The US trade deficit widened in March to $51.8 billion, the Commerce Department reported. The trade deficit was above the consensus forecast of Wall Street economists of a deficit of $50 billion. Economists had expected the deficit to snap back, believing that imports were held down in February due to the timing of the Chinese New Year. The wider deficit in March was in line with government forecasts in the initial estimate of first quarter GDP.
US weekly jobless claims were under economist forecast, but support the theory that the drop in unemployment is not because of increased jobs or a decrease in layoff but due to many Americans losing benefit eligibility and falling off the rosters.
The big gun came out today, as Federal Reserve Chairman Ben Bernanke spoke on bank capital at a Chicago Fed conference. His speech was market neutral.
Global equities continue to retreat despite a decent round of overnight fundamentals, as Greece’s high stakes election drama weighs on market sentiment. European equity benchmarks are lower, and Dow futures are suggesting a tiny drop at the market open. Global currency markets are divided with the A$, NZ$, pound sterling and CAD all up against the USD while the won, Scandinavian currencies and the rand are all lower and the euro is flat. Most European debt markets are rallying or are flat across 10s except for UK 10s that were disappointed by flat stimulus from the BoE.
Greek law requires that each of the three leading political parties get a chance to form a government. After the first and second place parties failed, the baton now passes to the Pasok party but the numbers simply don’t add up to suggest that it will be any more successful than the top two parties. Following likely failure, Greece’s President then inserts himself in an effort toward brokering a compromise in order to avert another election.
This seems impossible given that the first and third parties who previously governed Greece do not have enough seats to do it alone, the Syriza socialist party has created a rigid position on demands to renounce the aid agreement, nationalize banks, and cease debt payments, and also given that the Communist Party has stated it will not negotiate and favors another election.
Thus, by the weekend, we’re staring at another Greek election being called likely for some time in June that throws the entire timeline of aid and budget proposals up in the air for months of market uncertainty through much of the summer.
The Bank of England met consensus expectations and left its policy rate unchanged at 0.5% and the asset purchase target at £325 billion. Only a minority of 8 out of 51 economists had expected a higher QE program.
Solid European manufacturing data didn’t much help the global market tone. French manufacturing production climbed 1.4% m/m and far surpassed consensus expectations for a small drop, even as total industrial production fell thanks to lower electricity and gas production following the prior month’s massive gain in this category. Italian manufacturing also climbed 0.5% and surpassed expectations. UK manufacturing production climbed 0.9% m/m which nearly doubled consensus.
German Chancellor Angela Merkel is sticking to her guns, and good for her. She reiterated this morning that deficit financed stimulus to growth is a misguided path, and that austerity is the only solution. This continues to put the Franco-German partnership on a collision course over the summer.
Chinese trade figures disappointed expectations. While the surplus widened to double consensus expectations that was only because import growth ground to a halt (+0.3% m/m). That, in turn, was significantly due to lower crude oil imports. At least some of this weakness in oil imports has been attributed to idled refiners that are undergoing seasonal maintenance.
This effect overwhelmed the fact that export growth also slowed markedly to 4.9% y/y from 8.9% y/y the prior month and against expectations for a rise of 8.5%. The more material data lands tonight in the form of Chinese CPI that is expected to soften.