Intraday Market Thoughts Archives

Chinese GDP slows; Spain in center of attention; UK PPI declined and German CPI unrevised. Markets turn to CPI, UOM consumer confidence and Bernanke speech. EURUSD struggles at the 55 dma of 1.3215.

The USD has been trading within a narrow range since the beginning of the London session. European equities are losing about 1% and the relative strength winner is CAD.

Rumors of a strong Chinese GDP that boosted risk appetite yesterday proved unfounded as Chinese growth slowed considerably to 1.8% from 2.0% q/q and to 8.1% from 8.9% y/y. The impact was the strongest on the AUD that fell from 1.0450 to 1.0368 and currently trades around 1.0400.

EURUSD struggles at the 55 dma of 1.3215, with support creeping at 1.3130 trendline.

Spain is again in the center of attention after Bloomberg reported that Spanish banks have borrowed in March EUR 227.6 bln from the ECB, significantly more than EUR 152.4 bln in February, confirming concerns that the LTRO liquidity is drying up. Spanish 10 year yield pushed higher on the news and reached 5.92%. Not surprisingly, over the past few days the ECB officials have been reiterating that the ECB can buy sovereign debt via the SMP program.

On the data front, UK producer inflation slowed in March as input prices declined to 5.8% from previous 7.8% while PPI output prices fell to 3.6% from 4.1% on annual basis and German final CPI was unrevised in March at 0.3% m/m and 2.1% y/y in line with the initial estimate.

The NY session will bring March CPI that is expected to decline to 2.7% from 2.9% on annual basis with the core figure remaining steady at 2.2%.

The University of Michigan consumer confidence that is due at 9:55 am ET is seen higher in April at 76.5 from previous 76.2.

The last event that is likely to heighten volatility this week will come at 1:00 pm when the FED chairman Bernanke delivers a speech in NY.

US initial jobless claims were much higher than expected but a smaller trade deficit pointed to a Q1 better growth reading. Commodity currencies were the top performers and the yen lagged on rumors of a strong Chinese GDP print ahead of the official release in the upcoming session. The market is most concerned with the release of Chinese GDP at 0200 GMT. The consensus is for 8.4% growth but rumors of a reading above 9% have significantly boosted expectations. More below.

US jobless claims data added to concern that the employment situation remains soft. Claims were 380K compared to the 355K expected. It was the highest since late January and the prior report was revised 10K higher to 367K as well.

A positive sign for first quarter growth came in the trade balance report for February. The expected $51.8 billion deficit was just $46 billion. Inflation trended lower with the producer price index slipping to 2.8% y/y in March from 3.3% in February.

The Fed’s Dudley said more stimulus may be required if the economy falters but he balanced that by saying more QE could cause inflationary anxiety. He added that it’s too soon to say the economy is out of danger. The Fed’s Plosser continued to say more easing is unnecessary.

The market is most concerned with the release of Chinese GDP at 0200 GMT. The consensus is for 8.4% growth but rumors of a reading above 9% have significantly boosted expectations. Recall the last 3 months of 2011 showed a 8.9% rise, which remain well above the 7.5% growth target for the year announced earlier. At the same time, industrial production is expected to climb 11.3% y/y and retail sales +14.8%.

AUD labor market improved; UK trade deficit widened; Eurozone industrial production rose m/m but declined y/y; Italian auction. Market turns to PPI, trade deficit, jobless claims and Canadian trade data. See below for the latest on Tuesday’s Premium Trades.

The latest bounce in equities is being attributed to chatter of ECB returning to the markets, this time targeting Spanish bonds. The greenback is weaker against all majors in the ongoing session. European equities are losing about 0.7% and the relative strength winner is AUD.

FRBNY's Dudley reiterated Bernanke's take on the economy that more is needed on the policy front and that it is too early for any exit strategy.

AUD rose during the Asian session on labor market data that exceeded expectations. 44 thousand new jobs were created in March after a 15.4 thousand were lost in February. The unemployment rate remained steady at 5.2%. The AUD will undoubtedly be impacted by Chinese GDP that is due at 10:00 pm ET.

UK trade deficit widened in February to GBP -8.772 bln from GBP -7.5 bln as exports to non-EU countries fell 8.8% but imports grew 1%. Despite the poor result, GBPUSD trades higher around 1.5945.

Eurozone industrial production rose in February 0.5% from an unchanged reading a month earlier but declined to -1.8% from -1.7% y/y. Market sentiment towards the common currency cooled a bit as Greek unemployment ticked higher again in January as it printed 21.8% from previous 21.2%.

Italy nearly reached a full take up as it sold EUR 4.88 bln of BTPs out of EUR 5 bln target. However, the average yields rose and bid to cover declined.

The US session kicks off at 8:30 am ET with March PPI that is seen lower at 3.1% from 3.3% y/y (core PPI 2.8% from 3%). Trade deficit in February is expected to narrow slightly to USD -51.9 bln from USD -52.6 bln and jobless claims are anticipated at 355K from 357K.

Markets could also react at 9:00 am when FOMC member Dennis Lockhart participates at a panel discussion in Atlanta and at 3:30 pm when FOMC member Sarah Bloom Raskin delivers a speech on the state of economy.

Canadian trade data is due at 8:30 am ET and the surplus is expected to rise marginally to CAD 2.2 bln in February from previous CAD 2.1 bln.

Tuesday evening’s PREMIUM INTERMARKET INSIGHTS remain in progress ; EURUSD, AUDUSD, EURJPY, USDCAD, gold, silver and US crude (May contract), as well as EQUITY & FX VOLATILITIES vs SOVEREIGN YIELDS as well as the latest trades in Direct Access to these Premium Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=625 Non-subscribers, can go here: http://ashraflaidi.com/products/sub01/

Mixed Italian auction; weak demand in German auction; Spanish industrial production declined; German WPI fell. Canadian housing starts push up, US import prices and Beige book. Yesterdays Premium piece warned about rising VOX/EUR 1-mth Vols & sovereign yields, along w/ latest positioning in AUDUSD, EURJPY and EURUSD. See more below.

USD is marginally lower against all majors. European equities are gaining over 1% and the relative strength winners are NZD followed by AUD.

Despite the ongoing uncertainties, market sentiment improved in the middle of the Asian session sending USD and JPY lower. However, it seems unlikely that the market would turn and the risk on attitude would last.

The eagerly anticipated Italian auction had a mixed result. Italy was able to reach a full take up by selling 3 and 12 months bills worth of EUR 11 bln but the average yields rose considerably. Higher yields and the ECB deposits that rose to EUR 787.96 bln both indicate increasing market tension. Italian 10 year yield declined from 5.73% to 5.51%.

Spanish 10 year yield rose above 6% earlier today which was the highest level since mid December but has declined a bit and currently stands around 5.89%. Spanish industrial production fell -5.1% in February from previous -4.3% y/y which marks sixth month of declines.

Germany sold 10 year bund totaling EUR 3.87 bln out of EUR 5 bln target. The average yield declined to 1.77% from 1.83% but cover fell to a mere 1.1 from 1.4. This auction was technically uncovered and it was the first case since 11/2011. German wholesale prices declined in March to 0.9% from previous 1% (2.2% from 2.6% y/y).

Canadian housing starts rose to 215K in Mar from a evised 205K, vs esxpectations of 200K.

US March import prices are due at 8:30 ET and are seen higher at 0.9% from 0.4% m/m but lower at 3.4% from 5.5% y/y. Crude oil inventories that are due at 10:30 am are anticipated at 2.1M barrels from previous 9M barrels.

Market volatility will increase at 2pm when the Beige book and federal budget balance is due. The deficit is seen narrower at USD -202 bln from previous USD -231.07 bln.

Last nights PREMIUM INTERMARKET INSIGHTS, we chart EQUITY & FX VOLATILITIES vs SOVEREIGN YIELDS as well as the latest trades in EURUSD, AUDUSD, EURJPY, USDCAD, gold, silver and US crude (May contract). Direct Access to these Premium Insights is found here: http://ashraflaidi.com/products/ sub01/access/?a=625 Non-subscribers, can go here: http://ashraflaidi.com/products/sub01/

European peripheral yields surged on Tuesday as Italian bank stocks were battered. The yen surged and carry trades were unwound but the euro was somewhat unscathed. Japanese machine orders rise for the 2nd straight month. Australian consumer confidence are highlights of Asian trading. In our Tuesday’s PREMIUM INTERMARKET INSIGHTS, we chart EQUITY & FX VOLATILITIES vs SOVEREIGN YIELDS as well as the latest trades in

Crisis-redux was the theme throughout the day. Spanish and Italian 10-year yields rose more than 20 basis points to 5.99% and 5.69%, respectively. In early March, both were trading with a 4-handle. The market fled to the safety of German sovereign debt, sending yields there to record and cycle lows.

There was no single catalyst but talk about regional austerity in Spain contributed, as did slowing import growth in China and the continuing fallout from Friday’s non-farm payrolls report. It was the first trading day in Europe after the Easter holiday.

Italian bank stocks were the hardest hit, with UniCredit falling nearly 8% and the broadly MIB index closing down 5%. Stocks throughout the continent fell 2% and the S&P 500 closed down 1.6%.

The euro was surprisingly resilient, continuing in a choppy trade between 1.3050 and 1.3150. There was chatter about flows and European funds pulling in funds to shore up liquidity. If yields continue to rise, however, it will be impossible for the euro to hold the line.

Asia-Pacific Preview

Japan Feb core machinery orders rose 8.9% y/y following 5.7% in Jan, posting their 2nd consecutive monthly rise. At 0030 GMT, Westpac releases its April report on consumer confidence in Australia. The prior reading was 96.1. An hour late, February Australian home loan data is expected to show a 4.0% contraction.

In our Tuesday’s PREMIUM INTERMARKET INSIGHTS, we chart EQUITY & FX VOLATILITIES vs SOVEREIGN YIELDS as well as the latest trades in EURUSD, AUDUSD, EURJPY, USDCAD, gold, silver and US crude (May contract). Direct Access to these Premium Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=625 Non-subscribers, can go here: http://ashraflaidi.com/products/sub01/

As market emphasis shifts to US earnings, here are a few stats on the latest deterioration in the old continent; Spanish 10-yr yields +20% since LTRO-2 was announced on February 29; Italian 10-yr yields +8% since LTRO-2, and 19% since PSI deal on March 9. Spanish government bonds are now the latest victim of bond traders typical one-country assault amid speculation that Spain will be the 4th recipient of a Eurozone bailout. At a time of deepening recession, Spanish authorities have selected education and health sectors for 10 billion in budget cuts. In our LATEST PREMIUM INTERMARKET INSIGHTS, we chart EQUITY & FX VOLATILITIES vs SOVEREIGN YIELDS as well as the latest trades. Direct Access to todays Premium Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=625 Non-subscribers, can go here: http://ashraflaidi.com/products/sub01/

Periphery spreads widening; Spanish 10 yr yields+ 20% up since LTRO-2.

Italian yields +8% up since LTRO-2 and 19% since PSI deal of Mar 9;

Greek yields + 22% since Mar 9 PSI; Portuguese yields -15% since Mar 9 PSI but +10% since Mar 28 low.Eurozone sentix index dropped; Swiss unemployment steady; German trade surplus declined. Focus turns to IBD/TIPP economic optimism, wholesale inventories and three FED speeches. 1 EURUSD short in progress, the other stopped out. For the latest on Thursdays Premium trades, please see below.

The USD is stronger against all majors except JPY. European equities are losing about 1% and the relative strength winner JPY.

Positive market sentiment turned 180 degrees in the second part of the Asian session and the greenback continues to push higher as concerns about global growth intensified and focus turned to European periphery.

Spanish spreads continue to widen and the 10 year spread reached the highest level since the end of November at 424 bps. Meanwhile, traders are supposedly noticing that the LTRO liquidity is drying up which could impact demand for bonds in the days ahead. Focus will turn to Italy that will sell 3 month and 12 month bills tomorrow and 2015 BTP on Thursday. ECB deposits continue to be elevated at EUR 784.83 bln on last Thursday.

On the data front, Eurozone Sentix investor confidence for April dropped to -14.7 from previous -8.2 while market anticipated a slight improvement to -8.1, Swiss unemployment rate remained at 3.1% in March, German trade surplus declined to EUR 13.6 bln in February from January's EUR 15.1 bln and UK CB leading index rose in February 1% from January's 0.7%.

The US session has only second tier data releases today. The IBD/TIPP economic optimism is expected to rise in April to 49.1 from 47.5 and wholesale inventories are seen 0.5% higher in February from previous 0.4%. Both reports are due at 10:00 am ET.

There are also THREE FED SPEECHES scheduled for the afternoon. Fed's Fisher speaks at12:30 pm in Oklahoma, Atlanta FED president and FOMC member Dennis Lockhart delivers a speech at 12:45 pm at the conference in Stone Mountain and Fed's Kocherlakota speaks at 2:30 pm in Minnesota.

The latest from those Premium Intermarket Insights; 1 EURUSD short in progress, 1 stopped out. AUDUSD short all done, gold longs unfilled & so are the EURJPY shorts. Silver short in progress. Both USDCAD trades remain in progress. Access to today's Insights: http://ashraflaidi.com/products/sub01/access/?a=624 Nonsubscribers pls click here: http://ashraflaidi.com/products/

Ashraf tells CNBC that additional QE with a twist is the most likely scenario once the current program ends this summer. He adds that FX markets tend to become quickly overbought USDs and euros, while market positioning is more slated towards anticipating further Fed stimulus than none. http://youtu.be/kt1JtIcEHzQ

Apprehension about a speech in the Asian session from Ben Bernanke following Friday's disappointing US jobs report and the potential for further BOJ easing triggered dollar and yen selling in holiday-thinned US trading. The moves erased the "risk off" trades at the weekly open and left GBP and EUR as the day's top performers.

Non-farm payrolls and Chinese CPI remained in the spotlight in early trading but chatter about dovishness from Bernanke and/or the BOJ led to slump in the dollar and yen. EUR/USD edged below 1.3050 and then climbed up to 1.3135. EUR/JPY rose a full cent from the lows to 1.0720.

A Reuters survey of primary dealers revealed that 11 of 15 still believe the Fed will embark on QE3 with June as the likely target date. At 7:15 p.m. ET, Bernanke speaks for the first time since non-farm payrolls. Blatant hints about QE3 are unlikely but he could take small further steps toward more easing.

About 4 hours later, the Bank of Japan will make its latest policy announcement. Economists do not believe they will add to the QE announced last month but nothing can be ruled out. A hint at more easing may be enough to keep USD/JPY from falling below 81. Monday's announcement of 10,000 job cuts at Sony may have been timed to send a strong message about the difficulty of manufacturing with a strong yen.

Other events on the calendar include a speech from the BOE's Adam Posen, Chinese trade balance and Australia's NAB business confidence.

The latest Premium Intermarket Insights set ahead of Friday's US jobs report remain in progress; charts on USD Index & trades on EURJPY, AUDUSD, USDCAD and US crude. Access to today's Insights: http://ashraflaidi.com/products/sub01/access/?a=624 Nonsubscribers pls click here: http://ashraflaidi.com/products/

Calm trading due to Easter Monday in Europe likely to continue; Chinese CPI jumped back to 3.6% from 3.2% due to food prices soar; 3rd Greek bailout; week's key events. Market turns to Canadian business outlook, Bernanke and Posen speeches. Bernanke & Posen on tap later in the evening. Thursday's Premium Intermarket Insights remain in progress. See below for more detail on those trades.

The greenback strengthened across the board in early Asia but later gave up most of its gains. Since the London session started, the buck has been trading within a narrow range as most European markets are closed in observance of Easter Monday. The USD is only stronger against the CAD as it trades around 0.9984.

This week started with Chinese CPI that in March jumped 3.6% from 3.2% on annual basis which was above market expectations of 3.4%. The increase is largely attributed to continued food inflation that soared 7.5% y/y. This result complicates policy decision as an interest rate cut and even RRR cut seem unlikely at the moment. The focus will now shift to Chinese trade balance tomorrow and GDP that is due on Thursday night.

Resurfacing reports of a third Greek bailout and intensifying worries about the Spanish economy might keep the common currency under pressure in the days ahead. An article in Sunday Times that Greece accepted that it needs to cut additional EUR 12 bln in order to avoid a 3rd bailout is not likely to calm the markets. Greek PM Papademos' comments that Greece will return to growth in second half of 2013 seem like wishful thinking.

Key events for this week are Beige book and Australian labor market data on Wednesday; PPI, US and Canadian trade balance on Thursday; CPI and consumer sentiment on Friday morning and finally FED chairman Bernanke's speech on Friday afternoon.

The only report for today's US session will be Canadian business outlook survey that is due at 10:30 am ET.

At 7:15 pm ET, FED chairman Bernanke delivers a speech on financial stability at the Stone mountain conference, followed by 7:30 pm when BOE MPC member Adam Posen speaks at the Williams College in Massachusetts.

The latest Premium Intermarket Insights set ahead of Friday’s US jobs report remain in progress; charts on USD Index & trades on EURJPY, AUDUSD, USDCAD and US crude. Access to today's Insights: http://ashraflaidi.com/products/sub01/access/?a=624 Nonsubscribers pls click here: http://ashraflaidi.com/products/

US Non-farm payrolls were far weaker than expected on Friday, raising fresh questions about the QE3 and the US recovery. The US dollar and neighbouring CAD have been sold heavily while the yen has surged. EUR/CHF is right up against the SNB floor as liquidity dries up for the long weekend. Thursday's Premium Intermarket Insights remain in progress. See below for more detail on those trades.

The US added just 120K jobs in March compared to the 203K expected. The unemployment rate fell to 8.2% from 8.3% but it was a misleading signal because of drop in labour force participation. Had the rate of participation remained steady, unemployment would have risen to 8.4%.

There was no silver lining in the report and the market reaction was swift with USD/JPY falling to 81.30s. Other trades were choppy as dollar selling competed with risk aversion. EUR/USD initially jumped a half-cent to 1.3107 but most of the gains later faded. Stock markets were closed S&P futures traded for a short period before closing 20 points below fair value, or down 1.2%.

Bonds sent strong signals about a renewed likelihood of QE3. US 10-year yields fell below important support at 2.09%, touching as low as 2.04%.

EUR/CHF slumped in the post-NFP volatility, touching 1.2008 and then barely recovering to 1.2011. On Thursday, a wall of roughly $9 billion in bids from the SNB was seen at the peg but officials may try to exploit illiquid markets over the 4-day European holiday to give themselves some breathing room.

The latest Premium Intermarket Insights set ahead of Friday’s US jobs report remain in progress; charts on USD Index & trades on EURJPY, AUDUSD, USDCAD and US crude. Access to today's Insights: http://ashraflaidi.com/products/sub01/access/?a=624 Nonsubscribers pls click here: http://ashraflaidi.com/products/