has a consolidation day as stocks digested a number of regional and other economic reports that on balance still came in a bit soft. Although the data still suggests the Fed could remain on hold later in the year, it’s not weak enough to take the Fed off its path toward interest rate liftoff. With the potential for soft corporate earnings and markets heading into one of the historically seasonally weaker times of the year, traders appear reluctant to get really enthusiastic about this week’s new highs for the Dow and S&P. The NASDAQ actually outpaced its peers to the upside today in what could be seen as a catch up rally.
The main action on the day, however, was in the oil market where both WTI and Brent rallied again. The moves of about 3.0% were far more than could be explained by US Dollar weakness and suggest that traders continue to respond positively to another drop in US inventories. This drop combined with reports that China may be out looking for crude suggests that the supply demand imbalance that drove prices down could be improving a bit.
Looking ahead, there are still a number of potential developments that could move the markets before the weekend. Asia Pacific traders may key in on the Bank of Japan meeting. Although the Bank is widely expected to maintain its QE program at current levels, with GDP and flash PMI running above expectations, traders may be looking for signs of future tapering whether through an increase in hawkish dissenters from 1 at recent meetings or changes in economic forecasts. A hawkish turn could boost JPY especially relative to EUR a neutral to dovish stance could keep JPY on its heels especially relative to USD.
Friday also brings a number of significant reports from North America and Europe. Highlights include German GDP, US and Canada inflation and Canada retail sales, which could influence trading in EUR, USD and CAD.
It's also a big day for central bank talk with ECB President Draghi, Bank of England Governor Carney and FOMC Chair Yellen all scheduled to speak. GBP rallied Thursday following a strong UK retail sales report so traders may focus on Governor Carney’s speech for signs of whether the mid 2016 timetable for UK interest rates to start rising could be accelerated. Fed Chair Yellen may also attract attention for traders wondering if she may confirm whether a June rate hike is off the table or not.
With Monday being a holiday in the US and UK, we could see some position squaring before their long weekend.
Hewlett Packard $0.87 vs street $0.86
Intuit $2.85 vs street $2.75
Gap $0.56 vs street $0.55
Significant announcements released overnight include:
US jobless claims 274K vs street 270K
US flash manufacturing PMI 53.8 vs street 54.5
US Philadelphia Fed 6.7 vs street 8.0
US Kansas City Fed (13) vs street (4)
US existing home sales 5.04M vs street 5 23M
US leading index 0.7% vs street 0.3%
US natural gas 92 BCF vs street 96 BCF
France flash manufacturing PMI 49.3 vs street 48.5
France flash service PMI 51.6 vs street 51.9
Germany flash manufacturing PMI 51.4 vs street 52.0
Germany flash service PMI 52.9 vs street 53.9
Eurozone flash manufacturing PMI 52.3 vs street 51.8
Eurozone flash service PMI 53.3 vs street 53.9
UK retail sales 4.7% vs street 3.7% vs previous 4.2%
UK retail ex auto and fuel 4.7% vs street 3.7% vs previous 5.0%
Upcoming significant announcements include:
11:00 am AEST New Zealand ANZ consumer confidence previous 128.8
Approx 2:00 pm AEST Bank of Japan meeting no changes expected
7:00 am BST Germany GDP street 1.1%
9:00 am BST Germany IFO business climate street 108.3
9:00 am BST Germany IFO current assessment street 113.5
9:00 am BST Germany IFO expectations street 103.0
9:00 am BST ECB President Draghi speaking
10:00 am BST Italy retail sales street 0.4%
12:00 pm BST Bank of England Governor Carney speaking
8:30 am EDT US consumer prices street (0.2%)
8:30 am EDT US CPI ex food and energy street 1.7%
8:30 am EDT US real average weekly earnings previous 2.2%
8:30 am EDT Canada consumer prices street 1.0%
8:30 am EDT Canada core CPI street 2.4%
8:30 am EDT Canada retail sales street 0.3%
8:30 am EDT Canada retail ex auto street 0.4%
1:00 pm EDT US Baker Hughes Drill Rig Count previous 888
1:00 pm EDT US FOMC Chair Yellen speaking