US and European markets have begun the new week a subdued mood. But core global bond yields are showing some life, lower across the board while the USD is a tad softer too
Markets Today: Drift away
The commodity currencies were sold lower overnight, with the AUD feeling the brunt of the selling.
The commodity currencies were sold lower overnight, with the AUD feeling the brunt of the selling, the AUD/USD at the bottom of the major FX leader board, down 1.27% in the face of weaker commodity prices, somewhat jittery equity markets and hints of a renewed appetite for the USD (or at least some selling of the EUR and GBP in the wake of the Brussels terrorist incidents). The Bloomberg spot US dollar index is up 0.63%.
Commodity weakness was led by softness in oil prices overnight the wake of the weekly US EIA report data showing that US crude inventories rose a much larger than expected 9.36 million barrels last week (an increase of 2.3m was expected). WTI crude was trading at over $41 a barrel before the release of the data, then fell back to $39.75, a net decline of 4.1% for the day so far. The other commodity set seemingly breaking a better patch of support of late was iron ore and steel with the spot price of iron ore down 0.84% to $57.87, Dalian iron ore futures off a cool 5.2% yesterday while China’s steel rebar futures gave back 3.05%. The LMEX base metals index is down 1.7%, with copper off 2.28% and nickel down 1.08%. Gold has slipped 2.23%, currently trading at $1220.70. One commodity that has bucked the trend overnight is sugar from reports of adverse weather affecting production estimates in Thailand.
St. Louis Fed President James Bullard did a Bloomberg TV interview, with one particular comment grabbing the market’s attention: “You get another strong jobs report, it looks like labor markets are improving, you could probably make a case for moving in April”. Of course he voted with the pack for no change. This gave the USD some measure of support though pricing for a hike in April was not beefed up, held back by a soft equity market with bonds bid.
As far as today’s local releases are concerned, there is the NZ trade balance for February at 8:45 AM, followed at 1 PM by the March final release of the UK Japan Manufacturing PMI. Our BNZ colleagues look for a slightly larger NZ trade surplus, of just under $50m, a little shy of market’s $90 million consensus forecast.
As far as tonight’s session is concerned, the main releases are the U.K.’s retail sales report for February with payback from a 1% decline in sales expected after the outsize 2.3% January gain. In the US, the main focus will be on durable goods orders for February and, of course, the weekly jobless claims numbers, though claims are expected to again remain low at 268K, essentially the same as last week’s 265K. As for durable goods orders, this is also expected to reveal a monthly payback, a decline in headline sales of 3%, three fifths of the outsized 4.7% gain last month. Core orders are expected to give back a smaller 0.5% after rising 3.4% in January. Also due tonight is the services PMI from Markit for the US and the Kansas City Fed Manufacturing index for March. The BOE’s Bailey is speaking on the “Future of Green Finance”.
Looking further through the Easter weekend into Monday night’s session, the main release tomorrow is Japan’s CPI release and in the US, the third iteration of December quarter GDP, though no revision is expected from the 1.0% second estimate. On Monday US, most of this will be on the February personal income and spending report, what it infers four aggregate consumer spending in the March quarter and hence for GDP growth as well is the PCE deflators with the core deflator expected to have risen by 0.2%, and growth ticking from 1.7 to 1.8% as a result and thus knocking on the door of the Fed’s target of a sustainable 2% inflation rate. Pending home sales and the Dallas fed manufacturing index are also due on Monday.
The first Australian release next week does not come until Wednesday with the weekly consumer confidence report from the ANZ and the NAB online retail sales index for February.
On global stock markets, the S&P 500 was -0.60%. Bond markets saw US 10-years -6.34bp to 1.88%. On commodity markets, Brent crude oil -2.99% to $40.54, gold-2.3% to $1,219, iron ore -0.8% to $57.87. AUD is at 0.7525 and the range was 0.752 to 0.7649.
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