Market Roundup
• Risk exited as market lightens ahead of Fed minutes, equities slide on Lagarde fragile growth comments.
• US trade deficit widens (+2.6% to USD 47.1bn), rising exports (+1%) offer hope, deficit w/China -2.8%.
• ISM services index rises to 54.5 in Mar, employment, price paid& bus activity also rise.
• Canada trade deficit jumps (-1.91b vs -0.90b forecast), exports drop after good start to 2016.
• Atlanta Fed GDPNow Atlanta Fed model for Q1 now at 0.4% (0.7% previous).
• New Zealand's Fonterra: Dairy prices rise (+2.1%), volumes increase (11.2%) at auction.
• Japan’s PM Abe: competitive currency devaluation must be avoided – Nikkei.
• BOJ likely to debate possibility of easing in April, more likely to increase asset buying-sources.
• Brazil's Rousseff says no cabinet changes before impeachment vote
Looking Ahead - Economic Data (GMT)
• 01:45 China Caixin Services PMI* Mar 51.20-previous
• 05:00 Japan Coincident Indicator MM* Feb 2.9- previous
• 05:00 Japan Leading Indicator* Feb -0.4- previous
Looking Ahead - Events, Other Releases (GMT)
• No Significant Events
Currency Summaries
EUR/USD is likely to find support at 1.1300 levels and currently trading at 1.13854 levels. The pair has made session high at 1.1400 and hit lows at 1.1333 levels. The euro initially slipped against the greenback from 1.1377 to hit daily lows at 1.1335, after US ISM Non-Manufacturing PMI was released by the Commerce Department which showed better than expected reading in March. But later, in the US afternoon session euro gained all the lost ground as euro found buyers on increased risk aversion in the market ahead of Wednesdays FOMC meeting. Traders remained skittish following mixed messages by Federal Reserve policymakers as to when the U.S. central bank will increase rates. Strong services data supported expectations that a rate hike could come sooner rather than later, reducing the allure of higher-yielding but higher-risk emerging market assets. The euro, hit a session low against the dollar at $1.1337, down from a 5-1/2 month peak of $1.1437 touched on Friday, before paring losses.
GBP/USD is supported in the range of 1.4100 and currently trading at 1.4158 levels. It reached session high at 1.4204 and hit low at 1.4121 levels. The British pound fell against green back on Tuesday as dollar was a buoyed by positive bunch of US economic data, which came better than expectations, and kept alive the chances of an interest rate rise by the Federal Reserve in months. The Institute for Supply Management said its services industry activity index increased 1.1 points to 54.5 in March. A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of the U.S. economy. Meanwhile, UK Purchasing Managers Index for services recovered slightly last month after reaching its lowest in nearly three years in February. The Markit/CIPS services PMI which covers the private-sector services that make up about 40 percent of Britain's economy - rose to 53.7 in March from February's near three-year low of 52.7, in line with economists' expectations. The currency's strongest level of the session was $1.4207, while it touched its weakest level at $1.4121.
USD/JPY is supported around 109.50 levels and currently trading at 110.26 levels. It hit session high at 110.50 and made session lows at 109.90 levels. The dollar declined against Japanese Yen on Tuesday as concerns over global growth, lower commodity prices and prospects of higher U.S. rates drove investors towards safe heaven Japanese Yen. The dollar extended its losses against the yen to 8.2 percent for the year, with a downturn in stock also fueling the latest rally in the Japanese currency. The dollar fell more than 1 percent against the yen and hit 109.98 yen, its lowest level since late October 2014. Falling oil prices and uncertainty about Federal Reserve’s interest rate hikes this year has made investors lose confidence in the dollar. The dollar pared losses against the yen later in the U.S. trading session and was last down 0.81 percent at 110.41 yen.
USD/CAD is supported at 1.3109 levels and is trading at 1.3156 levels. It has made session high at 1.3218 and lows at 1.3142 levels. The Canadian dollar weakened against its U.S. counterpart on Tuesday as disappointing Canadian trade data and falling oil prices weighted on the pair. Canada's trade deficit unexpectedly jumped to C$1.91 billion ($1.45 billion) in February from C$628 million in January as exports slumped by their most in nearly seven years, Statistics Canada data indicated. Oil prices were weighed down earlier in the session by government data from Monday showing the first monthly drop in U.S. gasoline demand in 14 months. Gasoline demand has been one of the strongest pillars of U.S. crude for months now. The currency's strongest level of the session was C$1.3069, while it touched its weakest since March 29 at C$1.3208.
Equities Recap
European shares fell on Tuesday to touch their lowest level in almost six weeks, with mining, autos and bank stocks leading the decline after industrial orders in Germany unexpectedly dropped.
UK's benchmark FTSE 100 closed down by 1.09 percent, the pan-European FTSEurofirst 300 ended the day down by 1.74 percent, Germany's Dax closed down at 2.5 percent, and France’s CAC finished the day down by 2 percent.
Wall Street stocks fell sharply on Tuesday as investors took gains off the table after a recent rally and ahead of an upcoming quarterly reporting season that is expected to reveal sharply lower earnings.
Dow Jones closed down by 0.75 percent, S&P 500 ended the day down by 1.02 percent, Nasdaq finished the day down by 0.98 percent.
Treasuries Recap
U.S. Treasury yields fell on Tuesday with longer-dated bonds touching their lowest in more than a month as weak economic data in both the U.S. and Europe pushed investors into safe-haven government debt.
Benchmark 10-year treasuries yields fell by around 6 basis points to 1.718 percent, the lowest since March 1.
Yields on 30-year bonds dropped as low as 2.543 percent, the lowest since February 25.
Commodities Recap
Gold rebounded more than 1 percent on Tuesday, snapping two days of losses as risk appetite evaporated, pushing global stocks lower and knocking the dollar to a 17-month low against the yen.
Spot gold was up 1.1 percent at $1,228.31 an ounce by 2:15 p.m. EDT (1815 GMT), while U.S. gold futures for June delivery settled up 0.8 percent at $1,229.60 an ounce.
Oil prices edged higher on Tuesday after Kuwait's insistence that major producers will agree to freeze output this month even as Iran balks at the plan.
Brent crude settled up 18 cents at $37.87 a barrel, after hitting a one-month low at $37.27 earlier in the day.
U.S. crude finished the session 19 cents higher at $35.89, rising to $36.15 just before the close. Earlier, it sunk to $35.24, its lowest level since March 4.
