Market Brief

The Usd was weaker in the Asian session, as risk appetite firmed on the back of benign stress test results. The EurUsd traded down to 1.3342, before rallying to 1.3429, while the UsdJpy traded between 98.90 and 99.42. The highly anticipated results of the US Bank Stress Test failed to erode the markets growing optimism, even though 10 firms require almost $75bn in additional capital. The fact that the greater part of the results had previously been leaked gave markets some breathing space to price in the final results. In addition, Fed Chairman Bernanke said the results would give markets considerable comfort..Yesterday's Wall Stress session closed slightly lower, but Asian regional indexes are trading higher. In FX, risk seekers drove up commodity and EM currencies, with the AudUsd trading at 0.7571 and UsdRub trading at 32.5380. Gold longs continue to profit, as the precious metal sustains new price range above $910oz. The inflation story builds credibility as commodities in the energy sector benefit from heightened risk appetite. Crude oil traded as high as $57bbl and a serious test at $60bbl would constitute a breakout, also bolstering the attractiveness of gold as hedge. Several major events had a substantial impact on market behavior today, two of which were the ECB and BoE meetings, and the last were the announcement of the stress test results. Investors are starting to see justification of the so-called “green shoots.” The degree of transparency is comforting to Traders looking to capture the potential upside in a possible earlier than expected recovery. Gold can define a range between $850-$950oz over the long-term in either situation, meaning in an environment of increased risk aversion the price would hold steady and if markets stabilize we are likely to see a continued rally in the precious metal.

The RBA's quarterly statement on monetary policy contained significant downgrades to growth and inflation.. It also assumed that signs of growth in China , stabilization in Asia and the U.S. would prove durable. However, more rate cuts were signalled, but there is a clear reluctance to do so, as the RBA said further easing would be smaller, less frequent and also dependent on the prospects for sustainable recovery.

Ahead today, the employment report is expected to show a 600k decline in NFP, pushing the unemployment rate up to 8.9%. Initial jobless claims slipped to a monthly average of 637,000 in April from 658,000 in March. The better than expected ADP survey (showed just 491k jobs lost) will have the markets looking for a number to support the recovery story. however, correlations between the two series are small.

G10 Advancers and Decliners vs USD

Global Indexes Current Level % Change
Nikkei 225 Index9,432.83+ 0.50
Hang Seng Index17,320.72+ 0.59
Shanghai Index2,625.65+ 1.08
FTSE 100 Index4,441.48+ 0.97
DAX Index4,868.45+ 1.33
SMI Index5,361.52+ 0.67
DJIA futures8,446.00+ 0.70

World Markets Current Level % Change
Gold914.31+ 0.39
Silver13.99+ 1.00
VIX33.44+ 3.05
Crude wti57.57+ 1.51
USD Index83.72- 0.26

Todays Calender Estimates Previous Country / GMT
Manufacturing production, % m/m Mar-0.5-0.1NOK / 8.00
Producer input prices, % m/m (y/y) Apr0.8 (-3.6)1.0 (-0.4)GBP / 8.28
Producer core output prices, % m/m (y/y) Apr0.2 (2.3)0.2 (3.3)GBP / 8.28
Industrial production, % m/m (y/y) Mar-1.3,-21.1-2.9,-20.3GE / 10.00
Unemployment, % Apr8.38.0CAD / 11.00
Net change in employment, thous Apr-50.0-61.3CAD / 11.00
Nonfarm productivity, % q/q ar (y/y) Q1-P0.8 (1.8)-0.4 (2.2)USD / 12.30
Change in non-farm payrolls, thous Apr-620-663USD / 12.30
Unemployment rate, % Apr8.98.5USD / 12.30
Wholesale inventories, % m/m (y/y) Mar-1.0,-2.5-1.5,-1.7USD / 14.00
FRB of Richmond President Lacker (FOMC voter) spea----USD / 17.00
Trade Balance, $ mn Mar-F--160MXN / 19.30