The hangover from another EUR slide overnight could not be cured in the Asian session, with risk currencies content to hover near yesterday’s lows. As per yesterday, any hint of a rebound/retracement found a number of willing sellers.
Japan’s industrial production echoed weaker global sentiment with a below-forecast 0.2 percent m/m gain and a slower 13.4 percent increase from a year earlier (still distorted by the disaster-effect from March 2011). Certainly, as the impact of the post-earthquake rebuild fades there does not appear to be anything in the pipeline to take its place in the Japanese economy. A firmer JPY, rising to its highest versus the US dollar since mid-February this morning, is not helping either. This move again prompted the customary comments from Japanese finance minister Azumi and we can expect increased talk of further easing at the next BOJ meeting (June 15) near-term, should this continue.
There was further evidence of the two-speed nature of the Australian economy in today’s data releases. Investment in the mining sector continues apace, with a sharp increase in capital spending in the first quarter as private capital expenditure surged 6.1 percent q/q, well above the 4.0 percent consensus estimate and a very strong rebound from the -0.3 percent recorded in the last quarter of 2011. In contrast, home-building approvals declined for the second time in 3 months, falling a surprising 8.7 percent m/m in April and a hefty 24.1 percent from a year earlier. AUD traded to 6-month lows versus the US dollar post-data but failed to follow through to the downside, for now.
The EUR continued to trend lower overnight amid growing concerns about Spanish banks and the European banking system in general. There were pockets of small rebounds as chatter filtered through of the European Commission “envisaging” using ESM bailout funds directly for banks rather than sovereigns, but once it was apparent that the EC had no authority or means to implement such an idea the downtrend resumed. New 2012 lows as the hours progressed became the norm. USD remained well bid versus other currencies as well as month-end re-balancing flows appear to favour the greenback. The Swedish krone enhanced its status as a safe-haven currency with firm Q1 GDP and current account data supporting.
The only US data release was pending home sales for April, which were quite soft, down 5.5 percent m/m and rising at a slower 14.7 percent rate compared to a year earlier. Data and the European concerns were enough to see Wall St give back all of Tuesday’s gains with the DJIA falling 1.28 percent, S&P -1.43 percent and the Nasdaq -1.17 percent.
Data Highlights
US Apr. Pending Home Sales out at -5.5% m/m, +14.7% y/y vs. flat/22.0% expected and revised 3.8%/10.5% prior resp.
UK May GfK Consumer Confidence out at -29 vs. -32 expected and -31 prior
JP Apr. Industrial Production out at 0.2% m/m, 13.4% y/y vs. 0.5%/13.7% expected and 1.3%/14.2% prior resp.
NZ May NBNZ Business Activity Outlook out at 34.9 vs. 36.1 prior
NZ May Business Confidence out at 27.1 vs. 35.9 prior
AU Q1 Private Capital Expenditure out at +6.1% q/q vs. 4.0% expected and revised -0.7% prior
AU Apr. Private Sector Credit out at +0.4% m/m, +3.8% y/y vs. 0.3%/3.6% expected and 0.5%/3.4% prior resp.
AU Apr. Building Approvals out at -8.7% m/m, -24.1% y/y vs. 0.3%/-13.8% expected and revised 6.0%/-15.8% prior resp.
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Construction Orders (0500)
JP Housing Starts (0500)
Swiss GDP (0545)
GE Retail Sales (0600)
UK Nationwide House Prices (0600)
GE Unemployment Rate (0755)
Norway Retail Sales (0800)
Norway Unemployment Rate (0800)
EU Euro-zone CPI Estimate (0900)
US Challenger Job Cuts (1130)
CA C/a Balance (1230)
US Q1 GDP Revision (1230)
US Initial Jobless Claims (1230)
US Chicago PMI (1345)
US Bloomberg Consumer Comfort (1345)
US NAPM-Milwaukee (1400)
Andrew Robinson,
SAXO BANK