- UK Manufacturing PMI (Apr) M/M 50.5 vs. Exp. 51.5 (Prev. 52.1, Rev. 51.9).
- Australian RBA Cash Target (May) M/M 3.75% vs. Exp. 4.00% (Prev. 4.25%).
- Market holiday across continental Europe due to Labour Day.
With a Labour Day market holiday across the continent, focus turns to the FTSE-100. The UK market is trading modestly higher with some strong earnings reports overnight lifting the index. Lloyds Group posted stronger than expected profits and reported confidence in the delivery of their financial guidance. The report has boosted Lloyds shares to become one of the top gainers of the day. Despite this, the financials sector is being held back from outperforming as Man Group fail to deliver on their sales figures, pushing their shares lower throughout the session.
The only notable data release of the European session was UK Manufacturing PMI, coming in below expectations with a reading of 50.5 as manufacturing output was dampened across April by Eurozone weakness and contracting new orders. Following the release, GBP weakness was observed, with GBP/USD touching upon session lows.
Pre-market, the RBA cut their cash target rate by 50BPS, a larger cut than expected. The board cited skittish market conditions and below trend output growth as the triggers for the rate cut. As such, AUD weakness is observed across the board and AUD/USD stops just short of breaking through 1.0300 to the downside.
Looking ahead in the session, participants look toward US ISM Manufacturing for March due at 1500BST/0900CDT as the next key data release.
Moody’s have released their macro-risk outlook update, forecasting modest global growth and resurfacing oil price risks. Moody’s have estimated for G20 economies to grow at a real rate of around 3.0% in 2012 and 3.5% in 2013, adding that risks to the global forecast remain significant, but have become more moderated. Moody’s have said the main risk to their outlook is a deeper than expected recession in the Euroarea. (Sources)
Japan’s domestic sales of new cars, trucks and buses surged 92.0% from a year earlier in April, rising for the eighth straight month as government incentives fuelled demand. (Sources)
Chinese Manufacturing PMI (Apr) M/M 53.3 vs. Exp. 53.6 (Prev. 53.1) (Sources)
Note: Chinese market holiday
Fed’s Fisher has said he does not see inflation as an issue right now, adding that liquidity is ‘gasoline for the engine’. Fisher added that Congress needs to do more in order to help employers create jobs through tax and regulatory incentives. Fisher goes on to say that it is possible that the Fed’s policy has left the central bank in a trap, adding that he has no appetite at all to provide more Fed stimulus. Fisher concludes that it is not yet time to predict when the Fed should tighten their policy. (Sources)
EU and UK Headlines
With markets closed across the continent, the only notable data release has been UK Manufacturing PMI for April.
UK Manufacturing PMI (Apr) M/M 50.5 vs. Exp. 51.5 (Prev. 52.1, Rev. 51.9) (Sources)
- Headline activity and output indices lowest since December.
- New orders index 49.2, first contraction since November.
- New export orders index lowest since May 2009.
- Markit says Euro-Zone weakness hits UK manufacturers.
Following the below-expected reading, GBP weakness was observed, pushing GBP/USD to session lows and causing an initial 10 tick spike in Gilt futures.
Economists have questioned the extent to which the French presidential candidates can implement their policies without endangering their deficit targets. (FT-More)
Note: European Labour Day markets closed in: France, Germany, Italy, Netherlands, Portugal, Spain, Sweden & Switzerland
With all continental markets closed, the FTSE-100 is seen trading modestly higher despite the disappointing data from the UK. The index has been supported by some strong earnings reports released pre-market across the sectors.
Lloyds Group have published their Q1 report, recording a beat on profits at GBP 628mln vs. Exp. GBP 422mln. Lloyds also report that they are confident on meeting their delivery of full year guidance, despite the challenging environment that still faces the company. Co. have also commented on the recent speculation surrounding their Scottish Widows unit with the CEO saying there are absolutely no plans to go through with the sales. Lloyds shares now trade higher by 5.5%.
Holding back the financials sector is Man Group. Although the company reports in-line outflows of USD 1bln, the company is yet to see a pickup in sales. Despite the recent speculation that the company could become a takeover target, the CEO declined to comment, without giving clues of progression. As such, Man Group shares now trade lower by 6.0%.
Top performing sectors in the FTSE-100: Consumer Goods (+1.26%), Health Care (+0.99%), Telecoms (+0.91%)
Worst performing sectors in the FTSE-100: Oil & Gas (-0.72%), Basic Materials (+0.18%), Consumer Services (+0.19%)
GBP/USD weakness was observed following the release of a disappointing Manufacturing PMI reading from the UK dipping below 1.6200 to session lows. The pair has retraced since then but is still seen modestly lower on the session.
Australian RBA Cash Target (May) M/M 3.75% vs. Exp. 4.00% (Prev. 4.25%) (Sources)
Following the steeper-than-expected cut in the RBA cash target rate, AUD continues to be observed weaker at the midway point of the European session. AUD/USD continues to trade lower by over 100pips and is now close to a touted option expiry at 1.0330 for the 10am NY cut (1500BST).
WTI and Brent crude futures trade sideways halfway through the European session as a market holiday across the continent dampens price action ahead of the NYMEX pit open.
Oil & Gas News:
• JP Morgan have revised down their 2012 forecast for WTI crude by USD 3.00 to USD 108/BBL as it expects the spread between Brent and WTI futures to widen sharply again at the end of the year due to refinery maintenance. JP Morgan believe the spread will narrow to USD 6.00/BBL or less on an oil flow reversal in the Seaway pipeline from mid-May before widening again sharply to more than USD 15.00/BBL at the end of the year.
• Iraq boosted crude oil exports in April to an average of 2.51MBPD, the highest level in decades, according to the head of the State Oil Marketing Organization. Crude exports from Iraq rose 8.3% over April, generating USD 8.8bln in revenues against USD 8.47bln in the previous month.
• Saudi Arabia’s foreign minister has said Gulf states are moving ahead with plans for a closer political union, amid Arab fears of the threat from neighbouring Iran. The comments reflect increasing momentum towards a bilateral union between Saudi Arabia and Bahrain.
• Indian insurance companies have agreed to give limited cover to local ships for carrying Iranian crude oil from July, according to a Shipping Corp of India director.