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Piaci Panoráma. 19 április 2018

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I. Market focus:

Thursday's session in the foreign exchange market began with the publication of the Australian labor market data. The statistics revealed the unemployment rate in March remained at 5.5 percent, matching with economists’ forecast. At the same time, the number of employed persons grew at a less significant pace than expected. Moreover, the value of the reading for the previous month was significantly revised downwards (from +17,500 to -6,300). Thus, February was the first month in the last sixteen years, when the number of employed persons in Australia declined. The employment report signaled that the improvement in the Australian labor market observed during 2017 is not sustainable. The slowdown in the rate of employment growth will put pressure on the dynamics of wages, which in turn will limit the growth of inflationary pressures. In this situation, the Reserve Bank of Australia (RBA) will have to stick to its current monetary policy longer, which does not add support to the Australian dollar. The next important report for the Australian dollar will be statistics on inflation, the publication of which is scheduled for Tuesday, April 24.

Today, the main scheduled event may be data on retail sales in the UK, which will be released at 08:30 GMT. Average forecasts imply a decrease of 0.5 percent m-o-m and a gain of 2.0 percent y-o-y. The expectations of a significant decline in retail sales on a monthly basis, after growth in the previous reporting period, are supported by a drop in consumer spending in the UK in the first quarter, about which Visa reported. According to the company, the decrease in consumer spending in the first quarter of 2018 was the largest since the fourth quarter of 2012. The pound, as a rule, reacts quite strongly to the statistics on retail sales, and given the prospects for the release of weak data, it could be expected that the British currency will see another wave of sales, comparable to yesterday’s one, which was caused by the release of weak inflation data.

The stock market will focus on quarterly reports of companies. Alcoa (AA) and American Express (AXP) posted quarterly results after the bell yesterday. The reports of both companies exceeded expectations.


II. The market highlights are:

  • The Bank of Canada (BoC) left its benchmark interest rates unchanged at 1.25 percent on Wednesday, as widely expected, but warned that escalating geopolitical and trade conflicts risk could undermine the global expansion. The Central Bank also said that it expected the annual inflation in Canada to accelerate in the current year to be modestly higher than the Bank forecast at the beginning of the year but return to the 2 percent target in 2019. At the same time, the economy is projected to operate slightly above its potential over the next three years, with real GDP growth of about 2 percent in both 2018 and 2019, and 1.8 percent in 2020, the BoC said. Exports and business investments in Canada will continue to grow as well, but competitiveness challenges and uncertainty about trade policies could restrain both exports and investment.

  • The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories fell by 1.071 million barrels to 427.6 million barrels in the week ended April 13. Economists had forecast a decrease of 1.429 million barrels. At the same time, gasoline stocks dropped by 3 million barrels to 236 million barrels, while analysts had expected a decrease of 900,000 barrels. Distillate stocks fell by 3.1 million barrels to 125.3 million barrels last week, while analysts had forecast a decline of 500,000 barrels. Meanwhile, oil production in the U.S. increased to 10.540 million barrels per day from 10.525 million barrels per day in the previous week. U.S. crude oil imports averaged over 7.9 million barrels per day last week, down by 720,000 barrels per day from the previous week.

  • The Federal Reserve's Beige Book, which collected information on economic conditions on or before April 9, 2018, from the twelve Federal Reserve Districts, indicated that the economic activity continued to expand at a modest to moderate pace across all districts in March and early April. The document also noted that employment growth continued, with most districts characterizing it as modest to moderate, while wage growth was described as only modest. Meanwhile, prices increased in all districts, generally at a moderate pace. The Beige Book also revealed widespread concerns about trade policy. “ Outlooks remained positive, but contacts in various sectors including manufacturing, agriculture, and transportation expressed concern about the newly imposed and/or proposed tariffs”, said the document.

  • Statistics New Zealand announced on Wednesday that consumers price index (CPI) rose 0.5 percent q-o-q in the first quarter of 2018, following a 0.1 percent q-o-q gain in the fourth quarter of 2017. Economists had forecast the CPI would rise 0.5 percent in January-March period. In y-o-y terms, New Zealand’s CPI increased 1.1 percent in the latest quarter, compared with a 1.6 percent surge in the previous three-month period and economists’ expectation for 1.1 percent advance. According to the report, government-influenced price changes affected the figure, with higher cigarette and tobacco prices (+10.5 percent q-o-q) being countered by cheaper tertiary education (-16.0 percent q-o-q). Higher prices for food (+0.5 percent q-o-q), housing accommodation (+0.6 percent q-o-q) and household contents and services (+0.7 percent q-o-q) also contributed to the quarterly CPI rise, but they were slightly offset by lower prices in the transport group (-0.2 percent q-o-q), clothing and footwear group (-0.2 percent q-o-q) and communication group (-0.1 percent q-o-q).

  • The Australian Bureau of Statistics (ABS) reported on Thursday that the country’s seasonally adjusted unemployment rate stood at 5.5 percent in March, the same as a downwardly revised reading for February (originally 5.6 percent). Economists had expected Australia’s unemployment rate to come in at 5.5 percent in March. According to the report, seasonally adjusted labour force participation rate edged down to 65.5 percent in March from 65.6 percent in the prior month, while the number of unemployed persons decreased by 2,400 to 730,200. In the meantime, employment increased by 4,900 to 12,484,100 in March versus economists’ expectations of a climb of 20,000 following the drop of 6,300 jobs in the prior month (revised up from a gain of 17,500).


III. Market Situation
Currency Market
The currency pair EUR/USD fell slightly at the beginning of the session but then erased all losses on the back of general push into risky assets due to waning concerns of a global trade war and geopolitical risks. The next drivers for the pair may be data on the Eurozone's current account, the U.S. statistics on initial jobless claims and Philadelphia Fed Manufacturing Survey, as well as the comments by the Fed’s officials Brainard and Quarles. According to the economists’ forecast, the first-time applications for jobless benefits decreased to 230,000 last week from 233,000 in the prior week, while the Philadelphia Fed Manufacturing Index fell to 20.1 points in April from 22.3 points in March. Resistance level - $1.2421 (low of March 28). Support level - $1.2299 (low of April 12).

The currency pair GBP/USD traded near the opening level, as investors took a breather after yesterday's collapse caused by the publication of weak inflation statistics in Britain. In addition, market participants are awaiting the release of the UK’s retail sales data for March (at 08:30 GMT).  Retail sales decreased in December and January but rebounded in February, and data for March will help to understand whether this momentum was preserved at the end of the first quarter. According to the forecast, retail sales in March dropped by 0.5 percent m-o-m but rose by 1.5 percent y-o-y. In February, UK’s sales increased by 0.8 percent m-o-m and by 1.5 percent y-o-y. Resistance level - $1.4375 (high of April 17). Support level - $1.4078 (low of April 9).

The currency pair AUD/USD fell sharply early in the session, responding to weak data on the Australian labor market, but then resumed growth, and refreshed its five-week high, helped by improved risk appetite. The Australian Bureau of Statistics (ABS) reported that the country’s seasonally adjusted unemployment rate stood at 5.5 percent in March, the same as a downwardly revised reading for February (originally 5.6 percent). Economists had expected Australia’s unemployment rate to come in at 5.5 percent in March. According to the report, seasonally adjusted labour force participation rate edged down to 65.5 percent in March from 65.6 percent in the prior month, while the number of unemployed persons decreased by 2,400 to 730,200. In the meantime, employment increased by 4,900 to 12,484,100 in March versus economists’ expectations of a climb of 20,000 following the drop of 6,300 jobs in the prior month (revised up from a gain of 17,500). Resistance level - AUD0.7884 (high of March 15). Support level - AUD0.7738 (low of April 12).

The currency pair USD/JPY traded moderately higher, helped by increased risk appetites. The pair’s performance was also somewhat impacted by the outcomes of the meeting between the United States and Japan, at which U.S. president Donald Trump and Japanese Prime Minister Shinzo Abe agreed to intensify trade consultations between the two allies. In addition, investors are awaiting the release of the national consumer price index in Japan (at 23:30 GMT). According to economists’ forecasts, the consumer price index in March rose by 1.8 percent y-o-y after an increase of 1.5 percent y-o-y in February. Resistance level - Y107.91 (high of February 21). Support level - Y106.61 (low of April 9).


Stock Market

Index

Value

Change

S&P

2,708.64

+0.08%

Dow

24,748.07

-0.16%

NASDAQ

7,295.24

+0.19%

Nikkei

22,191.18

+0.15%

Hang Seng

30,661.91

+1.25%

Shanghai

3,117.55

+0.85%

S&P/ASX

5,881.00

+0.33%


U.S. stock indexes closed flat on Wednesday, as solid gains in the energy and industrial stocks were offset by declines in such sectors as consumer staples and financials. Investors digested the latest batch of first-quarter earnings and the Fed's Beige Book for March as well. The document indicated that the economic activity continued to expand at a modest to moderate pace across all districts in March and early April. It also noted that employment growth continued, with most districts characterizing it as modest to moderate, while wage growth was described as only modest. Meanwhile, prices increased in all districts, generally at a moderate pace. The Beige Book also revealed widespread concerns about trade policy.

Asian stock indexes closed higher on Thursday, helped by a rally across commodities, optimism over global growth and corporate earnings.

European stock indexes are expected to trade higher in the morning trading session.


Bond Market
Yields of US 10-year notes hold at 2.87% (0 basis points)
Yields of German 10-year bonds hold at 0.54% (0 basis points)
Yields of UK 10-year gilts hold at 1.42% (0 basis points)

Commodity Markets
Light Sweet Crude Oil (WTI) futures traded higher. Crude oil for delivery in May settled at $68.77 (+0.44%). The crude oil prices rose moderately, hitting their highest levels in over three years, as the U.S. crude inventories declined last week and as top exporter Saudi Arabia was reported to be happy to see crude rise to $100 a barrel. The U.S. Energy Information Administration (EIA) revealed that crude inventories fell by 1.071 million barrels to 427.6 million barrels in the week ended April 13. Economists had forecast a decrease of 1.429 million barrels. At the same time, gasoline stocks dropped by 3 million barrels to 236 million barrels, while analysts had expected a decrease of 900,000 barrels. Distillate stocks fell by 3.1 million barrels to 125.3 million barrels last week, while analysts had forecast a decline of 500,000 barrels. Meanwhile, oil production in the U.S. increased to 10.540 million barrels per day from 10.525 million barrels per day in the previous week. U.S. crude oil imports averaged over 7.9 million barrels per day last week, down by 720,000 barrels per day from the previous week.

Gold traded at $1,354.60 (+0.08%). Gold prices traded little changed, due to decreased demand for safe-haven assets and positive dynamics of the U.S. currency. The index, measuring the value of the U.S. dollar relative to a basket of six major currencies, rose 0.04 percent to 89.66. Since gold prices are tied to the dollar, a stronger dollar makes the precious metal more expensive for holders of foreign currencies.

IV. The most important scheduled events (time GMT 0)


08:00

Eurozone

Current account, unadjusted

08:30

United Kingdom

Retail Sales

12:30

U.S.

Continuing Jobless Claims

12:30

U.S.

Philadelphia Fed Manufacturing Survey

12:30

U.S.

Initial Jobless Claims

13:30

U.S.

FOMC Member Quarles Speaks

14:00

U.S.

Leading Indicators

16:30

United Kingdom

BOE Deputy Governor for Financial Stability Jon Cunliffe speaks

22:45

U.S.

FOMC Member Mester Speaks

23:30

Japan

National CPI Ex-Fresh Food

23:30

Japan

National Consumer Price Index


Market Focus

  • Canadian union leader says three NAFTA nations are still far away from resolving the most complex issues
  • Swiss Producer and Import Price Index fell 0.2% in March
  • OPEC Sec-Gen says oil inventories in February below 50 mln barrels above 5-year-average, decline trend to continue in coming months
  • Earnings Season in U.S.: Major Reports of the Week
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All posted material is a marketing communication solely for informational purposes and reliance on this may lead to loss. Past performance is not a reliable indicator of future results. Please read our full disclaimer.

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