It’s a banner Friday for indices in Europe with the Dax
breaking out to a new all-time high and leading the charge with indices in France, Italy and even Norway despite the oil price drag also hitting new highs while stocks in Sweden plus the FTSE and IBEX are testing previous highs today.
Meanwhile, GBP and continental indices like EUR, SEK, CHF and NOK dominate the lower half of the major league table, underperforming their counterparts in other regions. Industrial production figures particularly for Spain beat the street, suggesting that the ECB’s QE program may actually be helping the European economy in addition to boosting stocks by flooding the system with new hot cash. Gold, which has followed by ECB’s balance sheet up and down over the years has climbed back above $1,200 on anticipation of an increased supply of paper money sloshing around out there.
On the other hand, US indices and USD continue to reflect a tighter monetary policy environment. USD is top dog among major currencies today along with JPY as traders continue to speculate that US interest rate liftoff could be on the way soon particularly after comments from Richmond Fed President Lacker this morning indicating he still favours a June liftoff blaming recent softness data on temporary factors like bad weather.
Similarly, US indices have slowed their advance After leading world markets higher for the last several years, US indices have levelled off and passed the torch along to the Europeans. US indices may continue to lag behind as they come off life support with QE ending and interest rates about to rise. While learning to stand on their own two feet again, downside support for indices may come from an improving economy.
Last night’s profit warning from Citrix Systems arrives as an ominous sign for earnings season. The company cut its sales and earnings forecasts and blamed the shortfall mainly on the higher US Dollar. A moderating outlook for earnings growth could limit the near term upside for US indices. The technology sector appears to have seen the biggest dollar impact initially, so we could see the NASDAQ underperform today.
Canadian stocks and CAD may also be active again today. The loonie has been climbing following today’s Canadian jobs report. The overall boost was a positive surprise with a 28K increase. The one problem though was that it was all part-time jobs which rose by 57K while full time jobs fell 28K in a retrenchment of the previous month’s 34K full time gain.
Overall this means that the Bank of Canada looks unlikely to cut interest rates at its meeting next week. The loonie is climbing on the news but so far it has been unable to get back above $0.8000 on CADUSD or below $1.2500 on USDCAD
Citrix Systems Profit Warning! Cuts Q1 guidance to $0.63-$0.65 from $0.70-$0.72., cuts revenue guidance to $755-$760M from $780-$790M. Blames shortfall on restructuring and forex volatility (higher US Dollar)
Economic reports released overnight and this morning include:
Canada jobs change 28K vs street 0K
Canada full time jobs (28K) vs previous 34K
Canada part-time jobs 57K vs previous (34K)
Canada unemployment rate 6.8% vs street 6.9%
Canada participation rate 65.9% vs previous 65.8%
Canada housing starts 189K vs street 175K
UK industrial production 0.1% vs street 0.3%
UK manufacturing prodn 1.1% vs street 1.3%
UK construction output (1.3%) vs street 1.9%
China consumer prices 1.4% vs street 1.3%
China producer prices 4.6% vs street (4.8%)
France industrial production 0.6% vs street 0.5%
Spain industrial output 0.6% vs street 0.1%
Norway industrial production 1.9% vs previous (0.4%)
Norway consumer prices 2.0% vs street 2.1%
Norway producer prices (6.1%) vs previous (9.9%)
Economic reports due later today include:
1:00 pm EDT US Baker Hughes rig count previous 1,028