Global geo-political fear appeared to grip the markets and focus investors’ attention during Tuesday’s trading session, as orthodox economic calendar events were (in many ways) sidelined. Investors appeared to scramble for safe haven securities, such as yen and gold, due to fears that the dual threats the USA is making versus Syria/Russia and North Korea, could actually and unimaginably, escalate to armed conflict. USA equity markets initially sold off shortly after the U.S. open, to then recover to end the day close to flat. The DJIA closed down 0.03%, whilst the SPX fell by 0.14% and the NASDAQ sold off by 0.24%.
In terms of calendar events relating to the U.S. economy, only the JOLTS job openings registered as a medium to high impact data publication, it came in ahead of forecasts at 5743 in Feb, perhaps counter-balancing the extremely poor NFP data reported last Friday.
Turning attention to the UK, the economic data reported on Tuesday mainly beat expectations, with the exception of PPI (input) prices, which crept up to 17.9% YoY, indicating (once again) that British manufacturers and producers are currently contending with a tsunami of rising raw prices, which will eventually bleed into consumer prices, unless sterling (and the U.K.) makes a dramatic recovery versus its major trading partners/peers.
Inflation (CPI) data for March remained static in the UK at 2.3% YoY, whilst annual RPI inflation fell to 3.1% from 3.2%. Annual house price inflation in the UK dipped moderately from 6.2% to 5.8%, perhaps indicating that HPI in Britain has peaked and is finally beginning to cool. Although prices in London apparently rose in Feb.
In European economic calendar news on Tuesday, industrial production data for the single currency bloc disappointed, coming in at 1.2% annually, versus the expectations of a rise of 1.9%, during the month of Feb. production actually fell by -0.3%. Encouraging ‘soft’ European data came in the form of the various ZEW surveys; German ZEW sentiment coming in at 19.5, versus the previous reading of 12.8, whilst the overall Eurozone ZEW sentiment print came in at 11.5, versus the previous reading of 7.4. The UK’s FTSE decoupled from other European equity markets by closing up 0.23% on the day, STOXX 50 fell 0.30%, DAX closed down 0.50% and the CAC down 0.11%.
Yen was the major focus of interest on the FX markets during Tuesday’s sessions, USD/JPY falling through 110 for the first time since November, ending the day close to 109.63, down circa 1.3%. GBP/JPY experienced a similar fall, to close the day out at 136.89, a three month low. Having risen mid morning European time, EUR/JPY then mirrored the sell off versus all yen peers, to close out the day at circa 116.25. GBP/USD ended the day at 1.248, closing in on a one week high. EUR/USD ended the day close to flat, perhaps arresting the recent slump, which has seen a fall from circa 1.090 breached on March 26th, to 1.060 on Tuesday. Using heikin ashi candles the security formed the classic daily Doji candle on Monday, followed by a moderately bullish daily candle on Tuesday,p displaying an upward tail/wick, perhaps suggesting sentiment has turned for the euro v U.S. dollar.
Gold has experienced significant gains over recent weeks, rising from $1200 per ounce on March 13th, to end the day on Tuesday at circa $1276, a 6.33% rise in approximately a month. Silver ended the day close to $18.33 per ounce, similar to gold the PM is making significant returns for investors, searching out safe haven security since mid March. WTI closed the day out at $53.18 per barrel, up circa 0.5% on the day, making gains of circa 4% over the past week.
Economic calendar events for Wednesday 12th April, all times quoted are London (GMT) time.
08:30, currency impacted GBP. ILO Unemployment Rate (3M) (FEB). The UK’s headline unemployment rate is expected to remain unchanged at 4.7%.
08:30, currency impacted GBP. BOE Governor Carney Speaks at Event in London. Listed as a high impact event, Mark Carney has many issues and subjects to cover, including Brexit/Article 50, cutting off the headwinds of creeping inflation, and potentially delivering forward guidance, in relation to potential base interest rate rises.
11:00, currency impacted USD. MBA Mortgage Applications (APR 07). Analysts will be looking to see an improvement from the fall of -1.6% registered in the previous week.
14:00, currency impacted CAD. Bank of Canada Rate Decision (APR 12). There is general consensus amongst the economists polled, that Canada’s central bank will keep the base rate at 0.50%.
14:00, currency impacted CAD. Bank of Canada Releases April Monetary Policy Report. After announcing the interest rate decision, Canada’s central bank will release its publication explaining its monetary policy outlook.
14:30, currency impacted USD. DOE U.S. Crude Oil Inventories (APR 07). With oil price rising by circa 4% over the past week, analysts will be monitoring the inventory to see if the agreed OPEC cuts and increased USA rig activity, is increasing stockpiles beyond the 1566k registered last week.
18:00, currency impacted USD. Monthly Budget Statement (MAR). The USA’s deficit is expected to worsen to -$158.5b in March, from -$108.0b in Feb.