MAJOR HEADLINES – PREVIOUS SESSION

  • Canada Mar. Housing Starts out at 154.7k vs. 130k expected and revised 136.1k prior
  • US Feb. Wholesale Inventories out at -1.5% vs. -0.7% prior and revised -0.9% prior
  • NZ Mar. Credit Card Spending out at +0.3% m/m vs. +0.5% prior
  • JP Feb. Machine Orders out at +1.4% m/m vs. -6.9% expected and -3.2% prior
  • AU Apr. Consumer Inflation Expectation out at 2.4% vs. 2.2% prior
  • AU Mar. Employment Change out at -34.7k vs. -25.0k expected and revised +1.1k prior
  • AU Mar. Unemployment Rate out at 5.7% vs. 5.4% expected and 5.2% prior
  • NZ REINZ Mar. House sales out at +30.5% y/y vs. -17.7% prior
  • JP Mar. Machine Tool Orders out at -84.5% y/y vs. -84.4% prior

THEMES TO WATCH – UPCOMING SESSION

EU ECB Monthly Bulletin (0800)

  • GE CPI (0600)
  • Sweden Industrial Production/Orders (0730)
  • UK PPI Input/Output (0830)
  • UK Visible trade Balance (0830)
  • GE Industrial Production (1000)
  • UK BOE Rate Announcement (1100)
  • CA Unemployment Rate (1100)
  • CA Int'l Merchandise Trade Balance (1230)
  • CA New Housing Price Index (1230)
  • US Trade Balance (1230)
  • US Import Price Index (1230)
  • US Initial Jobless Claims (1230)
  • US Fed's Hoening speaks (1700)

Market Comment:

Australian data again provided a spark into what was expected to be a mundane trading session in Asia. Unemployment data for March came in much worse than expected, with 34.7k jobs lost during the month, well above the market's forecast of a 25k number and a significant deterioration from the 1.1k rebound seen in February. The unemployment rate surged to a 5-year high of 5.7%, again beating market forecasts of 5.4%, and with RBA policy moves seen as widely correlated to the employment data, interest rate markets should start to price in further cuts from the RBA and for rates to stay at low levels for a longer period. The AUD did an as-expected dive, but only a matter of 50 ticks before rebounding. However, expect to see further slippage in coming sessions (note Easter holidays will take most local players out of the market until Tuesday).

Late yesterday the Japanese government announced that it would increase fiscal spending to JPY15 tln in the new economic package. This marks an increase from the previously reported JPY10 tln stimulus package and has helped the JPY to rebound against the greenback, sliding back below the 100 mark again. The move lower was further supported by latest stock and bond flows data which showed a decrease in foreign stock and bond buying by Japanese accounts, indeed recording net selling of bonds in the week to April 3.

In developments overnight, ratings agency Fitch downgraded its rating for Latvia to junk status, BB+ from BBB-, and joining S&P with its downgrade. The other Baltic states of Estonia and Lithuania also saw their ratings cut, from A- to BBB+ for Estonia and from BBB+ to BBB for Lithuania, and the outlook for the new ratings remained negative amid a worsening outlook for all three nations. The kneejerk reaction in FX markets was a slide in the SEK, but it also piled more pressure on an already-defensive EUR.

A NYT article highlighted that, following the recent stress tests, the banking system may be in better shape than many people think. However, if you wanted to latch onto this as a signal that all was well, the article then commented that many of the US' biggest lenders would likely need further bailouts, either from the private sector or from the government.

The BOE meets later today, one month after it announced officially it was setting off down the quantitative easing path. While no shift in interest rates is expected, we expect the accompanying statement to give an update on the effectiveness and the implementation of the QE.  Elsewhere, we will see the US weekly jobless claims with another number in the region of 660k expected following last week's 669k. How long before the market gets “immune” to such numbers and starts looking for 700+ numbers?

With markets heading into Easter and a long weekend (super-long for some) there is a chance that we amble into the session close within a tight range after an early flurry on position adjustment.

Happy Easter.