An increase in risk appetite of the past couple of weeks has pulled bond yields and equity markets higher. A breakdown on gold has also been a reflection of this improvement in sentiment. This has come amidst seeming traction towards agreement on trade between the US and China. However, there has also been an improvement in economic data out of China. How major economies respond to a slow first quarter of 2019 is a key theme across global markets. As Chinese data has picked up following fiscal and monetary stimulus this is allowing traders to feel more confident for the months ahead. The focus will now be on how the Eurozone is reacting to this improvement. Flash PMIs for April will give a key indication of this. Coming into today’s session, there has been a slip back on yields, whilst equities futures are also dropping back. Perhaps Easter is an opportunity to lock in a few profits, and there is little suggestion as yet that this is a turning point. One area to potentially show some outperformance today is in the Australian dollar, with employment positive news out of Australia helping to support the Aussie. Australian unemployment may have ticked up to 5.0% (5.0% exp, 4.9% last) but with employment growth better than expected at 25,700 (+12,000 exp, +4,600 last) this is seen as key. The RBA is focusing on the labour market for its assessment of monetary policy. This data will reduce expectation of a rate cut.
Wall Street closed mildly lower last night, with the S&P 500 -0.2% at 2900, whilst US futures are lower by -0.2%. In Asia there has been a slight slip with the Nikkei -09% and the Shanghai Composite -0.3%. European markets are also a shade lower, with FTSE futures -0.1% and DAX futures -0.3%. In forex, there is a mild gain for the Japanese yen, whilst the Aussie is also outperforming on the employment data. In commodities, gold continues to slide to multi month lows, whilst oil remains in its consolidation of the past week.
The flash PMIs are in focus on the economic calendar today to give a look at how Q2 is shaping up. The Eurozone numbers for April are first up at 0900BST. Flash Eurozone Manufacturing PMI is expected to improve slightly to 47.9 (form 47.5 in March). Flash Eurozone Services PMI is expected to slip a touch to 53.2 (from an upwardly revised 53.3 in March). This would mean the Flash Eurozone Composite PMI is expected to improve slightly to 51.8 (from 51.6 in March). UK Retail Sales for March are at 0930BST and are expected to show a monthly decline of -0.3% on ex-fuel sales, although the Year on Year numbers would improve to +4.0% (from +3.8% in February). A swath of US data kicks off with Weekly Jobless Claims at 1330BST which are expected to increase slightly to 205,000 from a 49 year low of 196,000 last week. The Philly Fed Business Index is at 13330BST and is expected to slip back slightly to +10.4 (from +13.7) which would continue the recent trend lower. The US Flash PMIs are at 1445BST. US Flash Manufacturing PMI is expected to improve slightly to 52.8 (from 52.4 in March). US Flash Services PMI is expected to slip slightly to 55.0 (from 55.3 last month).
Chart of the Day – NZD/USD
As the Aussie continues to outperform, the Kiwi is a struggle. Yesterday’s weak New Zealand inflation numbers piled on the pressure (see the hourly chart spike) and an intraday downside break to a three month low ensued. For months, there has been a basis of a pivot at $0.6700/$0.6720. Although the market rebounded into the close, the sharp intraday breach of support is a big warning shot for Kiwi bulls. A close below $0.6700 would be a confirmed downside break and open a move back towards $0.6590, the December low. Momentum indicators are on the brink, with the MACD lines set for a bear kiss lower below neutral.