Equity markets are set to finish the week on a high note as data in the US and Japan calms recent jitters. Accelerating production in the private sector in the US gave investors confidence that the modest economic recovery continues. April CPI in Japan remains in negative territory but showed improvement from the March reading, suggesting the “whatever it takes” attitude of the new government’s coordinated stimulus may at last be gaining traction in the Japanese economy. However, gains are likely moderated by the official read on China PMI due Saturday. US Q1 GDP missed by 0.1%, coming in at 2.4% pa. However, markets drew comfort from the breakdown – after allowing for the drag on GDP from the reduction in government activity, the private sector expanded at around 3.6% pa, supporting further earnings gains in the corporate sector. Major indices shook off weaker than expected jobless claims to record gains, led by financial stocks. The technology sector overcame doubts to bolster the overall performance, making the Nasdaq the best performer at + 0.7%. Negative inflation in Japan is moving in the right direction, with April’s fall of 0.7% pa comparing well with March’s 0.9% pa. These reads were in line with expectations, but a positive surprise on Industrial Production (up 1.7% in April vs expectations at 0.6%) built on the 0.9% lift in the previous month. The Nikkei is up more than 200 points, or 1.7%. Gold featured, rallying more than 3% from U$1,376 to touch levels above $1,420. This morning, European traders will look to German retail sales (f/c + 0.2%, previous -0.3%) and Euro zone CPI and Unemployment releases to confirm an improving situation. Unemployment in April is expected to deteriorate to 12.2% from 12.1% previously, but inflation estimates for May are forecast to lift to 1.4% from1.2% pa in April. Globally, the key number is likely to be China manufacturing PMI. Flash estimates pushed into contraction territory at 49.6, dragging forecasts for Saturday’s official read to the knife edge at 50. EURUSD is pushing up against key resistance at 1.0340, with a breakthrough potentially signalling moves towards 1.3200. Failure at these levels may bring a test of the support at 1.2800 over coming trading days. GBPUSD continues the rebound from 1.5000, touching 1.5240 in overnight trade. 1.5280 remains a key resistance, and any weakness could see a return to support levels just above 1.5100. Money supply and credit numbers this morning may be a trigger. USDJPY pressure reversed overnight with a move up to 101.80. Trading through the session high could bring 102.40 intro play. 99.80 is key support, with a move through highlighting potential for a tumble to 98.50 Equity market calls FTSE100 is expected to open 2 points higher at 6,638 DAX is expected to open 61 points higher at 8,399 CAC40 is expected to open 21 points higher at 3,987
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