Markets Today: Stay

The Eurostoxx 50 ended 0.75% down and the S&P 500 -0.18%.

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Returning from the three day ANZAC Day weekend, there isn’t a single major stock market anywhere in the world that finished in the green on Monday. The Eurostoxx 50 ended 0.75% down and the S&P 500 -0.18%. The latter is after a virtually unchanged performance on Friday and where drag from Alphabet’s (nee Google) earnings on Thursday night and poor earnings results from GE and Caterpillar on Friday  were somewhat offset by a stronger than expected showing by McDonalds.  Maccas’ all day breakfast are the go, apparently.

US bond yield continue their grind higher, with 2s +1bp, 5s +2bp and 10’s +2, .5bps since Friday. This is not with any assistance from incoming US economic data. Their Markit  US manufacturing PMI disappointed on Friday, falling to 50.8 from 51.5 and 52.0 expected, which overnight March New Homer Sales fell by 1.05% instead of the 1.6% rise expected and the Dallas Fed manufacturing activity survey fell to -13.9 from -13.6, against the rise to -10.0 expected. Germany’s latest IFO survey was a drag factor in Europe, its business climate reading dipping to 106.6 from 106.7 (1-7.1 expected) and though expectations rose to 100.5 from 100.0 they were expected at 100.9.

Crude oil has fallen by between $ 0.30 (Brent) and $0.74 (WTI) but given the news flow the surprise perhaps is that the falls haven’t been bigger.  Saudi Arabia announced it will complete an expansion of its major Shaybah oil field by the end of May, allowing the country to maintain output capacity at 12 million barrels a day. Iran announced it has boosted output by 1m b/d since January, Kuwait has now emerged from its recent strike to announce plans for record output. Meanwhile crude inventories at Cushing built by a further 1.5mn barrels last week.

In fact, the biggest move in commodities since we went home of Friday was iron ore, which lost $4.10 or nearly 6% after having hit $70 on Thursday for the first time since January 2015. Overnight the 62% fine China import price slipped a further $0.26 to $66.07.

In currencies the explosive move higher in USD/JPY that began during our session on Friday followed a Bloomberg ‘source’ story suggesting the BoJ was contemplating paying banks to borrow from it (ECB-style), sharply extended the rally offshore. From an Asia-session high of around ¥110.75, the pair ended NY at ¥111.79.  Some of those gains have been given back in Monday’s session, to ¥111.21.  Comments from Abe adviser Etsuro Honda, that while Japan may have to take additional measures, BoJ action might not come before June, did the damage here.

The other big mover was the British Pound. Having been rising though last week on diminishing fear that the 23 June UK referendum would result in a vote for ‘Brexit’, the intervention of US President Obama in the UK last last week making the case for ‘remain’, and the latest Number Cruncher Politics poll (who were almost alone in getting the last UK general election result right) has 45.8% in favour of ‘Stay’ (+0.8%) and 41% for leave (+0.2%) as undecideds slip by 1 point to 13.7%. GBP/USD rose back above $1.45 for the first time since mid-March.  As for today’s title, there at last 15 songs titled Stay, but I’m humming Jackson Browne.

Coming Up

Super Thursday looms large, in the early hours of which we’ll get the latest language from the Fed when it issues its post-FOMC meeting statement alongside what will inevitably be an unchanged rates decision.

A few hours later the RBNZ will deliver its latest interest rate verdict, for which our BNZ colleagues (just) come down on the side of another quarter point cut (very much a minority view with only 3 op16 firms polled by Bloomberg favouring a cut this Thursday). The outcome will produce some fireworks in the NZD one way or another, though probably not nearly as much as in all things Yen when the Bank of Japan announces its latest policy decision(s) later Thursday.

Before all that we’ll get Australian Q1 inflation data, which will have to deliver a big downside surprise (0.3% q/q or lower on the ‘core’ measures versus the 0.5% consensus estimates) to seriously entertain thoughts of an RBA rate cut on 3 May – the same day as the Budget.

As for today, nothing in our time zone to note, but offshore tonight we get US durable goods orders, house prices (Case Schiller) the Conference Board’s version of consumer confidence (remembering the University of Michigan version was soft) and the Richmond Fed manufacturing survey.

Overnight

On global stock markets, the S&P 500 was -0.20%. Bond markets saw US 10-years +2.14bp to 1.91%. On commodity markets, Brent crude oil -0.78% to $44.76, gold+0.8% to $1,239, iron ore -0.4% to $66.07. AUD is at 0.7713 and the range since Friday’s local close has been 0.7691 to 0.7757.

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