Japanese equity markets underwent a marginal recovery as the yen took a breather from its 7-session intensive rally. Fears that the ‘one-sided’ move in the FX market could lead to an intervention sooner or later have imposed some vigilance for now amongst the yen bulls. Chinese stocks underperformed even though Chinese Premier Li said that more supply side reforms could be on the horizon given that the economy remains under pressure. Yuan volatility fell to a five-month low, which could well act as a trigger for an increase in risk appetite in the near term.
The US dollar softened in Asia as Fed’s Kaplan said there was little need for an April hike in light of weak economic data. Reuters reported that recent FX fluctuations will likely have had a significantly negative impact on North American firms – more will be known as the earnings season kicks off in earnest now.
WTI futures are consolidating around $40/bbl. Some of this upside move can be attributed to the softer greenback – certainly the fundamentals do not seem to have changed. Goldman Sachs has kept its negative bias and reported that the Doha oil meeting due on April 17th, may not deliver a 'bullish surprise'
Commodity markets were mixed. Steel hit a 10-month high in Shanghai, lifting the iron ore prices in Asia; copper fell toward the cheapest levels since February in London.
Buoyed yesterday on foot of a weaker dollar gold consolidates above the $1250 handle but has thus far failed to move past the $1260 level. The yen gained the most against the US dollar, followed by the Antipodeans. The Aussie dollar has garnered a positive spin today on the recovery in iron ore prices and solid business confidence data.
The euro and the pound remain flat. The UK inflation report has not gathered much momentum in London. With a rise of 0.3% year on year expected, the upside surprise for UK inflation this morning has kept sterling bid against the dollar, less so against the euro. Headline CPI was 0.5% while core came in at 1.5%.
Even though the number was higher than consensus, it will be unlikely to change the markets perception on when to expect monetary tightening. Nothing is expected form the Bank of England until next year particularly as the spectre of the EU referendum looms in June.
Alcoa (NYSE:AA), often described as the bellwether stock, was the first to report earnings last night. Setting the tone for the rest of the corporate earnings calendar perhaps, one could say that they were poorly received-the stock dropped 4.9% in after-hours trading. As was expected, commodities prices dragged on sales ahead of a planned company split.
An upside surprise for UK inflation this morning has kept sterling bid against the dollar, less so against the euro. Headline CPI was 0.5% while core came in at 1.5%.
Another day, another big move in mining stocks. Steel hit a 10-month high in Shanghai, lifting iron ore prices in Asia and helping to push the likes of Glencore (LON:GLEN) (+2.76%) and Anglo American (LON:AAL) (6.6%) to the top of the index in the early part of the session. It’s still not been enough to push the FTSE100 clear of the 6200 level which has been a substantial barrier over the past number of sessions.
The upside moves in gold prices have also elevated the precious metals’ producers Fresnillo (LON:FRES) (+1.56%), Randgold (LON:RRS) (+1.04%) this morning.
Standard Chartered (LON:STAN) (+2.51%): seeking to sell $4.4bn of assets in Asia – amongst then $1.4bn of stressed loans made to Indian firms.
Ashtead Group (LON:AHT) (-3.5%) Cut to hold v buy at HSBC.
Intu Holdings (-2.62%) cut to hold at Peel Hunt
Whitbread (LON:WTB) (-1.91%) lower on news it has appointed Dominic Paul as MD of Costa – he is to replace Chris Roberts who decided to leave after 4 years in the role.
Housebuilders are under pressure too. The uncertainty regarding Brexit and the extreme valuations in the property market have ignited fears of an overheating market.
Barratt Developments (LON:BDEV) (-1.22%)
Burberry Group PLC (LON:BRBY) (-1.7%) due to report earnings on 14th April. The luxury company is taking its cues from LVMH – it has fallen 3% in Paris. Terrorist attacks in Europe and weakening demand in Asia is weighing on sales.
We expect the Dow to open flat at 17556.