Healthcare stocks get burn-ied
Wall Street shrugged off much improved U.S. trade figures, and a slight China GDP beat, as Presidential hopeful Bernie Sanders’ “Medicare for all” comments saw healthcare sector stocks take fright. This took the edge off generally upbeat earnings from heavyweights such as Morgan Stanley (NYSE:MS) and PepsiCo (NASDAQ:PEP), ensuring the leading indices ended with a whimper rather than a shout. The S&P 500 fell 0.25%, the NASDAQ was down 0.05%, and the Dow Jones finished flat.
With delegates scheduled to fly between Washington DC and Beijing twice in the next few weeks, further progress in the U.S.-China trade talks was largely ignored. Despite this, as well as upbeat earnings, robust data from China and dovish central banks with their hands ready at the monetary policy taps, the stock markets and oil continue to bumble along in sideways ranges, unable to push on to new highs. This combined could suggest that a lot of good news – both present and future – is already baked into prices at these levels. Ahead of the extended Easter holidays and into the end of the month, the markets may be much more vulnerable to negative headlines then they have been in recent times.
Australia will take the spotlight in Asia Pacific this morning with the release of their employment change data. With the Reserve Bank of Australia vexed at stubbornly low inflation even as jobs hold up (much like its Kiwi neighbor), a low print today could see the noise for a rate cut reach deafening levels. This could also have an out-sized downward effect on the Australian dollar (AUD), which currently sits at 0.7160. The consensus is for a rise of 15,000 jobs, but frankly, the data set is notoriously volatile. Expect some fireworks at 0930 Singapore time.
The Easter egg hunt continues this evening in the States with the release of Retail Sales. The street is expecting a rebound higher from last month's -0.2% to 0.9%. Again, with so much global recovery/soft landing hope backed into equity and energy prices, a miss could have an out-sized negative effect.
FX
Major currencies were becalmed overnight yet again as the volatility flatline continues. More action was seen in the emerging markets (EM) space with the U.S. dollar weakening as traders repriced the better-than-expected China GDP print in EM currencies. That theme should continue in Asia today where we expect regional currencies to continue their gradual move higher.
Australian data at 0930 Singapore could have an out-sized impact on the AUD today if the print is below expectations. The AUD is currently at 0.7160 against the greenback, with 0.7000 the crucial long-term support level. Traders can look to the New Zealand dollar (NZD) for precedent, where a slight miss on yesterday’s CPI data saw the NZD fall 1.50% at one stage.
The Indonesian rupiah has rallied from 14,150 against the dollar to 14,085 as exit polls suggest the incumbent “Jokowi” has won yesterday’s presidential election. The official results aren’t released until early May, but polls suggest a handsome margin of victory for the candidate, who is seen as much more markets and investment friendly.
Equities
With much of the region heading into the Easter break tomorrow, trading will likely be muted on the region’s stock markets today. The rather sanguine response to the China GDP print by China’s various stock markets suggests there is more than a little buyers fatigue for now. Jakarta should respond positively to the unofficial election results, with Australian stocks in line for a potential boost if the street decides the RBA rate cut is closer post the employment data.
Oil
Oil eased overnight ostensibly on lower official inventory drawdown data from the U.S., with both Brent crudeand WTI struggling to make new topside in recent times. It’s likely the real reasons behind this are buyer’s fatigue, nervous longs and the still very overbought technical indicators.
Brent fell 0.15% to USD71.60 a barrel and WTI was down 0.50% to USD63.75 a barrel. Asia will likely be cautious about putting on new longs today ahead of the Easter break and the sideways price action of late.
Gold
With the U.S. dollar stubbornly firm, improving economic data and the trade talks making tangible progress, the reasons for holding gold continue to diminish as investors rotate from defensive positioning. After gold’s meltdown on Tuesday – it fell below the crucial USD1,280.00 an ounce support level – it dropped again overnight to close at USD1,273.50 an ounce, below secondary support at USD1,275.00.
Interest has clearly waned in the yellow metal for now, with the charts now wide open until USD1,245.00 an ounce. From a technical perspective, gold must recapture the USD1,275.00/1,280.00 region quickly, or the run for the exit door may become a stampede.