Market Review May 1 2012
Economic events scheduled for today
02:00 CNY Chinese Manufacturing PMI 53.60 53.10
China Manufacturing Purchasing Managers Index (PMI) provides an early indication each month of economic activities in the Chinese manufacturing sector. It is compiled by China Federation of Logistics & Purchasing (CFLP) and China Logistics Information Centre (CLIC), based on data collected by the National Bureau of Statistics (NBS).Li & Fung Research Centre is responsible for drafting and disseminating the English PMI report. Every month questionnaires are sent to over 700 manufacturing enterprises all over China. The data presented here is compiled from the enterprises responses about their purchasing activities and supply situations. The PMI should be compared to other economic data sources when used in decision-making.
02:30 AUD House Price Index -0.50% -1.00%
The Australian House Price Index (HPI) measures the change in the selling price of homes in the nation’s eight state capitals. It is a leading indicator of health in the housing sector.
05:30 AUD Interest Rate Decision 4.00% 4.25%
Reserve Bank of Australia (RBA) board members come to a consensus on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.
15:00 USD ISM Manufacturing Index 53.5 53.4
The Institute of Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) rates the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. The data is compiled from a survey of approximately 400 purchasing managers in the manufacturing industry. On the index, a level above 50.0 indicates industry expansion, below indicates contraction.
23:45 NZD Employment Change 0.4% 0.1%
Employment Change measures the change in the number of people employed. Job creation is an important indicator of consumer spending.
23:45 NZD Unemployment Rate 6.3% .3%
The Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous quarter.
Euro Dollar
EURUSD (1.3243) The euro has retraced Friday’s gains, entering the North American session down 0.2%, but still trading above 1.32. European bond yields are generally stable and EUR volatility is trading near its lows at 8.4. News flow has generally been negative, with Spain entering a recession (GDP came in at ‐0.3% in Q1), S&P downgrading 11 banks and the March central bank data revealing a lack of foreign demand for Spanish debt. As expected, S&P has downgraded 11 Spanish banks and put a further 6 on watch; while taking the opposite tact, Moody’s has announced that it views Spain’s new fiscal measures as credit positive.
Meanwhile, in March Spanish banks bought €20bn in sovereign bonds, with foreign holdings falling from €245bn to €220bn. On a brighter note for EUR, the flash Eurozone CPI came in stronger than expected at 2.6% and unchanged from March, suggesting that inflationary pressures are failing to fall, even as the outlook for the economy deteriorates. This will prove a complication for the ECB, as it will limit the central bank’s ability to cut interest rates. The balance between growth and austerity is increasingly complicated with political uncertainty rising on the back of it. In addition, as growth has disappointed there is increasing recognition that austerity cannot be the sole focus. Today there are rumors that the European Commission is planning to announce a new funding program aimed directly at growth. The resiliency of euro has been impressive as of late.
The Sterling Pound
GBPUSD (1.6265) Sterling rose to fresh multi-month highs on a trade-weighted basis on Monday as investors continued to view the British currency as a safer bet than the ailing euro and a softening U.S. dollar. But analysts said the pound’s gains were becoming stretched, given the British economy is mired in recession, which is likely to prevent the Bank of England from tightening monetary policy for the foreseeable future.
Sterling rose to an eight-month high of $1.6298 against the dollar which itself skidded to a two-month low versus a basket of currencies as weak U.S. growth data on Friday reinforced dovish U.S. monetary policy expectations. A less dovish tone in April’s BoE policy minutes reduced the scope for further increases in its asset purchase programme which currently stands at 325 billion pounds.
Latest IMM positioning data reflected the view that more asset purchases were unlikely in the near-term as speculators flipped to a small long position. The euro slipped to a 22-month low of 81.24 pence with worries over euro zone debt markets, notably Spain, keeping investors on edge over the common currency.
Asian –Pacific Currency
USDJPY (79.71) JPY continues to outperform climbing since Friday to new highs against the USD. Trading in Japan is expected to be light given holidays on Monday, Thursday, and Friday this week. The yen held at two-month highs against the dollar on Tuesday, having rallied across the board overnight as investors snapped up the safe-haven currency after disappointing economic news from Canada to Spain tempered risk sentiment.
Data showing Spain slipping into recession, Canada’s economy unexpectedly shrinking in February and business activity in the U.S. Midwest falling sharply gave markets the green light to cash in on recent gains in risk assets.
Gold
Gold (1665.65) edged lower Monday, with the metal posting a modest loss for April but holding its own compared with much steeper monthly losses for other commodities. Gold declined 60 cents, or less than 0.1%, to $1,664.20 an ounce on the Comex division of the New York Mercantile Exchange, recovering some ground after trading as low as $1,645.10 an ounce earlier.
Crude Oil
Crude Oil (104.75) began the new month lower in electronic trading Tuesday, after data showed Chinese manufacturing picked up slightly in April but remained a little short of expectations. Crude dropped 13 cents, or 0.1%, to $104.75 a barrel on the New York Mercantile Exchange during Asian trading hours.
Oil snapped a four-session winning streak earlier in the North American session, with sentiment damaged after Spain slid into recession while an index of manufacturing activity in Chicago also disappointed.
