China Exports Impress with Focus Shifting to Corporate Earnings to Fuel Risk

Earlier in the Day:

Economic data released through the Asian session was on the heavier side this morning. Key stats included Business PMI and electronic card sales out of New Zealand and March trade data out of China.

Outside of the numbers, the RBA also released its financial stability review.

For the Kiwi Dollar,

The Business PMI decreased from 53.7 to 51.9 in March, recording the lowest level since July 2018. According to the figures released by BusinessNZ,

• The employment sub-index was the only sub-index to improve in March, rising from 50.8 to 51.9.
• Weighing on the headline number were falls in the sub-indexes for production and new orders. New orders fell from 54.4 to 52.5, with the production sub-index falling from 53.6 to 51.4.
• Finished stocks also fell, with the sub-index falling from 55.0 to 53.1.

Electronic card retail sales fell by 0.3% in March, partially reversing a downwardly revised 0.6% rise in February. According to figures released by NZStats,

• The decline was attributed to a 1.9% slide in spending on durables (appliances, electronics, and hardware).
• Spending on apparel also declined in March.
• Spending on consumables increased by 0.5%, with spending on fuel rising by 0.7%. There was also an increase in spending on other necessities at the end of the quarter.
• For the 1^st quarter of the year, total credit card spending rose by 1%, reversing a 0.3% fall from the 4^th quarter of last year.
• Quarter-on-quarter, spending on fuel fell by 6.2% in the 1^st The decline came off the back of a slide in fuel prices.

The Kiwi Dollar moved from $0.67294 to $0.67246 upon release of the figures. At the time of writing, the Kiwi Dollar was up 0.04% to $0.6731 for the session

For the Aussie Dollar,

The RBA’s Financial Stability Review weighed on the Aussie Dollar early in the day. The RBA noted that:

• Global economic growth has slowed, with asset prices remaining at elevated levels.
• Domestic economic growth has also eased, with the housing market remaining weak.
• Risks to Australian financial stability include:
  • Vulnerabilities in key trading partners and global financial markets remain elevated. The likelihood of an event adversely impacting those vulnerabilities has seemingly increased.
  • Trade tensions could escalate.
  • High household debt increases the vulnerability of households and the financial sector to a sharp deterioration in economic conditions. A cut in consumption would compound economic weakness.
  • The slowing Housing market is expected to face more pressure from an increase in the supply of apartments.

The Aussie Dollar moved from $0.71311 to $0.71192 upon release of the review, which preceded trade data out of China.

Out of China,

Exports jumped by 14.2% in March, coming in well ahead of a forecasted 7.3% increase. Exports had tumbled by 20.8% in February. Imports fell by 7.6%, which was far greater than a forecasted 1.3% decline. Imports had fallen by 5.2% in February.

The Aussie Dollar moved from $0.71257 to $0.71357 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.06% at $0.7128, the gains coming in spite of a gloomy financial stability review.

Elsewhere,

The Japanese Yen down by 0.15% to ¥111.83 against the U.S Dollar.

In the equity markets, the ASX200 and Nikkei closed out the day with gains of 0.85% and 0.73% respectively. In contrast, the Hang Seng and CSI300 were in the red at the time of writing, down by 0.38% and 0.73% respectively.

The Day Ahead:

For the EUR

Economic data due out of the Eurozone is limited to finalized inflation figures for Spain and February industrial production figures for the Eurozone.

While finalized inflation figures will unlikely have an impact on the EUR, industrial production figures will likely influence.

Looking across the member states, while manufacturing PMI numbers reflected weaker output in February, industrial production figures painted a different picture.

Industrial production in France, Germany, and Italy saw unexpected increases in production supporting a positive reading later this morning. Forecasts are for production to fall by 0.5%.

While industrial production figures will have an influence, market risk sentiment will be the key driver through the day. March trade figures out of China this morning reflected a larger than forecasted increase in exports, which was a positive for risk appetite ahead of the European open.

At the time of writing, the EUR was up 0.28% at $1.1285.

For the Pound

It’s another quiet day on the economic calendar. The quiet day will leave events in Parliament in focus through the day.

Will Teresa May make it to the weekend? She made it through day 1, but there’s no guarantee she’ll make it to the weekend, let alone 31^st October.

On the bright side, the Pound will have a respite from all the Brexit chatter, at least for now, though expect this to be a short-lived one. Lawmakers will be pushing agendas, which will include the possibility of a 2^nd EU Referendum…

At the time of writing, the Pound was up 0.05% to $1.3063.

Across the Pond

Economic data due out of the U.S includes import and export price figures, which are due out ahead of April prelim consumer sentiment figures.

For the Greenback, the focus will be on the consumer sentiment figures.

Outside of the numbers, corporate earnings will likely be the key driver for U.S Treasury yields this afternoon. JPMorgan Chase and Wells Fargo will release quarterly earnings today and will set the tone for the season. Disappointing results and expect yields and risk appetite to take a tumble.

At the time of writing, the Dollar Spot Index was down by 0.15% to 97.032.

For the Loonie

It’s been a quiet week on the data front, which hasn’t been a bad thing for the Loonie. While the lack of stats was positive, a slide in crude oil prices on Thursday put the Loonie back under pressure.

Market risk sentiment and the influence on China’s trade data on crude oil prices will be the key driver today.

The Loonie was up 0.12% at C$1.3367, against the U.S Dollar, at the time of writing.