A surprise jump and better than expected Chinese PMI surveys have boosted market appetite for risk this morning as traders begin the second quarter on a positive note. The official Chinese composite PMI improved to 54.0 (from 52.4 in February) whilst even the unofficial Caixin data for the manufacturing sector surprisingly bounced back into expansion back above 50 (to 50.8). These surprises suggest that the fiscal stimulus that the Chinese government has injected around the turn of the year is beginning to reap rewards. After three consecutive months of declining PMIs, one month needs to be turned into several, but it is certainly welcome news after a string of data disappointments out of the economic powerhouse of Asia. This data surprise is helping to lift major bond yields and commodities whilst also boosting risk currencies (such as the Aussie and Kiwi). The safer end of the scale such as the dollar and especially the Japanese yen are underperforming. With improved risk we see equities also benefitting. It is another key day for Brexit, where the UK Parliament again gets a say in the potential way to end the log jam. Another session where the indicative votes on potential Brexit solutions (customs union, second referendum) will be debated and voted upon in an attempt to garner a majority of support from MPs and find an acceptable resolution to the puzzle that has proved so hard to solve.
Wall Street closed solidly higher with the S&P 500 +0.7% at 2834 whilst US futures are similarly higher today. Asian markets have had an excellent day in the wake of the Chinese PMIs, with the Nikkei +1.3% and Shanghai Composite +2.5%. European markets look to be positive today, with FTSE futures +0.4% and an outperformance on the DAX futures +1.0% as the exposure to risk seems to be benefitting. In forex, the broad move is for positive risk appetite, with the Aussie and Kiwi around 0.4%, whilst the yen and Swiss franc are underperforming. In commodities, there is a slight slip on gold and silver, whilst oil is benefitting from the positive sentiment.
Being the first day of the month, this is a hectic day on the economic calendar. The Eurozone final Manufacturing PMI for March is at 0900BST and is expected to be confirmed at a very weak 47.6 (47.6 flash, 49.3 final February). The UK Manufacturing PMI is at 0930BST which is expected to fall back to 51.0 (from 52.0 in February). Eurozone flash inflation for March is at 1000BST which is expected to see Eurozone headline HICP remaining at +1.5% (+1.5% in February) with Eurozone core HICP slipping back to +0.9% (from +1.0% in February). US Retail Sales are at 1330BST which are expected to show core retail sales, ex-fuel to rise by +0.4% in the month of February (+0.9% in January). The US ISM Manufacturing at 1500BST is expected to drop a shade lower to 54.1 (form 54.2 in February).
Chart of the Day – EUR/CAD
The euro has come under pressure in the past week and EUR/CAD has subsequently broken to a one month low and is moving back towards a test of the key February low at $1.4870. This move below the basis of support of the pivot at 1.5030, which had held throughout much of March, now means that the way is open for further weakness. The decisive negative c