The 2004 Saturday Night Live fictional character, recently brought back to life in song on Cortney Barnett’s brilliant debut album, would have been in her element on Friday. The (US) data was down, stocks (globally) were down and the US dollar was down. The only thing up was (downside) equity volatility, with the VIX above 17 at one point from 15 on Thursday, though a rally in the S&P in the last two hours of the New York session saw it close back on a 15 handle (15.7).

European and US equities fell for the second successive day – the Eurostoxx 50 by 3.1%and the S&P by 0.5% (having been down 1% earlier in the day). Treasury yields edged marginally higher, and the US dollar continues to slide, led by further EUR and JPY strength and bringing the dollar’s drop on the week to just over 2% in index terms. It was a night where in FX the EUR/USD uptrend drew support from an upside surprise in the first estimate of Eurozone GDP (0.6% against 0.4% expected), USD JPY extended its losses below low Y107 and commodity currencies were caught between the support for commodity prices from further dollar weakness and higher downside equity volatility.

AUD/USD recovered to 0.7603 at the close from an intra-day low of 0.7587 on the S&P late-session rebound.  It is struggling to regain a footing above 0.7600 so far this morning. Falls in the official China PMIs yesterday (manufacturing 50.1 from 50.2, services 53.3 from 53.8) are relevant factors here.

Commodities received a further lift from dollar weakness. The LMEX index was +1.68% and iron ore recouped a chunk of its early-week losses to be +3.30 at $66.24.

None of Friday’s US data was top drawer, but what there was more negative than positive.  The Chicago PMI disappointed at 50.4, down from 53.6 in March and 52.6 expected. Milwaukee fell to 51.05 from 57.7.  The final University of Michigan consumer sentiment index was 89.0 down from the 89.7 preliminary reading and a rise to 90.0 expected.

The March Personal income, spending and deflator date didn’t a whole lot to what we learned from the Q1 data on Thursday. The core PCE deflator 1.6% as expected down from 1.7%, personal income 0.4% better than the 0.3% expected but personal spending 0.1% against 0.2% expected.

The Q1 Employment Cost Index at 0.6% was as expected and the same as Q4. 2015.

Sunday’s CoreLogic RP Data weekend auction summary shows a preliminary nationwide average clearance rate of 71.0% up from a final 69.7% last weekend and on relatively high volumes (2,519).  Sydney cleared a preliminary 74% down from 77.4 last weekend and Melbourne 74.0% up from 71.5%.

Coming Up

If last week was a big one (and painful for those on the wrong side of the BoJ and RBNZ – we shared your pain) this week promises – or threatens – to be just as big. The money market judges Tuesday’s RBA decision to be a line-ball call (the swaps market ended last week ascribing a 54% probability to a 25-point cut – pretty much the same odds NAB gives to its cut call). The Budget comes later that evening, but has not historically been a market mover, in FX at least. That said, there will be scrutiny on what the ratings agencies have to say about the sanctity of Australia’s AAA rating and following Moody’s low-level warning last month.

Ahead of these marquee Australian events, Monday sees the latest NAB business survey (in time for RBA deliberations) and the very market sensitive US manufacturing ISM tonight (consensus 51.5 from 51.8 in March). Tuesday morning also sees the Caixin version of China’s manufacturing PMI following the small falls recorded in both the official manufacturing and service sector readings yesterday.

The US non-manufacturing ISM comes on Wednesday and the US April employment report on Friday.  China FX reserves are on Saturday and latest trade figures on Sunday. Enough? NZ has its Q1 labour data on Wednesday).

Much of Europe is closed today for the May Day holidays (and note value date for yen transactions will be Monday the 9th). Today’s Nikkei performance (the market is then closed Tuesday-Wednesday-Thursday) will be a key focal point.

Overnight

On global stock markets, the S&P 500 was -0.50%. Bond markets saw US 10-years +0.90bp to 1.83%. On commodity markets, Brent crude oil -0.84% to $47.37, gold+1.9% to $1,291, iron ore +5.3% to $66.24. AUD is at 0.7594 and the range since Friday’s local close has been 0.7587 to 0.7657.

For full analysis, download report

•  Markets Today: 2 May 2016 (PDF, 1MB)

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