Global markets went into risk-off mode today with capital flowing out of risk markets like stocks, commodities and resource currencies and into traditional defensive plays like USD, JPY and CHF.
European indices finished the day significantly lower with the FTSE down 0.9%, the Dax down 1.9% and the IBEX down 2.9% as Spain called a new election for June 26 to try and resolve a political impasse.
US indices started the day lower as well but managed to rebound and claw back some of their losses in the afternoon before fading into the close to finish down about 1%. On both sides of the border Energy, Materials and Financials were hit the hardest which could leave Australian stocks vulnerable to a correction of yesterday’s gains.
Selloffs in energy and copper also impacted resource stocks plus resource currencies. AUD continued to lead the way down the drain as the commodity impact compounded the interest rate impact with NZD following suit, while CAD and NOK turned downward along with crude oil. Oil could be active around the upcoming API and DOE inventory reports.
The selloff sparked by yesterday’s surprise RBA interest rate cut and Australia GDP forecast downgrade was followed by other signs of a weakening world economy including UK manufacturing PMI diving under 50 into contraction territory and the EC cutting both its GDP and inflation forecasts for this year.
Two US Fed speakers Atlanta Fed President Lockhart and SF Fed President Williams, came out hawkish today with Lockhart calling June a live meeting and suggesting the street is underestimating the potential for a rate increase while Williams said a June increase could be appropriate if the data holds up. While these comments may have provided a headwind early on, in the afternoon they appear to have provided some solace to skittish traders as a US rate hike can also be seen as a vote of confidence in the US economy.
Because a June decision still hinges on data this week’s flurry of US economic announcements could move the markets including tomorrow’s ADP payrolls, factory orders and PMI figures plus nonfarm payrolls. Service PMI reports from around the world may also be closely scrutinized with traders looking for confirmation or rejection of weak manufacturing PMI reports.
NZD could be active today with a number of New Zealand economic reports on the way that could further highlight the divide between weak commodity markets and a strong housing market. Singapore may also attract attention on a better than expected manufacturing PMI report.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
Singapore PMI 49.8 vs street 49.5 Singapore electronics sector 49.5 vs street 49.0
US ISM New York 57.0 vs previous 50.4
EC EU GDP growth forecast cut to 1.6% from 1.8% EC EU inflation forecast cut to 0.2% from 1.0%
UK manufacturing PMI 49.2 vs street 51.2
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
TBA US Indiana primary results
8:45 am AEST NZ employment change street 1.3% 8:45 am AEST NZ unemployment rate street 5.5% vs previous 5.3% 8:45 am AEST NZ average hourly earnings street 0.5% vs previous 0.2% 10:00 am AEST NZ QV house prices previous 11.4% 11:00 am AEST NZ ANZ commodity prices previous (1.3%)
12:00 am BST UK BRC shop prices street (1.7%) 8:00 am BST Spain employment change street (81K) vs previous (57K) 10:00 am BST Eurozone retail sales street 2.6%
8:15 am EDT US ADP payrolls street 195K
8:30 am EDT US trade balance street ($41.1B) 8:30 am EDT Canada trade balance street ($1.4B)
10:00 am EDT US factory orders street 0.6% 10:00 am EDT US final durable goods orders street 0.8% 10:00 am EDT US final durables ex transport street (0.1%)
10:30 am EDT US DOE crude oil inventories street 0.75 mmbbls 10:30 am EDT US DOE gasoline inventories street (0.25 mmbbls)
Service PMI reports:
9:30 am AEST Australia previous 49.5 3:00 pm AEST India previous 54.3
7:30 am BST Sweden street 56.0 8:15 am BST Spain street 55.0 8:45 am BST Italy street 51.9 8:50 am BST France street 50.8 8:55 am BST Germany street 54.6
9:00 am BST Greece manufacturing previous 49.0 9:30 am BST UK construction street 54.0
9:45 am EDT US Markit street 52.1 10:00 am EDT US ISM street 54.7