News this morning of terrorist attacks in Brussels on the airport and a Metro station sent shockwaves through world markets this morning. Initial reports of the blasts sparked a rush of capital from risk markets into defensive havens, in other worlds out of indices and into gold, the Yen and to a lesser extent, USD and CHF.
As the morning has progressed, the initial moves have subsided a bit with markets reversing back from their early highs or lows. Belgium’s index is down only 0.2% while other European bourses like the FTSE and DAX are down about 0.5%. US index futures for the Dow and S&P are trading down 0.3%-0.5% so far today.
We could see a more lasting impact in specific stocks and sectors. Airlines in Europe are falling with Air France down 4.7% and IAG, owner of British Airways down 3.0%. In North America today, American Airlines could come under particular pressure as one of the airport explosions was apparently near its departure counter, but other airlines that fly overseas could be impacted as well. In Canada, Transat and Air Canada could see a bigger impact than the more North America focused Westjet.
One would think that security companies could rally on a day like this but G4S in the UK is trading down about 1.5% on the day. It’s possible that considering Brussels has been on high alert for a terrorist attack for some time, forces were likely on alert following the arrest in Brussels of a key terrorist suspect yesterday, and yet a big attack still happened, the limits of security appear to have been exposed and traders may be seeing this tragic event as a sign more security may not be the answer.
On the topic of security, Apple could be active again today on reports that government officials may have found a way around its security putting the current court case demanding the iPhone maker open its security to government agencies on hold. Apple may also continue to see reaction to yesterday’s new cheaper mainstream product announcements which underwhelmed traders yesterday afternoon.
The economic news of the day has been overshadowed by today’s events in Brussels. Overnight news has been mixed. Flash manufacturing PMI reports for Germany, Japan and France were below expectations and some fell below 50 indicating the manufacturing sector may be falling back into recession, but flash service PMI reports beat the street. In Germany, IFO survey results were better than expected while ZEW survey results were worse than expected indicating business are more confident about the economy than investors. GBP is falling again today after UK inflation came in below expectations (except for house prices) reducing even further the potential for a rate hike out of the Bank of England this year.
Later this morning, US flash PMI is due while comments from Chicago Fed President Evans may give a better indication of how committed the dovish camp at the Fed is relative to other factions who have been trying to suggest April could still be a live meeting for a rate hike despite last week’s dovish signals. In Canada, it’s federal budget day which could impact specific sectors with increased infrastructure spending expected which could impact the construction and engineering sectors. API crude oil inventories late in the day may influence trading in crude oil.
There have been no major corporate announcements in North America this morning.
Significant announcements released overnight include:
UK consumer prices 0.3% vs street 0.4%
UK core CPI 1.2% as expected
UK retail prices 1.3% as expected
UK producer input prices (8.1%) vs street (7.4%)
UK producer output prices (1.1%) vs street (1.2%)
UK ONS house prices 7.9% vs previous 6.7%
Japan flash manufacturing PMI 49.1 vs street 50.5
France flash manufacturing PMI 49.6 vs street 50.2
France flash service PMI 51.2 vs street 49.5
Germany flash manufacturing PMI 50.4 vs street 50.8
Germany flash service PMI 55.5 vs street 55.0
Germany IFO business climate 106.7 vs street 106.0
Germany IFO current assessment 113.8 vs street 112.7
Germany IFO expectations 100.0 vs street 99.5
Germany ZEW current situation 50.7 vs street 53.0
Germany ZEW expectations 10.6 vs street 5.4
Upcoming significant announcements include:
9:00 am EDT US FHFA house prices street 0.5% over month
9:45 am EDT US Flash manufacturing PMI street 51.9
10:00 am EDT US Richmond Fed street 0 vs previous (4)
12:30 pm EDT FOMC Evans speaking
4:00 pm EDT Canada Morneau federal budget
4:30 pm EDT US API crude oil inventories