News and views
Bulls waiting for new catalysts. Most major equity indices and commodities were little changed last night, as investors wondered whether further rallies were justifiable given the lack of hard supporting data. The S&P500 closed -0.1%%, oil +0.6%, and copper +0.1%. Standard & Poor’s revised Greece’s outlook to negative. US 3mth Libor’s Panzer-like advance downwards continued – 2bp lower to 0.91%. Commodities guru Jim Rogers saw the USD nearing a crisis and favoured JPY and EUR (in contrast to George Soros’ views the previous day). Russia’s central bank said it had no plans to reduce US treasuries holdings. A CNBC item after Bernanke’s speech last night questioned whether the Fed is a lot closer to a gradual exit strategy than most think. Former Fed Chairman Greenspan commented a few hours ago that the US is finally seeing seeds of a bottoming in housing.
EUR made new recent high, from 1.3600 to 1.3710, but couldn’t follow through, settling in the low 1.36’s. ECB Weber’s comment that there was no need to expand asset purchases into other debt types was supportive. UK data, apart from employment, and M&A talk supported GBP higher from 1.5100 to 1.5350, before falling back a cent. USD/JPY fell from 97.85 to 96.15 on USD negativity.
AUD saw a choppy gain from 0.7600 to 0.7680. The federal 2009/10 budget was broadly better than expected: slightly better GDP, fiscal deficit, and debt forecasts.
NZD gained from 0.6000 to 0.6095, also in a choppy manner, holding AUD/NZD in a tight 1.2600 to 1.2665 range. Last night’s Fonterra auction saw milk powder prices down 4.1% since the previous month, a negative surprise.
US trade deficit widened for the first time in eight months in March, pretty much in line with Westpac’s $28bn deficit forecast. This outcome reflected unfavourable volume shifts on the export side (weaker capital, consumer good, auto and surprisingly aircraft sales to foreign customers) compounded by a previously reported rise in import prices and fall in export prices. However with the Commerce Dept assuming a higher March deficit this result points to a favourable revision to the net exports contribution to Q1 GDP growth.
UK manufacturing production fell just 0.1% in March and February was revised up by 0.6 ppts to a much smaller fall, probably enough to ensure a modest upward revision to Q1 GDP growth, initially reported at –1.9%. The slightly narrower trade deficit back in March also points in the same direction, though note that quarterly exports were down 8.3% in Q1 compared to Q4, while imports were down 8.1% over the same period – hardly a sign of a healthy economy.
UK retail survey up 4.6% yr in Apr. The BRC reported a sharp spike in sales last month but attributed this mostly to warmer weather and the timing of Easter, as did the CBI when commenting on their apparently healthy retail survey for April two weeks ago.
Mixed UK house price data. The government’s DCLG measure decelerated further to –13.6% yr, looking like it will soon match the 15-20% yr pace of decline recorded by the major lender price series. But the RICS index rose to its highest since early last year.
UK jobless data released a day early. This revealed a slower 57k pace of jobless gain in April (the smallest rise since October last year), but in Q1 (on the separate household survey) a very steep job loss of 157k, the steepest quarterly decline in employment yet this cycle. Consequently the household survey jobless rate jumped sharply to 7.1%, its highest since 1997. The earnings data remained very soft.
Canadian trade surplus C$1.1bn in Mar. The trade balance has been back in surplus for two months, most recently in March when a 4.4% fall in imports outpaced a 1.8% fall in exports.
Outlook
Momentum remains upward for the NZD, and we expect 0.6100 to break today, followed by 0.6130. Much of last night’s chatter was USD negative, US equities were neutral, and there is no local data today. The monthly RBNZ Financial Stability Report will be released, but it seldom contains market moving items these days.
