The markets were less focused on Cyprus now and more focused on some weaker than expected data out of the US overnight with stocks a little lower and the US dollar a little weaker. Interestingly however the Tankan survey in Japan yesterday didn't stop the yen from strengthening in what looks like both a technical move and some fundamental position squaring in the lead up to Kuroda's first meeting as BoJ Governor later this week. It is a decisive meeting for the USDJPY bulls because it is the first real test of all the hype we have built into the Yen's move since before the election last year.
But before we get to that and the RBA meeting in Australia today and the Aussie dollar lets have a look at the overnight moves.
In the US the PMI rose to 54.6 from 54.3 last month but a little lower than the 54.9 that was expected. The more widely watched ISM manufacturing index fell to 51.3 from 54.2 for a big miss but prices paid also dropped heavily in this index we guess tempering the overall weakness a little. Equally however falling prices speaks of lower demand so that is something to watch with regard to the US economy.
At the close the Dow was down 0.04%, the S&P 500 dropped 0.46% to 1,562 and the Nasdaq fell 0.87%. Apple was under pressure today on news which we picked up from Business Insider that Fidelity had cut its stake in the company.
Across the pond in the UK and Europe it was Easter Monday so the Asian data was the focus until the US entered and on that front it is worth noting that although the Chinese PMI climbed to 50.9 from 50.1 last month it was a little weaker than had been expected. The HSBC PMI was however stronger at 51.6 against 51.5 expected and up from 50.4 last. But there are some concerns for Asia based on the disappointing Japanese Tankan Survey and South Korean exports released yesterday.
It is interesting isn't it how with our focus on Cyprus the data has faded a little into the background. My read is that the global economy seems to be hitting a flat spot at the moment and this is likely to get worse in the months ahead. Sure the US seems to be healing slowly and non-farm payrolls data later this week are expected to print at 200,000 by the market pundits but elsewhere around the globe I sense a softening. Markets don't seem to care though.
Nor will the RBA care enough to cut rates at today's board meeting. I'm guessing that the meeting will still be an interesting one because while the staff, based on recent speeches, are pretty happy with where the economy is I get a sense that those members of the Board who are closer to business might be agitating for something more helpful for the domestic economy. But in the end it is the employees of the Bank and the governor who are likely to carry the day and no change in policy is expected.
There are of course a lot of economists out there still holding on to one or more rate cuts and if you are crazy enough to believe last months employment data you are probably readying you trigger finger for rate hikes. But the Australian economy is still on the slow side as the lack of demand for debt continues to highlight. If debt is not in demand then the economy is likely to grow more slowly than it has in the past which is the road we are on now.
The Aussie is likely to find support in the RBA communique this afternoon as it did last month but given it traded down to a low of 1.0383 yesterday some of this "expectation" if I can call it that, will likely already be priced in. Last week we said we thought the Aussie was headed toward the 1.0340/60 zone and that remains the case however for the moment and on the day Aussie is likely to remain supported in the run up to the RBA.
The Nikkei had a shocker yesterday falling more than 2% after USD/JPY broke the big uptrend from the start of the run at 79 and it sits at 93.33 this morning about a big figure or more from where it sat prior to the Australian Easter break. Clearly there is some position squaring in the lead up to this week's BoJ meeting where new Governor Kuroda has a chance to show his wares and of course the chances are that with the market having bulled him up so much and driven USD/JPY so high relative to a few short months ago disappointment may result.
Technically as noted above the up trend line has broken but the JimmyR trend indicator has not yet turned from positive to negative on the dailies. To put this in context JimmyR has been in a bull trend since October. We are now targeting 91.30/40.
Elsewhere in FX land the Euro continues to try to build a base above our 1.2650 target we have had for some time now and we are wondering if the recent low of 1.2751 is near enough. For the moment the answer is yes but while Euro holds below the 200 day moving average which comes in at 1.2871 just below the high overnight of 1.2867. It is an interesting juncture and in truth we won't know till the end of the week if the Low for the moment and a run toward 1.31 is on the cards but a break of the 200 day moving average would be a signal that the move has started.
On commodity markets gold is still marking time around the $1600 an oz region and sits at $1,599 this morning with silver at $27.88 down 1.34%. Crude was down 0.33% at $96.91 while the Ags have been absolutely smashed by a report last week that showed that Corn yields will be much higher than had been previously expected. Corn was down 7.01% last night after being limit down on Thursday. Wheat was down 3.41% and soybeans fell 0.91%.
AiG performance of manufacturing in Australia and then the RBA later this afternoon. In Europe tonight we see Spanish unemployment and a raft of Markit PMI reports for the zone. In the US we get the New York ISM