Today is a holiday in much of Asia and Europe (Happy May Day) but that doesn’t stop the dataflow.

This isn’t necessarily equating to the forecast path of economies of course, with the US expected to outperform Europe after its weather induced Q1 slump. The Chicago PMI was a key example of that last night – rising sharply in April (52.3A, 46.3E, 50P). US jobless claims were also very good, dropping to their lowest level since April 2000! That bodes well for the employment numbers released next Friday.

But positive news on Greece (despite the late pension payments today due to ‘technical reasons) and core inflation holding steady, meant that Core European yields are higher again. This equated to modest gains in European equity markets and outperformance in the Euro. Eurozone core CPI held at 0.6%yoy as expected and allayed concerns of further softness. Meanwhile, amid concerns that Greece cannot meet its cashflow obligations, the ECB’s Coeure said that perhaps Greece might be able to issue more T Bills if they were close to agreement with the Troika – more carrot and stick, but markets liked it. Greek yields have fallen sharply in recent days.

Interestingly, given that there is a waft of positive news last night, the indicator of market risk- the VIX – is higher. That is a partial factor in the AUD underperforming. Add to that lower iron ore prices and newspaper reports of the RBA easing next week – which is seeing that event being priced back into markets – means that there is likely to remain pressure on the AUD.

Coming Up

We get more colour on the outlook for economies today, with the usual first day of the month PMI reports. First up is China. This series has been subdued but did pick-up a little on the official measure last month. The HSBC flash PMI was very soft (Chart of the day) this month and industrial production has been running well below the official guide. The market reaction will be telling. A very soft outcome, below the 50 cut off between expansion and contraction, may generate optimism of more PBoC easing, but a soft outcome but not too bad could see risk markets sell off. A rise would be a surprise: again it will be a question of degrees.

The US ISM has slowed from its peaks but is expected to improve slightly. A pick up in this reading would likely drive US yields higher but the net effect on the USD depends on bunds. We care because these are the big drivers of what is happening in global (including Australia’s) equity, bond and currency markets at present. As central banks are currently more active than they have been in years and forward guidance is becoming less and less specific, the data becomes more important and markets more volatile.

For clues as to the BoJ (who held policy unchanged yesterday), today sees the Tokyo CPI data a year after the sales tax increase. That means it is going to look a lot less robust and place pressure on the BoJ to eventually consider what other easing policy options were going to be required.

Locally we get the PPI which doesn’t tend to be market moving, the US also releases the final Uni of Michigan reading, while Fed speakers Williams and Mester speak.

Overnight

On global stock markets, the S&P 500 was -1.20%. Bond markets saw US 10-years -0.18bp to 2.04%. On commodity markets, Brent crude oil +1.14% to $66.59, gold-2.3% to $1,182, iron ore -1.7% to $56.18. AUD is at 0.7912 and the range was 0.7863 to 0.8023. (For more market prices, please see p.2 of the pdf).

•           US Chicago PMI 52.3A, 46.3E, 50P

•           US ECI 0.7%A, 0.6E, 0.5P revised from 0.6

•           US Personal spending Mar 0.4%A, 0.5E, 0.2P

•           US Core PCE Mar 0.2%A, E, P

•           EZ Core CPI 0.6%A, E, P

For full analysis, download report:

• Markets Today: 1 May 2015 (PDF, 333KB)

For further FX, Interest rate and Commodities information visit nab.com.au/nabfinancialmarkets

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