March 23, 2016

Markets Today: Night moves

RBA Governor Glenn Stevens speech yesterday came and went without any fanfare as far as AUD comment was concerned

RBA Governor Glenn Stevens speech yesterday came and went without any fanfare as far as AUD comment was concerned, his only remarks coming in the Q&A saying that there is some risk the currency may be getting ahead of itself. He seemed pretty content with how the economy’s transition was progressing, noting it had continued into 2016.

Markets overnight took their initial direction from the bombings in Brussels at the airport and the railway station, a catalyst for a mild risk-off market tone. Euro bond markets were initially bid, the Euro losing half a cent, Sterling lower with the yen initially stronger and the USD a mild bid tone. The AUD likewise initially lost around ½ cent from around the 0.7620 level to 0.7560, but like most risk assets, that selling dissipated and was reversed for some risk assets, including the AUD that sits back above the figure at 0.7625 in early Asian trade this morning. The BEL 20 Belgium stock market index rose 0.17% while the E600 Eurostoxx index dipped 0.15%,

There was perhaps a little growth momentum comfort from the release of the preliminary March Markit PMIs for France, Germany, and the Eurozone that in their totality proved to be somewhat reassuring as did the German Ifo survey.

The French Markit manufacturing PMI missed slightly at 49.6 from 50.2 (f/c 50.2), but the services and the composite indexes were both better than expected. Germany’s set were almost unchanged (as expected) while for the Euro-zone, the preliminary manufacturing, services were all a little higher than in February and the same or better than tipped. The German March Ifo Business Survey outpaced expectations, the Current Assessment component up to 113.8, the highest since last September. It’s a hint that – notwithstanding any fallout from overnight events might have on business and consumer confidence – growth momentum in the zone’s largest economy ended the March quarter at a stepped-up pace.

US data was second tier, the March Markit manufacturing print virtually unchanged while the Richmond Fed regional manufacturing index for March bounced to 22 from -4.
Finance Minister Moreau has just released Canada’s Federal budget with little to no initial C$ impact forecasting more deficits ahead with some boost to growth from Budget measures.

Chicago Fed President (a non-voter this year) has been speaking applauding the downshift in rate rises dot plot Fed forecasts for 2016 from four to two, and noting that the Fed’s wait-and-see monetary response is appropriate to ensure growth continues, labor markets strengthen further, wages pick up with an eventual increase in currently low inflation, right back up to our 2 percent objective. Absolutely no argument from him to remain on hold, not that any was expected.

Coming Up

Local AU skilled vacancies data for February due at 11:00 AM are very unlikely to trouble the scorers. Before then we have Philly Fed President Harker (non-voter) speaking in New York at 10:00 AM. Then BoJ Board member Funo (former chief of Toyota for North America – before being appointed to the BoJ Board in May 2015 – so presumably sensitive to and knowledgeable about currency issues on both sides of the Pacific) is speaking at 12:30, before holding a press conference at 14:00.

In Europe tonight, Bundesbank President Jens Weidmann is speaking, as is Fed President James Bullard (a voter on the FOMC this year), who is speaking on Bloomberg TV and radio during the US session, and BOE Deputy Governor Andrew Bailey, speaking in London. The US New Home Sales report for February is also due.


On global stock markets, the S&P 500 was -0.10%. Bond markets saw US 10-years +2.66bp to 1.94%. On commodity markets, Brent crude oil +0.51% to $41.75, gold+0.3% to $1,248, iron ore -0.8% to $58.36. AUD is at 0.7619 and the range was 0.7551 to 0.7643.

Good luck.

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