Most European, the Australasian and the Hong Kong markets were closed on Monday, in their absence the DJIA and SPX brushed off the unstable geopolitical issues and roared ahead, despite certain USA economic calendar event ‘soft’ data missing the forecasts by quite a measure. The Empire State manufacturing index came in at 5.2, missing the forecast of 15, whilst the NAHB housing market index came in at 68, falling from the reading of 71 registered in March. There was also another potential canary screeching warnings from the coal-mine; that equity markets may be over valued, in the form of the bell weather stock Boeing, whose total headcount has shrunk 7.6 percent to 147,000 since March 2016. On Monday the aeronautics firm announced further high level engineering lay offs, due to a slow down in sales. Having already laid off 1800 engineering staff this year, hundreds of fresh redundancies will now be implemented. Both the DJIA and SPX ignored such trivial hard data and duly pushed through R1, both indices closing up approx. 0.90% on the day.
Earlier in the day the latest Chinese data came in ahead of expectations, which no doubt helped boost USA equity values; retail sales in China came in 10% up, industrial production up 7.6% and GDP up 6.8%, all measured on an annual basis. China produced a record quantity of steel in March, coal production rebounded in March (after the government said it doesn’t intend to reintroduce widespread restrictions this year) and property development rose 9.1% in the first three months, from a year earlier. However, China’s first Q 2017 monetary stimulus reached circa $1 trillion and their overall combined debt v GDP ratio is expected to reach 310% by 2020. Chinese govt. debt is currently at circa 170%, with most orthodox economists contending that any figure above 100% signals overheating. Therefore, the contrarians amongst us could contend that China’s 0.1% extra growth in Q1 2017 has been bought with one trillion US dollar’s worth of stimulus, whilst the debt mountain is reaching a peak of non sustainability.
Gold failed to maintain the safe haven appeal enjoyed over recent weeks; falling by circa 0.3% to $1283 per ounce, after rising to $1291 earlier in the day. Silver also sold off; following a similar pattern to gold, rising before falling through S1 to end the day close to $18.33 per ounce. WTI (West Texas Intermediate) crude fell 0.5% to $52.50 a barrel, the lowest level seen in over a week. The U.S. oil Co’s has continued to increase drilling, creating doubts that the OPEC-led efforts to cut a global glut, is having any tangible impact.
The Dollar Spot Index fell by circa 0.4% on Monday, to the lowest price seen in three weeks. EUR/USD rose by circa 0.3% to 1.0640, having at one stage reached 1.0671. Sterling enjoyed solid gains versus the majority of its peers; GBP/USD strengthened by circa 0.6% early in the New York trading session to reach 1.2596, the highest level witnessed in over two weeks, before giving up some gains to close the day out at circa 1.2563. USD/JPY reversed the early Sydney and Asian session losses to rise to 109.06, up circa 0.35% on the day. Yen fell versus most of its peers throughout the trading day; AUD/JPY, up 0.44%, GBP/JPY up 0.63% and EUR/JPY up 0.59%.
Economic calendar events for April 18th, all times quoted are London GMT time
12:30, currency impacted USD. Housing Starts (MoM) (MAR). The reading is forecast to fall to -3.0%, from a 3.0% rise in Feb.
12:30, currency impacted USD. Building Permits (MoM) (MAR). Despite housing starts expected to reveal a fall in March, permits are predicted to have risen by 2.8%, from the seasonal slump of -6.2%, which will have directly caused the potential fall in housing starts in March.
13:15, currency impacted USD. Industrial Production (MAR). Production was reported as flat according to the data published in Feb., the anticipation is for a rise to 0.5% in March.