Archived IMT (2011.04.13)

US Roundup & Asia/Pacific Preview: Yen pushed up as risk aversion rose for a second day; CAD fell as the Bank of Canada cut into rate hike expectations; and a survey of U.S. economic optimism crumbled on Tuesday.

=========== A round of risk aversion that kicked off in Asia circled the world on Tuesday. GBP and the commodity currencies were the laggards as U.S. stocks fell about 0.8% in the largest decline in a month. Sentiment is being driven by: 1) cascading DOWNGRADES to growth in advanced economies, especially the US, Japan and the UK. 2) Worries about the effects of HIGH OIL PRICES 3) uncertainty about CORPORATE PROFITS in light of high resource expenses.======== An UNLIKELY SOURCE of worry came from the IBD/TIPP economic optimism survey as it stumbled to 40.8 from 43.0 (Exp: 45.7). It’s a record low, beating out the 41.1 score in the depths of the recession 30 months ago. "The shock of the gasoline prices is going to suck up everything," The survey results put a downward bias in Thursday’s U.S. March retail sales report. The consensus is calling for +0.4% ex-autos and gas but the market will now be bracing for something weaker.

U.S. growth forecasts continue to be trimmed after large drops in imports and exports resulted in a $45.8 billion trade deficit (Exp: -$42.9B). In a separate report, the U.S. fiscal deficit hit $188.2 billion (near expectations) in March compared to $65.4 in the same month last year. The YTD deficit is at $829.4 billion compared with $717 billion at this time last year.

In CANADA The BoC was substantially less-hawkish-than-expected but upbeat about growth. They upgraded the 2011 growth forecast to 2.9% from 2.4% but downgraded 2012 to 2.6% from 2.8%. The BOC gave no hint they would be raising rates at the next meeting on May 31. Further details of economic forecasts will be released on Wednesday but there is enough here to call into question the likelihood of a rate hike in July (which is highly priced in).

ASIA PACIFIC PREVIEW: Economic data should not be a driving factor in Asia-Pacific trading unless there is a large surprise in Japan’s corporate goods price index (exp +1.9% y/y) or Australian consumer confidence from Westpac (prior: -2.4%). Expect the focus to stay on the nuclear crisis in Japan. A portion of Tuesday’s risk aversion was blamed on officials in Japan raising the rating for the nuclear disaster to 7, the highest level, from 5. The move, however, was a reflection (or admission) of the radioactivity that has already been released, not a warning that the condition is worsening. “I think it’s actually getting incrementally better,” Navy Admiral Robert Willard, the head of the U.S. military’s Pacific Command told Bloomberg Tuesday. We may see this manifest as a rebound, or at least stabilization, in risk appetite.

By AB - AshrafLaidi.com staff