News and views
Earnings help equities. JP Morgan’s results were about 30% better than expected, helping the S&P500 close up 1.6%. Google also beat expectations in after-market news. US data was mixed, with weak housing and jobless reports neutralised by a stronger Philadelphia Fed survey. Copper fell 1.2% in a reaction to China’s lacklustre GDP report yesterday, but oil decoupled to fall 1.4%. US 10yr treasuries followed equities’ lead, the yield rising 7bp, while subsiding funding pressures pushed 3mth Libor another bp lower to 1.11%. US bank stress test results will be released on 4 May, according to CNBC.
NZD broke minor support at 0.5750 and ranged between 0.5680 and 0.5765 overnight. NZ PM Key spoke from China saying Q1 GDP may be worse than -0.9%. Yesterday’s OECD report on NZ reiterated the need for lower policy interest rates.
AUD zig-zagged down after the domestic close, from 0.7250 to 0.7140, and bounced off that support level to settle around 0.7200 during early NZ. Treasurer Swan warned of a horror budget in an overnight article. AUD/NZD consolidated in a higher 1.2560 to 1.2685 range.
EUR bounced between 1.3130 and 1.3230, data releases containing no surprises. GBP dipped to 1.4845, but recovered to 1.4930, BoE’s Miles saying the worst of the UK recession may be over. USD/JPY dipped to 98.50, recovering to the previous day’s close at 98.30.
US housing starts fell 11% after a 17% jump in Feb, with both moves caused by volatility in the multiples component. Total starts did remain above the January level, and single-family units have been stable, suggesting that the new-home construction industry has at least stabilised, but hopes of recovery have been quashed. Likewise, housing permits fell 9%, setting a new low, although single-family permits remained above the January level.
US April Philadelphia Fed factory survey improved to –24.4 from –35, affirming the less-pessimistic tone set by yesterday’s NY Fed survey. Like the NY survey, the improvement was most pronounced in new orders, although for Philadelphia these remain firmly in contractionary territory. Six-month-ahead confidence was vastly improved. However, the employment component remains deeply negative, suggesting savage job losses have a long way to run, even if the production slump is easing a little.
US initial jobless claims fell 53k to 610k in the week ended April 11, although the number should be treated with caution as that week was affected by Good Friday. In the week ending April 4, continuing jobless claims rose 172k to 6m.
Euroland February inflation was confirmed at 0.6% yr (unrevised from the flash estimate). Base effects due to the price of oil first rising then falling last year are likely cause Eurozone headline annual inflation to fall temporarily below zero from May this year. Core inflation edged down to 1.5% yr, its lowest since 2006. Monthly headline inflation rose 0.4%.
Eurozone February industrial production fell a further 2.3%, led by a 4.3% decline in production of consumer durables (mostly cars). Capital goods production fell 3%, after a 7% decline in January. Europe’s factory slump is showing no sign of abating in the same fashion as the US.
Canadian Feb manufacturing shipments rose 2.2% after swooning 5.4% in January.
Outlook
NZD reached 0.57 support last night, that area proving sticky. Global risk sentiment was moderately positive overnight, but is starting to looked quite stretched. Accordingly, we maintain our negative NZD bias today, and expect to see a move towards 0.5600. Q1 CPI today is expected to be 3.0% yoy, and shouldn’t surprise markets.
