US Auto Industry In Trouble, as GM's and Chrysler's Recover Plans Rejected
Risk aversion was very evident in today's trading as equities plunged around the world as a result of news that the US government rejected the recovery plans put forth by GM and Chrysler. That, along with renewed concerns that the global recession will lead to further losses in the financial industry hurt investor sentiment. Financial and auto shares were sold off heavily and the Yen and greenback benefited from the deterioration in risk appetite.
AUD/JPY - Risk Aversion Boosts Yen
The Aussie-Yen pair a strong barometer of carry-trade sentiment in the Asian region, fell 300 pips from the start of Sunday trading to the early European session. The pair found support near the 65 level, which was a consolidation level 2 weeks ago. Stocks in Tokyo were down 4.5%, and those in Sydney slid 1.7%.
JPN Industrial Production Down Another 9.4% in February
In fundamental news from the region, Japanese industrial production fell by 9.4% in February, preliminary data showed, as the global slump in trade sapped demand for Japanese cars, electronics and other products. In January, production fell by a record 10.2%. February's marks the fifth straight month that output has declined, but there are some signs that perhaps the worst is over. With companies producing less, February saw a significant run down of inventories which points to an increase in production in the nearer term.
AUS New Home Loans Increase for Second Straight Month
In Australia, new home sales rose 3.9% in February, the second consecutive month of increases. The home building market is gaining much-needed stimulus from low variable mortgage rates and from the boost to the First Home Owners Grant.
AUD/USD - Aussie Retraces 38.2% of March's Rally
The Aussie slid against the Dollar as well, falling from its level around 0.69 to start the week the trade below 0.68 in late NY Trading. Today's fall extends the losses the Aussie saw on Friday, though the action could be seen as a retracement from the run up in this pair that we saw from March 10th to March 24th, that included significant greenback weakness as a result of the FOMC decision to print money to buy US Treasuries. The recent downmove which started at the 0.71 high last week, has now corrected about 38.2% of the March rally.
UK Mortgage Lending Sees Signs of Life
Moving on to the UK, mortgage approvals rose to their highest level in nine months in February, showing the first significant sign of improvement in the housing market. There were 38K new mortgages approved - the most since May 2008 - and the figure was better than forecast. Mortgage lending rose to £1.5 billion from £1.1, and also came in above expectations.
UK As Mortgage Lending Increases, Consumer Credit Falls By Record Amount
The same report, while showing improvement in mortgage lending, did show that consumer credit fell £245 million, far below expectations, and the lowest figure in the survey's 16-year history. Combining the positive mortgage lending with the negative consumer credit, the total net consumer lending posted a figure of 1.3 billion pounds.
UK Housetrack Housing Prices Fall by Lowest Amount in 10 Months in March
In another release from the UK housing sector, housing prices fell 0.6% over March, the lowest monthly decline for 10 months. On the year, prices are down 10.3%. Still with the economy continuing to show weak growth, and unemployment rising, it seems doubtful whether the increase in activity and sales will continue to gather momentum in the coming months.
GBP/USD - Pound Falls for 4th Session, Stages Late Rally
The Pound-Dollar pair fell in favor of the greenback today, despite the better UK mortgage lending, as London stocks were caught with the same selling pressure as other equity markets. Bank shares slid as did oil producers. Today's drop extends the fall in this pair to four sessions, as it has dropped from a high of 1.4750 last Tuesday to a low of 1.4115 today. However, a late rally in NY trading did bring the pair back to the level at which it began the session.
EUR Economic Sentiment Declines to Record Low
In the Euro-zone, the European Commission's Economic sentiment indicator declined to 64.6, the lowest level since the current series was launched in January 1985. Confidence declined to record lows among all three main sectors - services, industrial, and consumer. The Euro-zone recession is not seeing any signs of dissipating, and the ECB is set to lower rates to 1% in its meeting this week.
EUR/USD - Euro Slides on Risk Aversion vs Greenback, With Smaller Volatility
The Euro-Dollar extended its losses from Friday, falling to the 1.3115 level in today's trading. The fall here was not as steep as the Euro experienced against the Yen, and the counter rally was more subdued that what we saw from the Pound-Dollar pair. The Euro now finds itself back at the level it was at prior to the FOMC announcement on March 18th.
USD/JPY - Dollar Slides vs Yen, But Stages 61.8% Retracement
The Dollar-Yen pair fell steeply during the Asian session, but saw a rather modest recovery in late European and NY trading. The correction to the down move reached the 61.8% Fibonacci retracement level before turning back in the favor of the Yen. US stocks were sold off sharply, with the Dow Jones down more than 300 points by 3 PM EST.
USD/CAD - Loonie Suffers from Weaker Stocks, Falling Oil, and Technical Break
One currency that was pressured throughout today's session was the Canadian Dollar. The US Dollar-Canadian Dollar pair surged 250 pips from its open, taking only a brief pause around the 1.25 level before extending its gains. The dual effects of very weak stocks and a strong fall in oil prices pressured the Loonie. Oil was off nearly $4 to $48.50 a barrel in the late NY session. We had been monitoring the situation in this pair as it was consolidating in a wedge pattern last week, and today's data shows strong follow trough following the initial breakout on Friday.
Upcoming Releases
The fundamental docket is fairly busy in the upcoming session. First, Japan releases many of its end of the month indicators including, manufacturing PMI, household spending, unemployment rate and housing starts. Also tonight, the UK posts its Consumer confidence and Australia releases data on private sector credit.
Overnight, Germany reveals its unemployment change, the Euro-zone posts its flash version of March's CPI, and Switzerland reveals its UBS Consumption indicators.
Tomorrow, Canada will post its monthly measure of GDP growth along with its producer price index. The US meanwhile will release data on housing prices, consumer confidence and the Chicago PMI.
