News and views
Risk appetite was lifted as US equities were boosted in pre- and post-Easter action, the S&P500 gaining around 5% since Thursday, the banks index a spectacular 28%. The main catalyst for this was Wells Fargo’s guidance it would report around $3 billion net income, better than analysts’ expectations. Wal-Mart similarly flagged a stronger expected result, despite lower March sales volume. After Monday’s close, Goldman Sachs’ $1.7 billion Q1 earnings result easily beat expectations. Oil is 4% higher than Thursday’s level, even after last night’s almost 5% fall on an IEA forecast for lower 2009 demand. US 10 year treasuries are approximately unchanged, after a 10bp rise and fall.
NZD posted a low of 0.5690 shortly after the domestic close on Thursday, and steadily made its way to 0.5930, where it currently resides.
US equity inspired risk-seeking saw AUD rally during each of the past three evening sessions, with few corrections on the way up from the 0.7050 domestic close (Thu) to 0.7325 last night. It currently sits at 0.7300. AUD/NZD is around Thursday’s level of 1.2350, after a fall to 1.22 on Friday, and 1.2415 peak last night.
EUR ranged between 1.3090 and 1.3335 around Easter, decoupling from the rally in risk until last night when it posted a 1.3200 to 1.3380 rally. GBP ranged sideways between 1.46 and 1.48, breaking out last night to 1.4850. The BoE left their policy rate unchanged at 0.50%, as expected. USD/JPY gyrated between 99.30 and 100.70, stabilising just above 100.00.
US trade deficit shrank to $26bn in Feb, close to Westpac’s top-of-market forecast. Exports rose for the first time since last July, while imports fell further.
US initial jobless claims were 654k for the week ended April 4, close to the 650k per week average of the past 10 weeks. Continuing claims were up 95k, the smallest rise for five weeks.
German industrial production fell 2.9% in February, and Italian IP fell 3.5%. European production declines are persisting longer than in the US or UK.
German March CPI was unrevised at –0.1% in the final estimate.
UK PPI increased 0.1% in Jan. Annual core PPI was steady at 3.3%.
The Bank of England held its official interest rate unchanged at 0.5%, and announced no changes to its plan to engage in quantitative easing worth £75bn over three months. The accompanying statement was brief. Other than the decision, it noted only that £26bn of asset purchases had been completed in the last month. In other words, the £75bn is being distributed evenly over the three month period.
Canadian employment fell a further 61k in March, and unemployment rose to 8%. The pace of decline has eased a little, but the detail of the report was very weak. Full-time employment fell 80k while part-time rose 18k. All of the jobs lost were in manufacturing and other goods-producing industries such as construction and mining.
Canada’s trade balance was $0.1bn, returning to its customary positive position after two months of deficit. Exports, especially manufactures, were up, while imports were steady.
Canada’s new house price index fell a further 0.7% in February.
Outlook
The US corporate and bank earnings reports will be the main driver of global risk appetite, and therefore the NZD, this week. The NZD rally since Thursday should meet strong resistance before 0.5980. An upward break of that level would be significant, and point to much higher. NZ retail sales this morning will be closely watched for signs of weakness.
