USD sinks, stocks pause as traders prepare for PMI and payrolls

It's the last day of the month and of the quarter and market action so far shows traders around the world taking profits and squaring in markets which have rallied over the last six weeks. Asia Pacific trading was mixed with Chinese markets flat, the Nikkei falling 0.7% and Australia climbing 1.4%. European markets are tumbling this morning with the FTSE and Dax down 0.6% but other continental indices are getting hit harder with the CAC down 1.2% and Italy’s FTSEMIB down 1.8%. US index futures meanwhile remain well supported with Dow and S&P futures up 0.1%.

The impact of Fed comments this week from FOMC Chair Yellen and Chicago Fed President Evans confirming the central bank is forecasting 2 rate hikes this year rather than 4 while seen as dovish, has also helped to clear the air and clarify expectations. Not only has this helped to build support for US shares in terms of ongoing cheap money but it has been knocking USD back, taking some of the pressure off of US corporate earnings prospects.

There have been a lot of economic reports out overnight, particularly from Europe. Although inflation there remains subdued, there were significant signs of life too with UK GDP, Germany retail sales and France consumer spending coming in well above expectations.  This news has propelled gains for GBP and continental currencies like EUR, CHF, SEK and NOK today which have moved toward the top of the league standings.

Gold is also benefitting from the falling USD. Trading in crude oil is mixed with WTI down slightly and Brent up slightly while copper is down slightly as commodity markets digest the big moves of recent weeks.

Over the last hour or so, stocks and oil have started to move higher again, and there is still a lot of significant news to come this week that could impact trading. Today brings Canadian GDP and US Chicago PMI reports with manufacturing PMI reports from around the world overnight and into tomorrow morning heading into tomorrow’s big US nonfarm payrolls report.  

In Canada today, the restaurant sector could be active on the news that Cara has agreed to purchase Groupe St-Hubert, the Québec focused competitor to Swiss Chalet and food producer, for $537 million. Traders could speculate on whether this is the start of another round of consolidation in the food service sector.


Corporate News

There have been no major announcements in North America so far today.

Economic News

Significant announcements released overnight include:

UK Q4 GDP update            2.1% vs street 1.9%
UK Lloyds Business Barometer        43 vs previous 28
UK GfK consumer confidence        0 vs street (1)

Germany unemployment change    0K vs street (6K)
Germany unemployment rate        6.2% as expected

Germany retail sales            5.4% vs street 2.2%
Spain retail sales            3.9% vs street 4.0%
Norway retail sales            (0.5%) vs street (0.2%)
Greece retail sales            (3.8%) vs previous (0.2%)

Eurozone consumer prices        (0.1%) as expected
Eurozone core CPI            1.0% vs street 0.9%
France consumer prices            (0.2%) vs street (0.1%)
Spain consumer prices            (0.8%) as expected
Italy consumer prices            (0.3%) vs street (0.2%)

France consumer spending        1.8% vs street 0.9%

Japan housing starts            7.8% vs street (2.4%)
Japan construction orders        (12.4%) vs previous (13.8%)

Australia new home sales        (5.3%) vs previous 3.1%
NZ ANZ activity outlook            29.4 vs previous 25.5
NZ ANZ business confidence        3.2 vs previous 7.1


Upcoming significant announcements include:

8:30 am EDT        Canada Jan GDP        street 1.1% vs previous 0.5%

8:30 am EDT        US jobless claims        street 265K

9:45 am EDT        US Chicago PMI        street 50.8 vs previous 47.6
10:30 am EDT        US natural gas            street (20 BCF)

9:30 am EDT        FOMC Evans speaking
5:00 pm EDT        FOMC Dudley speaking