Following Sunday night's resumption of trade after a three-day weekend, which saw sharp moves lower in US yields, the dollar and the USDJPY after Friday's disappointing CPI and retail sales data and the weekend's North Korea jitters, the mood has stabilized in light trading with Asian stocks advancing, Europe mostly closed for Easter Monday and S&P futures fractionally lower at 2,325 in early New York trading.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.1 percent in holiday-thinned trade, while Japan's Nikkei fell as much as 0.6 pct to hit a five-month low before ending up 0.1 percent. Asian gains were led by consumer staples and health care as information technology and real estate sectors decline. Japan’s Nikkei and Korea’s Kopsi advance, while Hang Seng Index and Shanghai Composite decline. Investors prepare for first U.S. stocks trading since Thursday, which will be punctuated by Netflix earnings and Empire Manufacturing data.
As noted earlier, a raft of Chinese economic data beat market expectations but did not produce notable market reactions as investors had been already optimistic following a recent string of positive China numbers. China's economy grew 6.9 percent in the first quarter from a year earlier, a tad above economists' forecast of 6.8 percent. However, mainland Chinese shares fell, with Shanghai Composite Index down 1.0 percent at 3,212, risking a close below its 60-day average at 3,216, seen as an important support by investors and weighed by warning from top securities regulator to combat market misbehavior.
In the US, yields on 10-year Treasuries fell three basis points to the lowest since Nov. 11, while Bloomberg’s Dollar Spot Index slipped to the weakest in three weeks. Gold and the yen both climbed. The two have traded in what has effective been a mirror image for the past year.
There has been a barrage of macro news and events over the long weekend, from Friday's disappointing inflation data casting doubt on the pace of Fed rate hikes and the U.S. decision not to label any countries currency manipulators to North Korea’s failed ballistic missile launch and Turkey’s referendum.
On Friday, U.S. retail sales dropped more than expected in March while annual core inflation slowed to 2.0 percent, the smallest advance since November 2015, from 2.2 percent in February. Core CPI posted its biggest monthly drop since 2010.
That helped to drive down the 10-year U.S. Treasuries yield to 2.200 percent, its lowest level since mid-November from around 2.228 percent on Thursday before a market holiday on Friday. The yield had risen above 2.6% in December and again in March, from around 1.85 percent before the U.S. presidential election, on expectations of Trump's stimulus. But growing perception that Trump will struggle to push any tax cuts and fiscal spending programs through the Congress has prompted unwinding of the "Trump" trade.
"At the moment, it is hard to see any factors that could drive up bond yields," said Hiroko Iwaki, senior strategist at Mizuho Securities. "And compared to U.S. bond yields, which have given up much of their gains after the election, U.S. share prices, having gone through a limited correction, look vulnerable given potential developments in North Korea or the French election," she said.
As Bloomberg puts it, investors will be bracing for more to come, as the earnings season ramps up and European populism is put to the test in the first round of France’s presidential election.
“Geopolitical uncertainty weighed on global markets over the holiday weekend,” Cole Akeson, a strategist at Sberbank CIB in Moscow, wrote in an emailed note. “However, the macro data out of China this morning was slightly better than expected. For global markets generally and European markets in particular, the first round of the French presidential election on Sunday is probably the biggest planned event of the week.”
Elsewhere, there is no sign of easing in tensions over North Korea's nuclear and missile program after the reclusive country's failed missile test on Sunday. Trump's national security adviser said on Sunday that the United States, its allies and China are working together on a range of responses to North Korea. "In essence, North Korea made a provocation that would not transcend the U.S. 'red line'. But depending on how China will react, Trump could lose his patience," said Makoto Noji, senior strategist at SMBC Nikko Securities.
Bucking the broader risk off trade, Turkey’s lira jumped as much as 2.4% after voters handed President Recep Tayyip Erdogan greater powers, however the currency pared gains as investors digested the referendum result.
Safe-haven gold gained as much as 0.8 percent to hit a five-month high of $1,295.5 per ounce on continued concerns on tensions over North Korea. The dollar slipped to as low as 108.13 yen, a five-month low and 0.4 percent below its late U.S. levels. The semi-annual U.S. Treasury currency report maintained the six countries on a "monitoring list" -- China, Japan, Germany, South Korea, Taiwan and Switzerland -- suggesting Washington could put more pressure on those countries to take steps to reduce their trade surplus with the United States in future.
The euro stood at $1.0622, little moved so far, and not far from a one-month low of $1.0570 touched last Monday, with focus on the French presidential election. Ahead of the first round of voting on April 23, the race looked tighter. Two polls put any of the four frontrunners, including far-right candidate Marine Le Pen and hard-left challenger Jean-Luc Melenchon, within reach of a two-person run-off vote.
Companies reporting this week include Bank of America Corp., Goldman Sachs Group Inc., International Business Machines Corp., Netflix Inc., Heineken NV and Unilever.
Market Snapshot
- S&P 500 futures down 0.1% to 2,325.25
- MXAP up 0.4% to 146.86
- MXAPJ down 0.2% to 479.84
- Nikkei up 0.1% to 18,355.26
- Topix up 0.5% to 1,465.69
- Hang Seng Index down 0.2% to 24,261.66
- Composite down 0.7% to 3,222.17
- Sensex down 0.1% to 29,432.39
- Australia S&P/ASX 200 down 0.7% to 5,889.95
- Kospi up 0.5% to 2,145.76
- Brent Futures down 0.9% to $55.38/bbl
- Gold spot up 0.3% to $1,289.17
- U.S. Dollar Index down 0.2% to 100.32
Top Overnight News from Bloomberg
- Amazon Seeks 1,300 Prime Now Warehouses in Europe: Telegraph
- Amazon Said to Be Consider Buying BJ’s Wholesale Club: NYP
- Jared Kushner Said in Talks to Sell His WiredScore Stake: WSJ
- Ethos Still Critical of Credit Suisse Pay After Bonus Cut: SZ
- Leonard Green Said to Be Near $1.5b Charter NEX Purchase: Reuters
- Wal-Mart Said in Advanced Talks to Buy Bonobos: Recode
- Groupon Cuts About 100 Jobs in Chicago: Chicago Tribune
- Abbott Said to Agree to Buy Alere For $51/Shr; Ends Lawsuit: FT
- Ant Financial Raises MoneyGram Bid 36% to Fend Off Euronet
- BP North Slope Well Leaking Gas After Crude Oil Spray Stops
- Crude Slips Below $53 as U.S. Drilling Surge Stokes Output Fears
- Pence Visits North Korea Border, ‘Heartened’ by China Moves
- Universal’s ‘Fate of the Furious’ Is No. 1 Film at $100.2m
- ‘Star Wars: Battlefront II’ Game to Be Released Nov. 17
- McKesson Gets Temporary Order on Use of Lethal-Injection Drug
- Intercontinental Hotels: Malware Accessed Pay Cards in Americas
- Energy Transfer Partners: ISS Recommends Hldrs Vote for Merger
- Apple Gets California Autonomous-Vehicle Test Permit
- South Korea’s Former President Park Charged in Corruption Probe
- Gold Seen Climbing on Weak Dollar, Global Political Tension
In Asian markets, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.1 percent in holiday-thinned trade, while Japan's Nikkei fell as much as 0.6 pct to hit a five-month low before ending up 0.1 percent. A raft of Chinese economic data beat market expectations but did not produce notable market reactions as investors had been already optimistic following a recent string of positive China numbers. China's economy grew 6.9 percent in the first quarter from a year earlier, a tad above economists' forecast of 6.8 percent.
Top Asian News
- North Korea Said to Snub Chinese Diplomats as Tensions Mounted
- Shanghai Aluminum Climbs to Highest Since 2014 on Project Halts
- China Stocks Drop to Two-Week Low on Korea, Regulation Concern
- China’s Economy Accelerates as Retail, Investment Pick Up
- China-U.S. Yield Gap at Widest in Seven Months on GDP Momentum
- Indiabulls Real Restructure, Outlook Boost Property-Stock Rally
- Japan Stocks to Watch: H2O Retailing, Showa Denko, Densan
- Euro Casts Off French Vote Worries as Dollar Wilts: Markets Live
- U.S. Scrutiny Seen Sidelining Taiwan Central Bank: Street Wrap
- Singapore Stock Traders on FIS SunGard Face Monday Glitch
Most European bourses remain closed for Easter holidays. The Stoxx Europe 600 Index fell 0.3 percent to 380.58, the lowest in more than a week. The U.K.’s FTSE 100 Index also dropped 0.3 percent.The MSCI Emerging Market Index slid 0.2 percent.
Top European News
- EU’s Piri: Turkey Talks to Be Suspended If Package Not Changed
- Erdogan Declares Referendum Victory as Opposition Cries Foul
- Turkey Central Government Budget Deficit 19.5b Liras in March
- Moscow Oil Refinery Units Restart After Maintenance: Transneft
- Turkey Election Board Chief: All Authentic Ballots Counted Valid
- Turkey Banks Should Start Thinking How They Can Lend More: Bulut
- U.K. Will Need EU Workers After Brexit, Hammond Says in Rp.pl
- Turkish Jobless Rate Rises to 13% in January, Highest Since 2010
- Macron: Turkey’s EU Membership Won’t Advance in Coming Years
- FG Future EGM to Discuss New Share Issue
- Turkish Stock Futures Rise at Open After Referendum Vote
- HSBC Bank Settles Allegations it Failed to Disclose Fraud
In currencies, The Bloomberg Dollar Spot Index fell 0.3 percent to 1,218.01 at 10:13 a.m. in London, the lowest in three weeks. The euro rose 0.1 percent to $1.0627. The British pound strengthened 0.2 percent to $1.2542, the strongest in more than two weeks. The Turkish lira rose 1.2 percent to 3.6648 per dollar.
In commodities, gold rose 0.3 percent to $1,289.89 an ounce, the strongest in more than five months. West Texas Intermediate crude fell 0.8 percent to $52.73 a barrel, the lowest in more than a week. The U.S. continued to ramp up drilling, stoking concerns the nation’s surge in output this year will counter OPEC-led efforts to cut a global supply surplus. Iron ore fell 2 percent to 501 yuan per metric ton, the lowest in more than 14 weeks.
US Event Calendar
- 8:30am: Empire Manufacturing, est. 15, prior 16.4
- 10am: NAHB Housing Market Index, est. 70, prior 71
- 4pm: Total Net TIC Flows, prior $110.4b
- 4pm: Net Long-term TIC Flows, prior $6.3b