Market wrap
Sentiment remained positive but asset class performance was limited to commodities and risky currencies. US equities are unchanged, spending the evening ranging sideways as portfolios were stayed on the sidelines into quarter end. The CRB commodities index bounced 1.5%, oil up 2.0% to match March’s multi-year high, copper up 0.8%, and gold up 1.0%. US 10yr treasury yields are 2bp higher at 3.46%, volatile in a 3.40-3.48 range. A comment from Walmart CEO Simon that US consumers face serious inflation in the months ahead sparked a brief sell-off during early NY. Peripheral Eurozone government debt suffered, Portugal’s 10yr yield surging 31bp to 8.41% – a fresh record, Ireland up 12bp to a 1992 high of 10.22%, Spain up 9bp, and Greece up 7bp to 12.84% euro-era record high. The Irish bank stress tests mean around $24bn is required to recapitalise the sector, within expectations.
Safe havens and the US dollar underperformed. The US dollar index dipped to a week low early London before partly recovering. Westpac’s data surprise model generated a shortterm sell signal, recent data releases disappointing elevated expectations. EUR rose from 1.4150 to 1.4233 (June 2010 trend resistance) before settling under 1.4200. The peripheral debt sell-off and ECB reluctance to provide fresh liquidity to Irish banks caused only a shortlived 50 pip dip. USD/JPY ground higher inside an 82.60-83.00 range. AUD continued its two-week rally and made a fresh post-float high of 1.0373 in NY. NZD also extended its rally to 0.7647. AUD/NZD was contained inside a 1.3540-1.3600 range.
Economic wrap
US initial jobless claims down 6k to 388k, probably a new cycle low excluding weather distorted weeks in late Feb when claims were backlogged into March.
US Chicago PMI eases from 71.2 to 70.6 in Mar, its first slippage in five months and still the second strongest reading since the late 1980s. The detail showed production down 4 pts, orders down 0.4 pts (but both still above 74) and jobs up almost 6 pts to 65.6 (highest since 1983). Prices paid rose 2.2 pts to 83.4, still lower than in 2008 when oil prices were higher. The Milwaukee NAPM rose from 63 to 66, matching highs reached twice in 2010.
US factory goods orders down 0.1% in Feb, with the durables component revised from –0.9% to –0.6% and non durables up just 0.3%, pretty softy given sharp food and other commodity price rises in the month (ie volumes would have been down).
Japanese data: Nomura/JMMA manufacturing PMI fell sharply in March to 46.4 (prev 52.9); the sharp decline is not surprising given the survey was taken in the midst of the nuclear crisis. Also, the pace of labour cash earnings growth moderated a touch in Feb to 0.3%yr; in contrast, annual growth in housing starts accelerated sharply to 10.1% in Feb; annual growth in construction orders also rose sharply to 19.5%yr, from –10.7%yr in Jan.
Euroland inflation flash estimate of 2.6% yr in March was the highest since late 2008 and will firm some ECB council member’s resolve to tighten rates next week, even though core inflation remains weak at around 1%.
German retail sales fell 0.3% in Feb and Jan was revised back from 1.4% to 0.4% so the level of sales remains lower than it was back in July last year, although annual growth is positive at 1.1% yr thanks to early 2010 sales gains. Unemployment fell a further 55k in March after Feb’s 54k drop and the jobless rate fell to 7.1%, a new low since reunification records began 20 years ago. Germany continues to benefit from industrial expansion due in part to a competitiveness edge, while much of the rest of Europe languishes.
UK house price data mixed. Hometrack down 0.1% in March, their 9th straight fall to be down 3.2% yr. But Nationwide recorded a 0.5% gain, the third in four months, for a 0.1% yr annual pace, back in the black after annual declines in the first two months of 2011. In other news, GfK consumer confidence held at –28 in March, hovering around two year lows after plunging 8 pts to –29 in Jan.
Canadian GDP grew 0.5% in Jan, matching the strongest pace recorded twice in 2010, driven by strong manufacturing sector contributions.
Market outlook
AUD/USD and NZD/USD outlook next 24 hours: We repeat yesterday’s outlook for AUD, which retains upward momentum, corrections finding minor support at 1.0315 and major support at 1.0200. China PMI data this afternoon could have an impact. NZD corrections today should be limited to 0.7520, the multi-day target 0.7720, the upper channel (since November) boundary. The US payrolls report tonight is the main risk event ahead, followed by Fed member Dudley’s speech.
Similar Posts:
- Yield curves jump on temperate retail sales data
- New York Manufacturing Conditions See Continued Deterioration
- AUD opens this morning buying 1.0560 US Cents
- Eurozone Industrial Orders Jump In May
- US ADP private payrolls rise 157k in June
