With US markets taking a day off today for Memorial Day, liquidity will be even more sporadic than usual, and any sharp moves will be that much more accentuated, although such a likelihood is minimal with all US traders still in the Hamptons. In an otherwise very quiet overnight session, perhaps the most notable move was that of the USDJPY, which continues to be "strangely attracted" to the 101 line although selling pressure is certainly to the downside, with a downside breakout quite possible, however that would lead to an early and very unpleasant end to Abe's latest 'experiment' (to quote Weidmann). The Nikkei225 already closed down 470 points, or 3.22%, as Mrs. Watanabe's faith in the market, seems to be fading with every passing day.
What the numbers say:
- S&P 500 futures -0.3% to 1646.00
- Stoxx 600 up 0.1% to 303.7
- US 10Yr yield up 0.2bps to 2.01%
- German 10Yr yield up 1.5bps to 1.44%
- MSCI Asia Pacific down 1.2% to 137
- Gold spot up 0.6% to $1394.3/oz
- 18/19 sectors rising led by technology, autos & parts, media
- Selected movers on earnings/statements: Fiat +4.1%, Saras +3.2%, Club Med +2.6%
- Other gainers: Exor +4.1%, Commerzbank +3.2%, Aixtron +3%, Lagardere +2.6%, Suez Envir. +2.6%, Ryanair Holdings 2.4%, Freenet +2.4%, Fugro +2.4%, SAP +2.2%
- Other decliners: ADP -2.8%, Holcim -1.1%, GEA Group -1.1%, SGS -1%, Pohjola Bank -0.9%, NCC -0.8%, Kerry Group -0.8%, Kuehne & Nagel -0.7%, EMS Chemie -0.7%, Celesio -0.7%
- Asian stocks trade mixed with Nikkei, Topix declining, Shanghai, Hang Seng, Kospi rising.
- MSCI Asia Pacific down 1.1% to 137
- Nikkei 225 down 3.4%, Hang Seng up 0.3%, Kospi up 0.3%, Shanghai Composite up 0.2%, ASX down 0.5%, Sensex up 1.5%
- 9/10 sectors fall led by consumrer discretionary, utilities * Chinese YTD industrial profits for April grew 11.4% vs prior 12.1%
- Gainers: Nomura Real Estate +7.7%, Asics +6.8%, Guangzhou Auto +6.4%, Beijing Enterprises +6.4%, Reliance Communications +5.4%, Reliance Industries +5%, Airtac Intl. +5%, Orior +4.6%, SBI Holdings +4.6%, Dena Co. 4.6%
- Decliners: Mitsubishi Motor -9.3%, NSK -8%, Yamaha Motor -7.9%, Mitsubishsi Electric -7.7%, Taiyo Nippon -7.6%, Nabtesco -7.6%, Fuji Heavy -7.6%, Yaskawa Elec. -7.5%, Tepco -7.3%, Hitachi Construction Machinery -7.2%
SocGen recaps what little macro catalysts there are today:
The bounce in EUR crosses on a stronger than forecast German IFO survey on Friday proved short-lived and in doing so sent an important message: good macro-economic reports and positive data surprises from the eurozone are being met with a considerable degree of indifference among market participants, whilst disappointing data tends to magnify the downside growth risk and bolster EUR aversion. This proverbial shrug of the shoulders to eurozone data was repeated after the weekly ECB LTRO repayment data. A marked increase in total repayment (LTRO1+2) from EUR1.124bn to EUR8.123bn, the highest since April 19, made no difference even though at the margin the increase and resulting decline in the balance sheet is a positive EUR element. However, turning the argument on its head, an anaemic recovery where liquidity is diminishing (excess liquidity below EUR300bln) will keep the ECB mulling over its options to boost the flow of credit.
This week is unlikely to improve EUR sentiment dramatically considering the mostly second-tier nature of data releases and the greater focus instead of month-end flows in bonds and currencies. The direction of UST yields and the volatility in JGBs cast a large shadow over asset markets last week and wild gyrations in the Nikkei will plead for caution until the dust settles. Rate differentials have been the determining factor for currencies and this will remain the case until we hear from the ECB at the June 6 meeting. Economists will feast on a deluge of EU data including the flash estimate of EU CPI, unemployment and monthly EC confidence data, but to the market this data may not prove extremely relevant.
US and UK markets are closed for public holiday today and the resulting dent in market liquidity will keep many participants sidelined. Norwegian unemployment and Swedish retail sales data are due this morning. The NOK is the second best performer in G10 this month but the SEK took a fresh blow on Friday following disappointing confidence and economic tendency surveys. For EUR/NOK, failure to extend above 7.55 last week looks set to be followed by a return below 7.50 this week. EUR/SEK was denied of a weekly close above 8.60 after a third attempt in five weeks, but downside pressure does not look compelling either with support holding firm at 8.53 since mid-April.