Overnight Sentiment: Lack Of Good News Is Not Good News
So far futures are broadly unchanged, following the release of a Chinese trade report which while showing a resumption in the trade surplus, on expectations of further trade deficit in March, showed it was primarily due to a slide in imports, not so much a rise up in exports, a fact which impacted the Aussie dollar subsequently. We already noted that in conjunction with the BOJ, this means that Asia's central banks will likely hold off on further easing, and defer to the Chairman, especially with food inflation in China still prevalent. Aside from that the traditional European weakness is back, where April Sentic Investors Confidence slid to -14.7 on expectations of -9.1: to be expected from a meaningless market-coincident indicator. European equities are selling off. In the aggregate, as BofA notes, they are down 0.9%. Shares listed in France are underperforming, down 1.0%, while shares listed in London and Germany are doing marginally better than the broader market, off 0.7%. At home, futures are pointing to a modest rebound from yesterday's sell-off. The S&P 500 is set to open 0.2% higher, after dropping 1.1% yesterday. Keep a close eye on PIIGS bonds where whack a mole is now firmly back as the LTRO benefit is long forgotten, 3 month half life and all that.
Deutsche Bank and BofA do the formal overnight action summary today:
In terms of Asian markets overnight the Nikkei is close to flat on the day as we type having been up as much as much as 1% in earlier trading. The index had already fallen around 1.5% on Monday following Friday’s US payrolls data. Other Asian markets have reacted overnight to the data with the Hang Seng off just over 1% as we type. In terms of data overnight the Chinese trade balance for March came in ahead of expectations, returning to surplus as exports rose more than expected at 8.9% (7.0% consensus) and imports rose less than expected at 5.3% (9.0% consensus).
As expected, France's industrial production increased 0.3% mom in February. That followed a revised lower 0.2% mom gain in January, which was originally reported as a 0.3% mom gain. Manufacturing production, which excludes electrical and mining output, fell for the third straight month. Production in the manufacturing sector fell 1.2% mom in February, building on the 0.1% drop in January and the 1.5% mom contraction in December. The rise in total industry production is mostly due to a jump in electricity production, as February was marked by cold temperatures. Looking ahead, French industrial production will likely fade in the coming months, as the recession in the Euro area weights on demand and the automobile sector fails to rebound. Overall, we look for industrial production to fall 0.1% yoy in 2012.
One bright spot in the Euro area economy is German exports. German exports unexpectedly rose 1.6% mom in February, following a revised higher 3.4% mom gain in January. January's figure was originally reported as a 2.3% mom gain. Germany's export sector is benefiting from strong demand from outside Europe. Meanwhile, iindustrial production in the Netherlands fell 0.7% mom in February, following a revised higher 2.8% drop in the prior month. Last quarter, the Netherland's economy fell into a recession and today's industrial production report points to the economic slowdown continuing into the first quarter. Unlike Germany, the Netherlands has not been able to take advantage of strong overseas demand.
As for the rest of the week we see import/export prices out of the US tomorrow as well as a budget balance update and the Beige Book release. As further scrutiny envelops Spain, there will be interest in their industrial production numbers tomorrow. In auction terms Italy will be auctioning Bills tomorrow and bonds on Thursday. We also have French CPI being released on Thursday alongside industrial production numbers for the Euro-area. On Friday China will be releasing Q1 GDP and in Europe, the release of the CPI will come out in Germany, Spain and Italy. Also the UK releases their PPI numbers and consumer sentiment and CPI will be released in the US.
Last but not least we have the usual official, but slow start to US earnings season tonight with Alcoa reporting. The key highlights for the rest of the week being Google (tomorrow), JP Morgan and Wells Fargo (Thursday) and Citi (Friday). This will start to give us some clues as to how earnings have been holding up.
At 7:30 am, consensus is looking for the NFIB small business optimism index to increase to 95.0 in March from 94.3. At 10:00 am, the market is looking for wholesale inventories to rise by 0.5% mom in February, building on the prior month's 0.4% increase.