The Asian session traded with a general risk-off feel to it with commodity-bloc currencies, and the EUR to a lesser extent, extending their recent bout of weakness. There were no major data releases to influence so it was equity markets that drove direction. Echoing the weakness seen on Wall St, Asian bourses were uniformly weak with the Nikkei leading the pack with 1.2 percent losses by lunchtime, closely followed by Shanghai and Sydney with -1.0 percent.
The only data release also indicated weakness for the UK economy with UK BRC like-for-like sales tumbling 3.3 percent y/y in April, the steepest fall in more than a year. A particularly wet April (the wettest since records began in 1910) destroyed buying interest in clothing, footwear (possibly not wellies!) and gardening stuff but a bleak outlook for the economy (entered technical recession in Q1) is ensuring a cautious consumer. GBP traded weaker on the day, in line with other currencies.
There was quite respectable demand for the US Treasury’s 3-year auction yesterday with the bid/cover ratio for the $32 bln on offer rising to 3.65 from 3.36. The yield dipped to 0.362 percent from 0.427 percent yet the USD still managed to eke out small gains versus the index. There is another $24 bln worth of 10-year notes on auction today, which might give us a better gauge of demand.
The only positive for the EUR so far this week was the release of German industrial production for March, which rose more the three times expected to 2.8 percent m/m from a 1.3 percent decline in February. Coming on the heels of a similarly robust March factory orders number on Monday might suggest that the German export machine will prevent the economy from slipping into technical recession in Q1. The positive reaction in the EUR did not last long, however, with EURUSD peaking at the 1.3040 level before heading back below 1.30.
US data releases were secondary in nature and showed that confidence among small business is at a 14-month high in April, with companies expecting to increase both spending and hiring. The NFIB business optimism index rose to 94.5, its highest since February last year, up from 92.5 the previous month and better than the consensus 93.0. JOLTs job openings rose to their highest since 2008, with a spike to 3.74 million from a revised 3.57 million the previous month. The index of economic optimism from the IBD/TIPP was not quite as buoyant, slipping to 48.5 from 49.3 last but was better than the consensus 48.0.
Data Highlights
US Apr. NFIB Small Business Optimism out at 94.5 vs. 93.0 expected and 92.5 prior
CA Apr. Housing Starts out at 244.9k vs. 204k expected and revised 214.8k prior
US May IBD/TIPP Economic Optimism out at 48.5 vs. 48.0 expected and 49.3 prior
US Mar. JOLTs Job Openings out at 3,737 vs. revised 3,565 prior
UK Apr. BRC Like-for-like Sales out at -3.3% y/y vs. 0.6% expected and +1.3% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Leading/Coincident Indicators (0500)
GE Trade Balance (0600)
GE Current Account balance (0600)
EU ECB’s Constancio to speak (0730)
Sweden Avg. House Prices (0730)
US MBA Mortgage Applications (1100)
EU Bundesbank’s Weidmann to speak (1215)
US Fed’s Kocherlakota to speak (1400)
US Wholesale Inventories (1400)
US Fed’s Pianalto to speak (1445)
EU ECB’s Nowotny to speak (1500)
Andrew Robinson,
SAXO BANK