We saw a slight lull in the risk-off trade during today’s Asian session, but any rebound lacked momentum and depth, and there was a sense of willing sellers into any risk currency rally.
Data releases were second-tier in nature and had little impact on relatively quiet trading. Australian home loans approvals remained soft, but were slightly better than expectations, and indicating that the Oz housing sector continues to struggle. Consumer sentiment also remained weak, with the Westpac index falling 1.6 percent on-month, the second straight month of declines though not as dire as the -5.0 percent recorded last month. Weakness was concentrated in consumers’ assessment of their own finances, with the index on family finances sliding a further 14.4 percent from a year earlier after the prior survey’s 8.6 percent fall, while the measure for finances over the next 12mths declined 4.1 percent on top of March’s 4.5 percent decline. In contrast, consumers’ outlook on the economy over the next 12mths edged up by 0.8 percent after falling by 2.5 percent in March.
Data out of Japan was generally above consensus with machinery orders rising 4.8 percent m/m and 8.9 percent y/y while bank lending also showed growth picking up in March and marking its sixth increase in a row. Corporate funding appears to be finally showing signs of a welcome turnaround, as demand rises for reconstruction activity, while the report also showed that an increased number of firms have also been taking out loans to finance acquisitions abroad.
From today’s price action in Asia it is becoming apparent that the market is anticipating more depressing news and not willing to force any rebound. Where is this news likely to come from? Well, with Spanish yields pushing even higher overnight (we are now above levels prior to both LTRO events which may force Mr. Draghi to swallow some of his earlier words) and CDS prices rallying it would take something miraculous to turn that sentiment around. Meanwhile we have Fed chairman Bernanke trotting out his customary dovish rhetoric overnight while Fisher and Kocherlakota maintained their hawkish tendencies.
Elsewhere, authorities appear to be talking down economic growth prospects across the globe. Banque de France sees Q1 growth close to zero while Canada’s finance minister Flaherty only sees moderate Canadian growth this year with a patchy recovery threatened by developments in Europe.
The list of factors prompting the risk-off trade overnight was long – weak equity markets (despite better results from Alcoa after hours), the Spanish flu, soft commodity prices dragging the commodity-bloc currencies lower, while the IMF is reportedly set to lower its forecasts for China’s medium-term current account surplus (report due April 17). Asian bourses remained in the red on the back of Wall St’s weak performance and the prevailing risk-off mood is likely to continue today.
Data Highlights
US Mar. NFIB Small Business Optimism out at 92.5 vs. 95.0 expected and 94.3 prior
US Apr. IBD/TIPP Economic Optimism out at 49.3 vs. 48.5 expected and 47.5 prior
US Feb. JOLTs Job Openings out at 3498 vs. revised 3477 prior
US Feb. Wholesale Inventories out at +0.9% m/m vs. +0.5% expected and revised +0.6% prior
NZ Q1 NZIER Business Opinion Survey out at +13 vs. 0 prior
UK Mar. BRC Sales Like-for-Like out at +1.3% y/y vs. flat expected and -0.3% prior
JP Mar. Bank Lending out at +0.9% y/y vs. 0.7% expected and 0.8% prior
JP Feb. Machine Orders out at +4.8% m/m, +8.9% y/y vs. -0.8%/3.0% expected and 3.4%/5.7% prior resp.
AU Apr. Westpac Consumer Confidence out at -1.6% m/m vs. -5.0% prior
AU Feb. Home Loans out at -2.5% m/m vs. -4.0% expected and revised -1.1% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
GE Wholesale Price Index (0600)
Norway Industrial Production (0800)
US Fed’s Lockhart to speak (1130)
CA Housing Starts (1215)
US Import Price Index (1230)
US Fed’s George to speak (1330)
US Fed’s Rosengren to speak (1430)
US Fed’s Beige Book (1800)
US Monthly Budget Statement (1800)
Andrew Robinson,
SAXO BANK