Risk appetite exploded higher at the start of Asian trading today after China announced some stellar (or should we say unbelievable!) PMI data for March yesterday. The official China PMI rose to 53.1 from 51.0 (50.8 expected) and was the fastest pace of expansion in 12 months and the fourth consecutive month above the key 50 threshold. However, as my colleague Steen Jakobsen points out, there is some skepticism surrounding the data, especially considering the “alternative” HSBC reading showed deterioration to 48.3 from 49.6.
Nevertheless, AUD and other currencies gapped higher as risk took off with the former benefitting from a perceived view of less chance of a cut at tomorrow’s RBA meeting. However, it was interesting to note that the AUD bank bills market showed a muted reaction to this idea and this was one of the factors pulling the AUD back from its early highs.
In other data, Japan’s Q1 Tankan survey failed to impress with large manufacturers especially pessimistic, both on the current index and outlook surveys. This came despite the JPY’s extended weakness during the quarter and suggests that Japanese corporate are less impressed with the prospect of an economic rebound than Japanese officials. USDJPY continued its gains through the 83.0 mark early in the session and held above it for the rest.
From Australia the data releases were also uninspiring. The manufacturing PMI slipped back below the 50 mark again, falling to 49.5 having spent three months above it, reminding us of the very weak footing most sectors of the Australian economy have aside from the mining sector. The breakdown of the data showed output, new orders and supplier deliveries sub-indices falling but rises for employment and inventories. The former might bode well for Thursday’s employment report but all indications are that the RBA will remain on hold at tomorrow’s rate meeting. Inflationary pressures remained subdued in March with the TD Securities gauge indicating a faster m/m increase of 0.5 percent (from 0.1 percent) but a slower 1.8 percent annual increase from 2.0 percent last month.
It was a relatively calm end to the week on Friday though the US dollar did perk up towards the close as US yields ticked higher on month/quarter-end selling. The AUD had suffered the most despite rumours of a much better China PMI reading (borne out later, see above) as risk appetite was pared back. The EUR held the 1.33 handle as the EU announced increased size in rescue funds (€800 bln but new ceiling includes past loan commitments).
On the US front, Q4 GDP was unchanged from earlier estimates while February’s personal income data fell below forecasts (+0.2 percent m/m, unchanged from a downwardly-revised 0.2 percent the previous month and personal spending rose above consensus, coming in at +0.8 percent m/m versus 0.6 percent (signs of a more confident consumer?). Other data was mixed with the Chicago PMI disappointing slightly at 62.2 versus 63.0 expected but final Michigan confidence rose to 76.2 from 74.5, though month- and quarter-end factors meant the data’s impact on markets was limited.
Data Highlights
CA Jan. GDP out at +0.1% m/m, +1.7% y/y, both as expected vs. revised 0.5%/1.9% prior resp.
US Feb. Personal Income out at +0.2% m/m vs. 0.4% expected and revised 0.2% prior
US Feb. Personal Spending out at +0.8% m/m vs. 0.6% expected and revised 0.4% prior
US Mar. Chicago PMI out at 62.2 vs. 63.0 expected and 64.0 prior
US Mar. Final Michigan Confidence out at 76.2 vs. 74.5 expected and 74.3 prior
US Mar. NAPM – Milwaukee out at 51.8 vs. 58.0 expected and 58.6 prior
China Mar. Manufacturing PMI out at 53.1 vs. 50.8 expected and 51.0 prior
China Mar. HSBC Manufacturing PMI out at 48.3 vs. 49.6 prior
UK Mar. Business Barometer out at +31 vs. +1 prior
UK Mar. Hometrack Housing Survey out at +0.2% m/m, -1.0% y/y vs. flat/-1.4% prior resp.
AU Mar. AiG Performance of Manufacturing out at 49.5 vs. 51.3 prior
JP Q1 Lge Manufacturers’ Index out at -4 vs. -1 expected and -4 prior
JP Q1 Tankan Lge Manufacturers’ Outlook out at -3 vs. +2 expected and -5 prior
JP Q1 Tankan Non-manufacturing out at +5, as expected vs. +4 prior
JP Q1 Tankan Non-manufacturing Outlook out at +5 vs. +6 expected and 0 prior
JP Q1 Capital Expenditure out at flat vs. +0.8% expected and +1.4% prior
AU Feb. RPData-Rismark House Prices out at +0.2% m/m vs. +0.8% prior
AU Mar. TD Securities Inflation out at +0.5% m/m, +1.8% y/y vs. 0.1%/2.0% prior resp.
AU Feb. Building Approvals out at -7.8% m/m, -15.2% y/y vs. +0.5%/-5.3% expected and revised +1.1%/-14.7% prior resp.
Upcoming Economic Calendar Highlights
(All Times GMT)
Sweden Swedbank PMI Survey (0630)
Swiss Retail Sales (0715)
Swiss PMI Manufacturing (0730)
GE PMOI Manufacturing (0800)
Norway Credit Indicator Growth (0800)
EU PMI Manufacturing (0800)
UK PMI Manufacturing (0830)
EU Euro-zone Unemployment rate (0900)
US Fed’s Bullard to speak (1400)
US Construction Spending (1400)
US ISM Manufacturing (1400)
US ISM Prices Paid (1400)
CA BOC’s Carney to speak (1615)
US Fed’s Pianalto to speak (1635)
Andrew Robinson,
SAXO BANK