China selloff follow through in focus as stocks and oil rally
All eyes may be on Chinese markets this morning looking to see if yesterday’s selloff was a sign of things to come or the bears’ last stand. A month ago, big plunges in Chinese indices sent shockwaves around the world.
Yesterday’s drop, however, was mainly contained to the mainland and Hong Kong as markets in Europe and North America saw the drop as an aftershock and continued on their recovery ways. Better than expected US durable goods orders indicated the US economy remains strong, keeping a potential March Fed rate increase on the table. Friday’s US GDP and core PCE inflation (a measure the Fed uses) reports along with speeches from permanent FOMC voters Powell and Brainard could keep the interest rate speculation pot boiling through to the weekend.
In addition to local stock market action, the G20 finance ministers meeting being held in China today and tomorrow could also have an influence in trading. While no fiscal support for the world economy is expected following comments from US treasury secretary Lew earlier this week, we could see discussions about negative interest rates and currency movements.
Crude oil had a roller coaster day but shrugged off an early trading correction to finish the day strong after Venezuela, Saudi Arabia, Qatar and Russia confirmed plans to hold another meeting in March to discuss production freezes. It’s still too early in the process to be thinking about production cuts, but the fact that they are even talking to each other is being seen as progress by the street.
Currency trading also shows that we may have passed the point of maximum bearishness and that a reversal appears to be underway. Both JPY and gold have been giving back ground and it increasingly looks like they both have completed double tops and gone into reverse with capital flowing out of defensive havens back into risk markets. AUD and NZD have been attracting renewed interest along with stocks and oil. NZD has picked up on better than expected trade figures including a surprise surplus.
CAD is coming off a very strong day which saw it break out of an ascending triangle against USD and pop against JPY and the still struggling GBP. The loonie ignored the downdraft in oil earlier in the day and continued to advance as black gold bounced back.
Kraft Heinz $1.88 vs street $1.70
Gap $0.57 vs street $0.56, guides neat year EPS to $2.20-$2.25 below street $2.40
Significant announcements released overnight include:
NZ trade balance $8M vs street ($271M)
US durable goods orders 4.9% vs street 2.7% and previous (5.0%)
US durables ex transport 1.8% vs street 0.3% and previous (1.0%)
US jobless claims 272K vs street 270K
US FHFA house prices 0.4% vs street 0.5%
US natural gas storage (117 BCF)street (144 BCF)
US Kansas City Fed (12) vs street (6)
UK GDP 1.9% as expected
Spain GDP 3.5% as expected
Germany consumer prices 0.4% as expected
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)
10:30 am AEDT Japan consumer prices street 0.0%
4:00 pm AEDT Singapore industrial production street (5.1%)
7:45 am GMT France GDP street 1.3%
7:45 am GMT France consumer prices street 0.0%
8:00 am GMT Spain consumer prices street (0.5%)
8:30 am GMT Sweden retail sales street 3.7%
9:00 am GMT Norway unemployment rate street 3.3%
1:00 pm GMT Germany consumer prices street 0.1%
8:30 am EST US advance goods trade blnce street ($61.2B)
8:30 am EST US Q4 GDP update street 0.4% vs previous 0.7%
8:30 am EST US Q4 personal consumption street 2.2%
8:30 am EST US Q4 core PCE inflation street 1.2%
8:30 am EST US personal income street 0.4%
8:30 am EST US personal spending street 0.3%
8:30 am EST US Jan core PCE inflation street 1.5%
10:00 am EST US consumer sentiment street 91.0
10:15 am EST FOMC Powell, Williams speaking
1:00 pm EST US Baker Hughes Drill rig count previous 514
1:30 pm EST FOMC Brainard speaking