The positive momentum coming out of yesterday’s Asia Pacific trading has accelerated through the US and European sessions with strong economic reports out of North America boosting stocks and pulling capital out of defensive havens.
While Asia Pacific and European manufacturing PMI reports, North American reports were much better than expected with the US coming in above expectations and Canada improving over the previous months. This news continues a string of much better than expected US economic numbers pointing to a robust economy and keeping a March Fed rate hike on the table.
I know bonds are pricing in a low percentage of a rate increase this time and NY Fed President Dudley remains dovish but the USD Index hanging around just below 100.00 indicates currency traders still expect several rate hikes this year. Whose cuisine will be supreme? Upcoming ADP and nonfarm payrolls reports plus the Beige Book may give a better idea of where the Fed could be heading and keep trading active.
US construction spending was also a lot stronger than expected which also helped stock markets to power forward into March. Enthusiasm was catchy as 2%-3% gains for US indices
were matched by similar advances in Europe. Canadian stocks rose 1.4% on the day led by a 6.7% gain for the Bank of nova Scotia on the back of strong earnings and a dividend increase but held back by declines in gold producers particularly Barrick Gold’s 5% drop as gold retreated. Base metal miners followed copper higher, a divergence that may play out in Australian trading today as well.
Gold and JPY fall back as fast money left defensive havens bound for risk markets once again. Although USD gained on those two, it underperformed pretty much all of the other major currencies. CAD had a particularly strong day, soaring against everything as strong monthly and quarterly GDP figures plus improving manufacturing PMI indicated the Canadian economy while in transition is not as weak as had been thought. This makes another Bank of Canada rate cut less likely which ignited the loonie rally. MXN and RUB were also strong performers on the day while GBP continued to struggle with $1.4000 against USD.
Crude oil was well supported through the day but has started to fall back following a big increase in US API inventories. This could impact trading in energy shares. API has been all over the place the last few weeks so traders may put more stock in tomorrow’s DOE inventories.
AUD and NZD posted moderate gains and may continue to benefit from improving sentiment toward China, improving commodity prices and yesterday’s decisions by the RBA to hold interest rates steady and to not stamp out the recent dollar rebound. Both dollars could be active today around Australia’s GDP report. Japanese stocks may also be active today. Just as the rising Yen drove down export sensitive Japanese stocks, the falling Yen could take some of the pressure off.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US construction spending 1.5% vs street 0.3%
US API crude oil inventories 9.9 mmbbls vs street 2.3 mmbbls
US API gasoline inventories (2.2 mmbbls) vs street (1.8 mmbbls)
Canada Q4 GDP 0.8% vs street 0.0% vs previous 2.3%
Canada December GDP 0.5% vs street 0.0% vs previous 0.2%
Germany unemployment change (10K) as expected vs previous (20K)
Germany unemployment rate 6.2% as expected
Italy unemployment rate 11.5% vs street 11.4%
Eurozone unemployment rate 10.3% vs street 10.4%
Italy GDP 0.8% vs street 0.6%
Manufacturing PMI reports:
US Markit 51.3 vs street 51.2
US ISM 49.5 vs street 48.5 and previous 48.2
US ISM new orders 51.5 unchanged
Canada 49.4 vs previous 49.3
UK 50.8 vs street 52.3
Germany 50.5 vs street 50.2
Sweden 51.7 vs street 55.0
Norway 48.4 vs street 48.0
Poland 52.8 vs street 50.6
Spain 54.1 vs street 54.5
Italy 52.2 vs street 52.3
France 50.2 vs street 50.3
Greece 48.4 vs previous 50.0
Russia 49.3 vs street 49.5
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)
TBA Super Tuesday results from 13 caucuses and primaries
10:00 am AEDT NZ QV house prices previous 12.6%
11:00 am AEDT Australia new home sales previous 6.0%
11:30 am AEDT Australia Q4 GDP street 2.5%
12:00 am GMT UK BRC shop prices previous (1.8%)
8:00 am GMT Spain unemployment change street 8K vs previous 57K
9:30 am GMT UK construction PMI street 55.5
10:00 am GMT Eurozone producer prices street (2.9%)
8:15 am EST US ADP Payrolls street 188K vs previous 205K
9:45 am EST ISM New York previous 54.6
10:30 am EST US DOE crude oil inventories street 3.3 mmbbls
10:30 am EST US DOE gasoline inventories street (1.5 mmbbls)
11:00 am EST FOMC Williams speaking
2:00 pm EST US Beige Book
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