A new week, month and quarter weren’t enough to shake the market blues as indices in North America and Europe tumbled into the new quarter. Crude oil slumped back toward $50.00 which held, but the FTSE
continued to decline. The Dax reversed an early pop to a new high in what looks like a bearish key reversal or buying climax, while indices in Spain and Italy lost over 1.0%.
A round of neutral to disappointing economic news set a tone of disappointment for the day. Manufacturing PMI reports for most countries were in line or slightly below expectations, with Canada and Norway two positive exceptions. Even then, the loonie responded more to action in oil. US construction spending did not bounce back as much as expected either although the previous month was revised upward, which partially offset that.
The auto sector attracted particular attention today. Tesla Motors gained 5.6% after announcing it delivered 25,000 vehicles last quarter, above street expectations. In contrast, Ford reported 7% decline over year in March sales. In what could be a classic warning sign or a sign of the times, Tesla has passed Ford in market cap.
In currency action, Sterling came under pressure following a dustup between the UK and the EU over the weekend over whether Spain could block Brexit over Gibraltar while Spain also publicly supported Scottish separation from the UK. Although formal negotiations are unlikely to start fo another 6-8 weeks, it’s clear the war of words could still move markets around quite a bit between now and then. Both countries may continue to attract attention tomorrow with UK construction PMI and Spanish employment on the schedule.
For today’s Asia Pacific trading, the spotlight is clearly on Australia with the RBA meeting. The Australian Dollar popped after last month’s meeting, but has been falling over the last two weeks. With Australia employment, manufacturing and construction PMI and retail sales all disappointing in recent weeks, it appears trades are expecting a neutral to dovish central bank. Trading in the upper half of a $0.7200 to $0.7800 range, it’s possible Governor Lowe could try to talk the dollar down in the statement as well. The areas that could keep the central bank in neutral are housing and inflation as prices have been on the rise lately.
For North America tomorrow the focus is on trade and manufacturing with US and Canada trade balances plus US factory orders and the update to durable goods orders due.
There have been no major corporate reports after the US close today.
Significant announcements released overnight include:
US construction spending 0.8% vs street 1.0%
US construction spending last month revised up to (0.4%) from (1.0%)
Manufacturing PMI reports:
Canada 55.5 vs previous 54.7
US Markit 53.3 vs street 53.5
US ISM PMI 57.2 as expected vs previous 57.7
US ISM prices 70.5 vs previous 66.0
US ISM new orders 64.5 vs previous 65.1
US ISM employment 58.9 vs previous 54.2
UK 54.2 vs street 55.0
Germany 58.3 as expected
France 53.3 vs street 53.4
Spain 53.9 vs street 54.7
Italy 55.7 vs street 55.1
Norway 54.7 vs street 52.8
Greece 46.7 vs previous 47.7
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)
11:30 am AEDT Australia trade balance street $1.9B
2:30 pm AEDT Australia RBA interest rate 1.50% no change expected
8:00 am BST Spain unemployment street (41K)
9:30 am BST UK construction PMI street 52.5
10:00 am BST Eurozone retail sales street 1.0%
8:30 am EDT Canada trade balance street 0.55B
8:30 am EDT US trade balance street ($44.5B)
10:00 am EDT US factory orders street 1.0%
4:30 pm EDT FOMC Tarullo speaking