Daily US Opening News And Market Re-Cap: April 23
- Chinese HSBC Flash Manufacturing PMI (Apr) M/M 50.5 vs. Exp. 51.5 (Prev. 51.6) - HSBC's chief China economist Qu Honqbin said new export orders contracted, suggesting external demand for China's exporters remains weak.
- Analysts at Credit Suisse say a cut to the ECB's interest rate is likely following the flash Euro area PMI's this morning and forecast a 25bps cut.
- German Manufacturing PMI (Apr A) M/M 47.9 vs. Exp. 49 (Prev. 49) and German Services PMI (Apr A) M/M 49.2 vs. Exp. 51 (Prev. 50.9)
Yet another round of less than impressive macroeconomic data from China and Eurozone failed to deter equity bulls and heading into the North American crossover, stocks in Europe are seen higher, with tech and financials as best performers. The disappointing PMI data from Germany, where the Services component fell below the expansionary 50, underpins the view that the ECB will likely cut the benchmark interest rates next month and may even indicate that it is prepared to provide additional support via LTROs. As a result, the EONIA curve bull flattened and the 2/10s German spread flattened by almost 3bps to levels not seen since June 2012. In turn, Bund future hit YTD peak at 146.77 and the next technical level to note is 146.89, 1st June 2012 high. However it is worth noting that the upside traction is also being supported by large coupon payments and redemptions from France, the second highest net market inflow for 2013.
Going forward, market participants will get to digest the release of the latest New Home Sales data from the US, as well as the weekly API report. Also, Apple will report its earnings after the closing bell on Wall Street.
Chinese HSBC Flash Manufacturing PMI (Apr) M/M 50.5 vs. Exp. 51.5 (Prev. 51.6); New exports sub-index falls to 48.6 from 50.5 in March.
- HSBC's chief China economist Qu Honqbin said new export orders contracted, suggesting external demand for China's exporters remains weak. Qu also stated that Beijing is expected to respond strongly to sustain the economic recovery by increasing efforts to boost domestic investment and consumption in the coming months.
Morgan Stanley poll shows that investors are becoming more bearish on China.
S&P said there is more than 1/3 chance S&P will lower Japan's AA- long term sovereign rating and that the Japan downgrade risk arises from risks linked to government initiatives and uncertainty of their success.
EU & UK Headlines
Analysts at Credit Suisse say a cut to the ECB's interest rate is likely following the flash Euro area PMI's this morning and forecast a 25bps cut. Analysts note that the data does not materially change their forecast as they were anticipating a cut in Q2.
Eurozone Manufacturing PMI (Apr A) M/M 46.5 vs. Exp. 46.8 (Prev. 46.8) and Eurozone Services PMI (Apr A) M/M 46.6 vs. Exp. 46.6 (Prev. 46.4)
Chief Economist at Markit noted that the survey is signalling a worrying weakness in the economy at the start of the second quarter, with signs that the downturn is more likely to intensify further in coming months rather than ease.
- German Manufacturing PMI (Apr A) M/M 47.9 vs. Exp. 49 (Prev. 49)
- German Services PMI (Apr A) M/M 49.2 vs. Exp. 51 (Prev. 50.9)
- French Manufacturing PMI (Apr) M/M 44.4 vs. Exp. 44.3 (Prev. 44.0)
- French Services PMI (Apr) M/M 44.1 vs. Exp. 42.0 (Prev. 41.3)
German Bild reported citing the head of Italian party Five Start Movement Beppe Grillo that the Italian state will probably run out of money by the autumn.
- As a guide, Italy's President Napolitano began consultation on the formation of government in Italy and is expected to meet all main parties today.
In the UK, official data showed public sector net borrowing was GBP 120.6bln in the 2012/13 fiscal year, about GBP 300mln less than the previous year, after the effect of various one-off transfers was stripped out (Royal Mail’s pension fund to the government’s books and the Treasury’s seizure of the Bank of England’s earnings from its quantitative easing programme).
Also of note, UK DMO raised 2013-2014 gilt sales target to GBP 155.7bln vs. Prev. planned GBP 151bln.
BarCap Pan-Eur aggregate month end extension: +0.09 yrs
BarCap Sterling aggregate month end extension: +0.05 yrs
Latest JP Morgan Treasury Client Survey shows longs at 13% (Prev. 21%), neutrals at 62% (Prev. 60%) and shorts at 25% (Prev. 19%)
US BarCap month end extension: +0.06 yrs
Yet another round of less than impressive macroeconomic data from China and Eurozone failed to deter equity bulls and heading into the North American crossover, stocks in Europe are seen higher, with tech and financials as best performers.
Apple won patent infringement case brought by Google's Motorola over phone sensors, which could have hindered imports of iPhone 4 into the US.
For a full rundown of EU equity news, please refer to European Equity Opening News report located in research section. Complete rundown of US equity news will be available on the website at 1400BST (0800CDT). See "US Pre-Market Earnings Snapshot" headline on the website for a summary of today's earnings.
The risk averse sentiment saw EUR/USD break through the 1.3000 level to the downside which now exposes the 62% retracement of this month’s recover at 1.2920, where a close below would trigger a deeper sell-off towards 1.2746. On the other hand, resistance levels are seen at 1.3129, the April 19th high and then at 1.3202, last week's high.
GBP/USD is also testing a strong support at 1.5190, the 38% retracement of the March to April recovery, where a closing break below would indicate that market participants may then target 1.5054, the 62% retracement. On the other hand, resistance levels are seen at 1.5308, the mid-point of the recent sell-off and then at 1.5368 which is the April 19th high.
Although USD/JPY traded lower, the underlying momentum remains to the upside and it is more likely than not that market participants will soon use the recent bout of selling pressure as an opportunity to establish long positions.
Technically, resistance levels are seen at 100.00 and then at 101.45 level, the April 2009 high. Once broken, market participants will look to target 105.75, the 62% retracement of the June 2007 to October 2011 sell-off.
WTI heads towards the American session trading down around USD 1.20, following lower than expected Chinese HSBC Flash Manf. PMI data for April (50.5 vs. Exp. 51.5 M/M), as well as less than impressive European PMI releases.
Citigroup says it sees USD 90/bbl representing a price ceiling not a floor within five years. In addition, the bank commented that US oil output may rise by 3mln bpd by 2020.
UBS revise their 1-month gold price target to USD 1,425 from USD 1,725, and the 3-month forecast to USD 1,500 from USD 1,850. Analysts note that gold will have to continue rebuilding and regaining its investor base over the next month and see prices consolidating around the current levels.
- Separately, Morgan Stanley cut 2013 silver target 19% to USD 27.17 and cuts silver 2014 target 15% to USD 29.48.
Analysts also cut 2013 copper target 9% to USD 3.53, cut 2013 aluminium estimate 11% to USD 0.90 and sees iron ore average USD 128.00 in Q3 and USD 125 in Q4.
Gold prices edged lower throughout the session, driven by weak macroeconomic data from China and Europe this morning. Technically, support levels are seen at USD 1404.00 and then at USD 1380.63, the mid-point of the latest recovery. Silver underperformed, down around 2.50% and looks set to make a test on USD 22.07 which is last week’s low.