Bad news is once again good news. Asia sells off on Monday's weaker profit news; the Bank of Spain says that the Spanish economy is expected to see a negative print in Q1 which if confirmed will ensure a fresh recession while the budget statistics released by the Spanish government yesterday showed further deterioration in its fiscal situation, per DB. The deficit for the first two months of the year was €20.7bn and this does not include state and regional governments’ budgets; lastly American housing slump accelerates as MBA mortgage applications drop for the 7th consecutive week with applications down 2.7%, on the back of a 4.6% decline in refi applications, the lowest since December 7. And futures are...green. Which is to be expected, since good news is good news, and bad news is, thanks to the Fed, and in this case uber-dove Rosengren, who said more stimulus is on the table [10], better news. It is now obvious that the Fed will not rest until the market is at fresh all time distorted, manipulated, nominal highs.
Full overnight summary from BofA below.
Market action
Overnight, equity markets sold off in Asia after Chinese companies posted weaker profits. The MSCI Asia Pacific index dropped 0.4%. Not surprisingly, looking at the individual equity markets we find that the worst performer was the Shanghai Composite, the epicenter of the disappointing news. The Hang
Seng finished 0.8% matching the decline in the Indian Sensex. The Japanese Nikkei fell 0.7% while the Korean Kospi finished 0.4% lower.
In Europe, equities are down 0.2% in the aggregate after the UK's fourth quarter growth rate was revised lower to show a 0.3% qoq contraction in the fourth quarter instead of the originally reported 0.2% contraction. Meanwhile, at home futures are pointing to a marginally higher open later today. The S&P 500 is set to open 0.1% higher partially offsetting yesterday's late in the afternoon drop that left the market down 0.3% on the day.
In the bond markets, Treasuries are selling off across the curve. The five, ten and thirty year issues are yielding 1bp more than yesterday's close. The 10-year yield is currently 2.20%. In Europe, the UK gilt is 2bp lower to 2.24% while the German bund is 1bp lower at 1.88%.
The dollar is basically flat against a basket of other major currencies while commodity prices are slightly lower. WTI crude oil is down 98 cents to $106.34 a barrel and gold is $1.15 an ounce lower to $1,679.72.
Overseas data wrap-up
Thailand's exports expanded 0.9% yoy in February following January's 6.0% yoy contraction in exports. The rise in export follows a turning in manufacturing production following the recent floods that had knocked out a significant portion of the country's manufacturing base. Looking ahead the country should continue to recover and our Asian economists expect exports to expand by 10% for the whole year.
The UK's fourth quarter growth rate was revised lower to show a 0.3% qoq contraction in the fourth quarter instead of the originally reported 0.2% contraction. Looking ahead our UK economist expects the country to bounce back this quarter and expand by 0.4% qoq. For the entire year the economy is expected to grow 0.6% as the recession in the euro area acts as a headwind to more robust growth.
Today's events
At 8:30 am, the main economic data report for the week will be released: durable good orders for February. Durable goods orders are expected to rise 4.0% MoM in February after a 3.7% decline in January. Boeing orders rose sharply over the month and we expect this to translate into a 30% increase in the nondefense aircraft orders component. Stripping out this component, along with the rest of transportation, we expect durable goods orders to rise 2.0%. Under our forecast, core capital goods orders rise 2.0% in February, partially offsetting the drop last month, leaving us on tracking 6.0% capital spending growth in the first quarter.