Macro Wrap
After the Chinese GDP “miss” on Friday, the dataflow that night comprised two tranches: some European industrial production and inflation figures and US consumer figures, including CPI and sentiment, before a speech by Fed Chairman Ben Bernanke. German CPI was bang on consensus – 0.3% for March , 2.1% year on year – same as the previous month as the European dynamo stablises. Unfortunately Italian industrial production figures were a big shock, dropping 0.7% in February, or nearly 7% for the year, on expectations of a minor drop of only 0.2% for the month:
This was followed by Italian CPI, which remains high at 0.5% for March, or 3.3% year on year, whilst UK producer price index rose 3.6% for the year to March, with the underlying strength due to higher fuel prices.
Finally to the market moving US Consumer Price Index, which rose 0.3% in March, and 2.6% over the year in line with expectations, and generally easing. Consumer sentiment figures were stable, but muted.
In other macro news, the Chinese central bank noted that daily trading range of its controlled currency, the yuan, will be doubled to plus or minus 1 percent from current 0.5%, in another move designed to encourage more liquidity in the worlds 2nd (soon to be 1st?) largest economy.
Market Update
So with all that to digest – what happened on the markets? European shares resumed sharp losses, as I pointed out in Trading Week, mainly from the financial sector, with banks hit hard, the “periphery” Spanish and Italian bourses – and bonds – both seeing very large sell offs. The US soon followed and responded in kind, as a new round of earnings kicked off, with nearly a quarter of the S&P500 and a third of the Dow Jones Industrial Average reporting this week. (US report quarterly compared to Australian six monthly)
Bonds rallied – the “safe” ones at least, whilst risk ran away from commodities, particularly base metals. Currencies responded similarly, returning to king US Dollar.
See charts of all major markets at bottom of post.
Bonds:
- US 10 year Treasury were bid up strongly, yields falling by nearly 7 pips to be at 1.98%
- German 10 year bunds saw the same, falling 5 pips to 1.73%
- Spanish 10 year bonds were sold off strongly gain, yields gaining 15 pips now at 5.94% whilst Italian 10 years were not far behind, yields up 12 pips to 5.49%
- Australian 10 year government bonds remain steady at 3.82%
Currencies:
- King USD was up against all the majors (except NZD strangely) with the dollar index DXY up 0.6 at 79.88 points
- Euro fell to 1.3078 and continues to look weak
- AUD was also sold off to 1.037 where it remains at the start of Asian trading.
Equities:
- The broader Euro Stoxx 50 fell sharply, down over 2.5% to 2352 points
- The FTSE 100 fell just 1% to 5651, whilst German DAX was off 2.3% to 6583 points
- The FTSE MIB Italian slumped 3.4% to 14359, now down nearly 5% for the year, whilst the Spanish IBEX35 was off 3.5%, down 15% for the year
- US markets were relatively better with the S&P 500 down only 1.2% at 1370, the Dow Jones Industrial Average losing 1% to 12849
- Apple (AAPL) fell over $17 a share to $605.23
Commodities:
- Oil prices slipped with ICE Brent futures down by $0.31 a barrel to $121.21 per barrel – with NYMEX WTI crude off further, nearly 1% to $102.83USD per barrel, whilst natural gas was flat at $1.98, having fallen 334% YTD
- Gold (USD) fell over 1% on the broader risk off move down $17USD an ounce, settling at $1658USD an ounce as we wait the start of the Asian session, with silver losing nearly 3% to $31.52 an ounce, and base metals on the London Metals Exchange fell, aluminium down 1.6% and copper down nearly 3%
- Iron ore import prices into China continue to climb, up to $US 149.4 per metric tonne on Friday from 148.8
Today in Asia
- As Asia wakes up to the risk-off story the ASX200 futures are pointing to a lower open, and back below resistance again, down around 30 points to 4290 points.
- Data today locally includes the release of the April monetary policy minutes from the RBA followed by motor vehicle sales for March. Regionally, eyes are on Japanese industrial numbers. Click here for our economic calendar.
Market Charts
| AUD_USD | EUR_USD |
| US DOLLAR INDEX | GOLD USD |
| S&P500 | VIX VOLATILITY |
| DAX 30 | SPOT BRENT CRUDE |
| RJ/CRB COMMODITY INDEX | CHINA IMPORT IRON ORE |
Sovereign 10 year bond yields
| UK | USA |
| JAPAN | |
| GREECE | IRELAND |
| SPAIN | ITALY |
| FRANCE | GERMANY |
| PORTUGAL | AUSTRALIA |
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