Market Brief
In the Asian session, the big story was the strong performance of Chinese shares. While the majority of Asian equity markets underperformed Shanghai and Shenzhen were higher by 1.4% and 1.8% respectively (Hang Seng rose 0.71%). In particular, the Shanghai composite looks to close above 3800 key psychological resistance. The catalyst for optimism over China stocks was the China’s official PMI unexpectedly rising above the 50 threshold to 50.1 in March from 49.9, verse expectations for decline to 49.7. Most sub-indices’ improved, yet new orders index slowed by 0.2 to 50.2 and new export orders index dropped by 0.2 to 48.3. Elsewhere, China’s non-manufacturing PMI moderated to 53.7 in March from 53.9 in February. There is growing evidence that Beijing’s proactive stimulus response is now starting to pay-off in growth. The PBoC USD/CNY fix was slightly higher to 6.1434 from 6.1420. We remain constructive on the CNY, based on expectation that policy makers will provide excessing response to slowing growth and attempts to manage currency volatility. However, in a potential setback in CNY aspirations, US Treasury Secretary Jack Lew stated that the USA believed the CNY had not become freely traded enough to be included IMF basket of global currencies (SDR). Six world powers and Iran negotiations went past the 31st March deadline, unable to achieve an accord on Tehran's nuclear program. But the extension indicates positive developments in discussions. Brent crude was marginally softer falling to $54.78 from $56.
In Japan, BoJ March Tankan survey indicated a weak and slowing recovery. Manufacturing firms provided no improvement regardless of low oil prices and weak JPY. Large manufacturing firms read was flat at 12 and outlook failed to meet expectations coming in at 10 verse 16 expected but up from 9 in Feb. Meanwhile, non-manufacturers indicated improvement in their sentiment up 2 pt to 19. We anticipate that decelerating growth and inflation will demand another stimulus boost. Yet the long term effectiveness looks limited. The start of Japans fiscal year and weak Tankan sent Nikkei down 0.41% which spilt over to JPY. USD/JPY was range bound falling to 119.45 before bouncing to 120.02. USD/JPY support at 118.90 should contain downside moves. GBP/JPY was choppy, initially dropped to 177.40 then rallying to 178.48 before stabilizing around the 178.00 handle, yet demand was weak indicating further downside risk. Elsewhere, Australia’s building approvals fell 3.2% m/m in February (verse -4 exp) from a revised increase of 5.9% in January. Also, AIG performance of manufacturing index marginally increased to 46.3 in March from 45.4. AUD/USD rose to 0.7664 on the decent data before reversing earlier gains. With a RBA rate cut back on the table, traders will be focused on 0.7560 March low.
In the European session, we have a slew of PMIs. Final manufacturing PMIs are anticipated to be broadly unrevised from the flash at Euro area 51.9, Germany 52.4 and France 48.2. European periphery could see a slight improvement but scope is limited. However, with a heavy US data scheduled (starting with today’s ADP) and confusion over the Greek reform negotiations, as a driver, European data will take a back seat. The Greek saga continues to drag on and it looks like no deal will be reached before Easter. Despite the breezy, carefree response from Greek and European policy makers (obviously to project a feeling of calm and comradery) Athens will struggle to meet debt repayments starting April 9th to the IMF. Finally, The ECB balance sheet is now ramping (€2246bn) up with heavy TLTRO loan to banks and ECB buying of government bonds. We remain significantly negative on the EUR/USD. Yesterdays close below the 21d MA at 1.0780 indicates a bearish move towards 1.0458.
| Today's Calendar | Estimates | Previous | Country / GMT |
|---|---|---|---|
| NO Mar Manufacturing PMI | 51.3 | 51.2 | NOK / 01:00 |
| SZ Mar PMI Manufacturing | 47.5 | 47.3 | CHF / 01:30 |
| EC Mar F Markit Eurozone Manufacturing PMI | 51.9 | 51.9 | EUR / 02:00 |
| UK Mar Markit UK PMI Manufacturing SA | 54.4 | 54.1 | GBP / 02:30 |
| DE Mar Danish PMI Survey | - | 56.2 | DKK / 03:00 |
| US mars.27 MBA Mortgage Applications | - | 9.50% | USD / 05:00 |
| US Mar ADP Employment Change | 225K | 212K | USD / 06:15 |
| CA Mar RBC Canadian Manufacturing PMI | - | 48.7 | CAD / 07:30 |
| US Mar F Markit US Manufacturing PMI | 55.3 | 55.3 | USD / 07:45 |
| US Feb Construction Spending MoM | -0.10% | -1.10% | USD / 08:00 |
| US Mar ISM Manufacturing | 52.5 | 52.9 | USD / 08:00 |
| US Mar ISM Prices Paid | 38 | 35 | USD / 08:00 |
| AU Mar TD Securities Inflation MoM | - | 0.00% | AUD / 17:30 |
| AU Mar TD Securities Inflation YoY | - | 1.30% | AUD / 17:30 |
| JN Mar Monetary Base YoY | - | 36.70% | JPY / 17:50 |
| JN Mar Monetary Base End of period | - | ¥278.9T | JPY / 17:50 |
| JN mars.27 Japan Buying Foreign Bonds | - | ¥765.5B | JPY / 17:50 |
| JN mars.27 Japan Buying Foreign Stocks | - | ¥221.3B | JPY / 17:50 |
| JN mars.27 Foreign Buying Japan Bonds | - | -¥953.5B | JPY / 17:50 |
| JN mars.27 Foreign Buying Japan Stocks | - | -¥352.8B | JPY / 17:50 |
| JN Bank of Japan Releases Company Price Forecasts | - | - | JPY / 17:50 |
| NZ Mar ANZ Commodity Price | - | 1.80% | NZD / 18:00 |
| AU Feb Job vacancies | - | 2.60% | AUD / 18:30 |
| AU Feb Trade Balance | -1300M | -980M | AUD / 18:30 |
| JN Feb Labor Cash Earnings YoY | 0.70% | 1.30% | JPY / 22:00 |
| JN Feb Real Cash Earnings YoY | - | -1.50% | JPY / 22:00 |
Currency Tech
EUR/USD
R 2: 1.1280
R 1: 1.1043
CURRENT: 1.0812
S 1: 1.0768
S 2: 1.0613
GBP/USD
R 2: 1.5166
R 1: 1.4994
CURRENT: 1.4812
S 1: 1.4635
S 2: 1.4547
USD/JPY
R 2: 122.03
R 1: 120.50
CURRENT: 119.41
S 1: 118.33
S 2: 117.93
USD/CHF
R 2: 0.9984
R 1: 0.9812
CURRENT: 0.9685
S 1: 0.9491
S 2: 0.9450