ISM Business Conditions and the March Total Vehicle Sales (exp 16.78 mio). Kiwi traders will look to the Global Dairy Trade Index at midday, London, for guidance (exp +0.3%), while the API Weekly Crude Oil Stock Inventory will also be released late in the day.
Economic data highlights will include:
Tue: NZIER Business Confidence, Australian Building Permits, RBA Interest Rate Decision, UK Construction PMI, EU Unemployment, PPI, US Durable Goods, ISM NY Business Conditions, Global Dairy Trade Index, API Weekly Crude Oil Stock Inventory
Market moves, in brief:
FX: DXY 97.25 (0.05 %)
Bonds: US10Y; 2.503% (3.77%), German 10Y; -0.025% (64.91%), UK 10Y; 1.047% (4.68%), Australian 10Y; 1.813% (1.23%), NZ 10Y; 1.84% (1.38 %), China 10Y; 3.143% (2.36%)
Stock Indices: DJI; 1.27%, S+P; 1.16%, NASDAQ; 1.35%, EUStoxx50; 0.63%, FTSE100; 0.52%, Shanghai Composite; 2.58%,
Metals: Gold 1288 oz (-0.37%), Silver 15.10 oz (-0.11%), Copper 2.93 lb (-0.05%), Iron Ore 87.52 per tonne (1.33%),
Oil: WTI 61.69 pb (2.59%)
|INDICES / COMMODITIES|