Futures Ignore Overnight Newsflow, Prepare For More Yen-Driven Momentum Ignition

One can see that while the traditional 6:00 AM USDJPY buy program is just duying to resume aggressive upward momentum ignition, futures are still leery and confused by the recent post-open high beta selloffs. Then again, things like yesterday’s ridiculous no news 3:30pm ramp happen and confused them even more just as momentum is about to take a downward direction. Stocks in Asia (ex-China) advanced amid a reversal in sentiment after Citigroup (+4.15%) inspired positive close on Wall Street, however Shanghai Comp (-1.4%) underperformed as concerns over GDP data on Wednesday following weak money supply data weighed on sentiment. Stocks remained on the back foot (Eurostoxx50 -0.42%), with Bunds supported by the release of lower than expected German ZEW survey and also ongoing concerns surrounding the stand-off between Ukraine/Russia. Short-Sterling bear steepened after UK CPI fell to its lowest level since October 2009, but house prices across Britain posted its biggest rise since June 2010, reviving concerns over an overheating market.

Turning to the day ahead, the focus in the morning will be on the April ZEW surveys for Germany and the Euro area. Before the US market open, the focus will be on the latest US consumer inflation report where consensus expects a +1.4% and +1.6% YoY reading in the headline and core, and the Empire manufacturing survey. The latest NAHB homebuilder sentiment index will be released shortly after. A number of US industrial large-caps are due to report before the US open including Coca-Cola and Johnson & Johnson. Tech heavyweights Yahoo! and Intel’s earnings come shortly after the closing bell. Yellen’s will be making some opening remarks at the Atlanta Fed’s Financial Market conference. She is due to appear via video conference for 15 minutes only, so we’re unsure if there will be too much she will say on monetary policy. A number of speakers will be participating/presenting at the conference today including Nobel laureate Joseph Stiglitz from Columbia University and Charles Plosser from the Philly Fed.

Bulletin headline summary from Bloomberg and RanSquawk

Treasuries little changed amid decline in Chinese and European stocks, copper and oil on China growth concern; trading may be quiet with market participants unwilling to take positions before long holiday weekend.
China’s money supply grew less than forecast and the broadest measure of credit fell 19% from a year earlier in March before data that’s expected to show economic growth slowed in 1Q; yuan traded in Hong Kong fell to a 14-month low as PBOC cut its onshore fixing to the weakest since September
China’s loss of economic momentum in 1Q was deeper than the most widely-cited data will show, according to analyst forecasts for a gauge that’s gaining increasing recognition
The U.S. and EU deliberated deepening sanctions against Russia for stoking unrest in eastern Ukraine, while Putin said he’s being called on to intervene in the former Soviet republic
EU is reluctant to introduce stronger measures that could threaten its already fragile economic recovery
Japan’s population slid for a third year with the proportion of people over the age of 65 rising to a record, underscoring the challenge the world’s most-indebted economy faces in financing its aging society
Sovereign yields mostly lower. Asian stocks mixed, Nikkei +0.6%, Shanghai -1.4%. European equity markets, U.S. stock futures fall. WTI crude, gold and copper lower

US Event Calendar

8:30am: Empire Manufacturing, April, est. 8 (prior 5.61)
8:30am: CPI m/m, March, est. 0.1% (prior 0.1%);
- CPI Ex Food and Energy m/m, March, est. 0.1% (prior 0.1%);
- CPI y/y, March, est. 1.4% (prior 1.1%)
- CPI Ex Food and Energy y/y, March, est. 1.6% (prior 1.6%)
9:00am: Net Long-term TIC Flows, Feb. est. $30b (prior $7.3b); Total Net TIC Flows, Feb. (prior $83b)
10:00am: NAHB Housing Market Index, April, est. 50 (prior 47)
POMO 11:00am: Fed to purchase $1.75b-$2.25b in 2020-2021 sector

Fed Speakers

8:30am: Fed’s Lockhart speaks at Atlanta Fed conference at Stone Mountain, Ga.
8:45am: Fed’s Yellen speaks via video to Stone Mountain conference
3:00pm: Fed’s Plosser moderates panel discussion at Stone Mountain
4:00pm: Fed’s Rosengren speaks in Bangor, Maine
8:00pm: Fed’s Kocherlakota speaks in Fargo, N.D Supply

EU & UK Headlines

Risk averse sentiment failed to support Gilts, which underperformed its peers after the release of the latest UK inflation data matched median estimates and brought the gap between inflation and average wage growth to its narrowest since April 2010, while the ONS House Prices posted its biggest rise since June 2010. Analysts at Citi believe that market is too complacent on GBP rates, pointing to the fact that no full rate increased is priced in until at least March 2015, with economists at the bank expecting the first rate hike to be delivered at November meeting this year.

At the same time, Bunds remained in the green, with prices supported by the cautious sentiment amid the ongoing stand-off between Ukraine and Russia, as well as the release of weaker than expected German ZEW survey.

US Headlines

Going forward, market participants will get to digest the release of the latest US Empire Manufacturing and CPI reports, as well as earnings by Intel, J&J , Coca-Cola and Yahoo!.

Equities

Stocks remained on the back foot this morning (Eurostoxx50 -0.42%), with basic materials leading the move lower following trade update by Rio Tinto, where the company blamed adverse weather conditions for missing some metrics. Also of note, reports of Monte Paschi (-8.3%) planning a capital increase resulted in the FTSEMIB under performing its peers, while the SMI remained in the green and was supported by Roche, as well as Nestle.

Despite coming under pressure following weaker than expected UK BRC LfL data overnight and also ahead of the CPI data this morning amid rumours of a weaker number, the pair staged an impressive come back and moved back to unchanged after all major data points came in line with exp. , while the ONS House Price data for Feb posted its fastest Y/Y rise since June 2010.

The release of weaker than expected money supply data from China, which comes ahead of the GDP report on Wednesday, saw the PBoC set the CNY fix at its weakest since September 17th, consequently pushing USD/CNY to trade at its highest level since the start of the month. Also of note, RBA minutes reiterated AUD high on a historical basis and rates to stay stable in the medium term.

Commodities

Commodities are broadly lower, with particular focus on spot gold, which remains under pressure following slower than expected money supply data from China, which comes ahead of the GDP release tomorrow, and also after the world gold council predicted that Chinese demand for gold will fall this year before rising by 25% over the next 4 years as the population gets wealthier. Furthermore, according to Citigroup, China’s commodity demand reached short-term bottom with commodity demand expected to pick up in H2,

Regarding the situation in Ukraine, Germany’s RWE has started reverse gas supplies to Ukraine through Poland, in accordance with the contract, the supplies’ volume may reach up to 10 billion cubic meters per year.

* * *

In conclusion, here is Jim Reid’s overnight recap

Taking a quick look at Asian markets overnight, it’s been a mixed overnight session with the Nikkei (+0.8%) clawing back some its 7%+ losses over the last week as USDJPY tests the 102 level (101.9 as we type). A lunchtime meeting between the BoJ’s Kuroda and PM Abe was rather uneventful. Kuroda said he did not receive any requests on monetary policy from Abe but the two agreed to revive their practice of meeting monthly. Chinese equities are softer today (HSCEI -1.4%) after data showed that China’s M2 money supply data grew at 12.1 % yoy (vs 13.0% expected) which is the slowest pace since 2001. Shanghai and COMEX copper fell 0.4% and 0.6% respectively in response to the Chinese monetary data. There was minimal reaction to the RBA’s April minutes where the central bank reiterated its neutral stance and noted a rise in the AUSUSD in recent months. The AUDUSD is 0.4% weaker today. In India the continuing elections are the prime focus – a poll taken on Monday by NDTV suggested that the nationalist pro-reform BJP opposition party is set to win a narrow majority in elections (Reuters). There is some caution around the polls though given that opinion polls in 2004 wrongly predicted victory for a BJP-led alliance. Elsewhere the EURUSD (-0.1% overnight) continues to edge lower after the recent dovish ECB comments. The Bank of France’s Noyer said yesterday that the EUR’s gain over the last year has been “not appropriate” and said there was no question the ECB could find enough assets to purchase if needed.

The cautious sentiment that prevailed during the European morning yesterday (on the back of Ukraine/Russia headlines) eventually gave way to firmer price action as the US markets opened. Equities were already ticking upwards midway through the European session but Citigroup’s earnings before the US markets opened gave risk sentiment a further boost. The bank reported EPS of $1.30 on revenues of $20.1bn, both well above consensus estimates. The details were somewhat messy though with one-off items including significant gains from loan loss reserve releases and better revenues from Citi Holdings (the non-core part of the bank) contributing to the result. There was an 18% drop in revenues from Citi’s fixed income trading business, but this was consistent with JPM’s result on Friday and was offset by a 10% rise in Citi’s equities trading revenues. Another setback in the bank’s Mexican unit also clouded the result. Nevertheless the stock closed 4.4% higher, following a tumultuous few months which included last month’s rejection of the bank’s capital plan by the Fed. Citigroup’s stock is down 8.5% in the YTD, 11 percentage points worse than the 2.5% gain in the S&P 500 bank index. We’re still early in the reporting season but so far about 57% of the 30 S&P 500 companies who have reported earnings have beaten analyst earnings estimates. On the revenue side however, only 50% of companies have managed to do the same. We’ll provide our usual earnings tracker table in a few days time when we have a few more data points at hand.

Equities hit an intraday high soon after the release of retail sales (+1.1% vs +0.9% expected). The month-on-month gain was the highest since September 2012 and the growth was apparent across a number of categories including furniture (+1.0), building materials (+1.8%), general merchandise (+1.9%) and restaurant sales (+1.1%). DB’s economics team thinks the strong showing from discretionary retail categories was a sign that adverse weather effects have dissipated. While EM as a whole has done well of late, it did give up some of its recent gains yesterday following another spiralling in tensions between Ukraine and Russia, playing out in the former’s eastern half. Government officials in both the EU and US have indicated that they may intensify sanctions against Russia soon, but will probably wait until the outcome of a summit on Thursday between the EU, US, Ukraine and Russian foreign ministers in Geneva. Gazprom US ADRs fell 4% yesterday with the prospect of stage 3 economic sanctions from the US and EU. Politico is reporting that President Obama and Putin spoke by phone on Monday to try and diffuse the situation. Russian CDS widened by 21bp and the Ukrainian Hryvnia managed to find some stability after Ukraine’s Central Bank increased its discount rate from 6.5% to 9.5%.

via Zero Hedge http://ift.tt/1iSVATd Tyler Durden

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