Stocks were lower in the US overnight after some data printed weaker than expected and the fact that stocks held in as well as they did is testament to the policies of QE and their ability to prop the market up. In the US the PMI rose to 54.6 from 54.3 last month but a little lower than the 54.9 that was expected. The more widely watched ISM manufacturing index fell to 51.3 from 54.2 for a big miss but prices paid also dropped heavily in this index we guess tempering the overall weakness a little. Equally however falling prices speaks of lower demand so that is something to watch with regard to the US economy.
At the close the Dow was down 0.04%, the S&P 500 dropped 0.46% to 1,562 and the Nasdaq fell 0.87%. Apple was under pressure today on news which we picked up from Business Insider that Fidelity had cut its stake in the company.
Across the pond in the UK and Europe it was Easter Monday so the Asian data was the focus until the US entered and on that front it is worth noting that although the Chinese PMI climbed to 50.9 from 50.1 last month it was a little weaker than had been expected. The HSBC PMI was however stronger at 51.6 against 51.5 expected and up from 50.4 last. But there are some concerns for Asia based on the disappointing Japanese Tankan Survey and South Korean exports released yesterday.
Turning to Australia it is a fast start to April with today being RBA day given it is the first Tuesday in the month and it would be a great surprise to anyone if they move rates down given the recent rhetoric. It would be equally shocking of course if they were to move rates higher but that is a lower probability outcome than a cut but both would have a less than 10% chance of occurring. Rather the RBA is more likely than not to continue to sit on its hands and review the economy and the global backdrop. No doubt they will note the improving employment market even though none of us believe the last employment report of +71,500 and they will also note the improvement in housing prices and the wealth impact that is having but their meeting is also going to focus on the weak retail sales and moribund manufacturing sector, what’s left of it. It will probably be the board against the employees in some senses and the employees of the RBA are likely to win the day again.
So there will be no move by the RBA but a cautious hope no doubt that the Australian economy is slowly readjusting.
The Aussie is likely to find support in the RBA communique this afternoon as it did last month but given it traded down to a low of 1.0383 yesterday some of this “expectation” if I can call it that, will likely already be priced in. Last week we said we thought the Aussie was headed toward the 1.0340/60 zone and that remains the case however for the moment and on the day Aussie is likely to remain supported in the run up to the RBA.
The Nikkei had a shocker yesterday falling more than 2% after USD/JPY broke the big uptrend from the start of the run at 79 and it sits at 93.33 this morning about a big figure or more from where it sat prior to the Australian Easter break. Clearly there is some position squaring in the lead up to this week’s BoJ meeting where new Governor Kuroda has a chance to show his wares and of course the chances are that with the market having bulled him up so much and driven USD/JPY so high relative to a few short months ago disappointment may result.
Technically as noted above the up trend line has broken but the JimmyR trend indicator has not yet turned from positive to negative on the dailies. To put this in context JimmyR has been in a bull trend since October. We are now targeting 91.30/40.
Elsewhere in FX land the Euro continues to try to build a base above our 1.2650 target we have had for some time now and we are wondering if the recent low of 1.2751 is near enough. For the moment the answer is yes but while Euro holds below the 200 day moving average which comes in at 1.2871 just below the high overnight of 1.2867. It is an interesting juncture and in truth we won’t know till the end of the week if the Low for the moment and a run toward 1.31 is on the cards but a break of the 200 day moving average would be a signal that the move has started.
On commodity markets gold is still marking time around the $1600 an oz region and sits at $1,599 this morning with silver at $27.88 down 1.34%. Crude was down 0.33% at $96.91 while the Ags have been absolutely smashed by a report last week that showed that Corn yields will be much higher than had been previously expected. Corn was down 7.01% last night after being limit down on Thursday. Wheat was down 3.41% and soybeans fell 0.91%.
AiG performance of manufacturing in Australia and then the RBA later this afternoon. In Europe tonight we see Spanish unemployment and a raft of Markit PMI reports for the zone. In the US we get the New York ISM