Japan data still make dismal reading; Can the appetite for risk be sustained? May have to wait till next week...


  • US Mar. Personal Income/Expenditure out at -0.3%/-0.2% vs. -0.2%/-0.1% expected resp.
  • US Mar. PCE Core out at 1.8% y/y as expected
  • US Weekly Initial Jobless claims out at 631k vs. 640k expected
  • US Apr. Chicago PMI out at 40.1 vs. 35.0 expected and 31.4 prior
  • AU Apr. AiG Manufacturing Performance out at 30.1 vs. revised 33.2 prior
  • JP Mar. Jobless Rate out at 4.8% vs. 4.6% expected and 4.4% prior
  • JP Mar. Household Spending out at -0.4% y/y vs. -2.5% expected and -3.5% prior
  • JP Mar. National CPI out at -0.3% y/y, as expected vs. -0.1% prior
  • CN China Apr. PMI out at 53.4 vs. 52.4 prior
  • JP Mar. Labour Cash Earnings out at -3.7% y/y vs. -2.7% expected and -2.7% prior


  • Denmark Retail sales (0730)
  • UK CIPS Manufacturing Survey (0830)
  • UK Consumer Credit (0830)
  • UK M4 Money Supply (0830)
  • UK Mortgage Lending/Approvals (0830)
  • US Factory Goods Orders (1230)
  • US ISM Manufacturing Index (1400)
  • US Final Michigan Sentiment (1400)

Market Comment:

Chrysler filed for Chapter 11 bankruptcy last night, a move that had been widely anticipated, with US President Obama saying that the process would be “quick and efficient”, possibly lasting only 60 days. It was also announced that the Chrysler/Fiat deal would proceed with the US providing up to $3.5b in finance and Fiat will build new cars and engines in the US. Also in the headlines overnight, It was also announced that the results of stress tests for the biggest banks might be delayed as executives debate the preliminary findings with examiners. The initial schedule for release was for may 4 but may be delayed until the end of the week.

With the Labour Day holidays closing most Asian centres, and then the majority of Europe, FX markets have had a very subdued session with Japan the only centre to report or trade anything of note.

Japanese data releases kicked off with the weekly portfolio flows with foreign investors proving net sellers of both stocks and bonds while Japanese investors net sellers of stocks but remaining net buyers of foreign bonds. As a result, there was a net outflow of Y585.1 bln in the week to April 25 compared to a revised net inflow of Y933.5 bln the previous week.

Next up, we saw unemployment numbers, which deteriorated to their worst level in 4 years. Unemployment reached 4.8% in March, worse than the forecast 4.6% and showing a steeper deterioration from February's 4.4%. A further sign of the deteriorating labour market, something which is starting to feature prominently across the globe, the jobs-to-applicants ratio slumped to a 7-year low of 0.52 from 0.59 previously. Household spending also slipped in March, down 0.4% y/y versus -3.5% the previous month and was better than market expectations of -2.5%. More bad news was to come from wage earnings data, which fell 3.7% y/y in March, its steepest fall since July 2002 while overtime pay, a barometer of corporate activity, saw its biggest ever drop on record, down by an unprecedented 20.8% y/y and the 8 th straight month of declines.

The trend towards a deflationary spiral was further confirmed by the national CPI numbers. Core inflation fell for the first time since September 2007, dropping 0.1% y/y after posting a flat reading for the past 2 months. Excluding fuel and food, prices were down a slightly larger 0.3% y/y.

All in all, the data continued to paint a bleak picture, particularly in the jobs sector, and as a result finance minister Yosano had few positives to say on the economy in comments post-data. He especially tried to downplay the recent “green shoots” seen in production activity, highlighting that downside risks were still more prevalent with domestic demand unable to fully compensate for the huge fall in exports.

The only less-depressing piece of news to emerge this morning was in China's PMI data for April. The official number rose to 53.5 from 52.4 previously and marked the fifth straight month of improvement and continued its rebound from the record low of 38.8 last November. In addition, S.Korea”s exports managed to beat expectations, but only by coming in less-negative than feared but stillin negative territory, down 19.0% y/y in April.

As mentioned above, the Asian day was extremely subdued once the Tokyo fixing was out of the way (note small USD demand was seen) and currencies stuck close to NY closing levels from the previous day as Tokyo wound down ahead of the Golden Week holidays next week. Things are not likely to improve into the European session and any spark of activity may be delayed until the NY session. Range-bound, slow trading likely the order of the day.