Originally published by Rivkin Securities
The euro gained on Monday following further positive data that confirmed the recovery in the Euro-zone continues to broaden. The final reading for the Eurozone manufacturing PMI (MoM Mar) remained unchanged at 56.2 as forecast with France and Italy, the second and third biggest economies, showing particular improvement. The report also highlighted increasing delivery days for suppliers, a sign of strong demand that can translate into price rises which was also confirmed overnight with the release of the producer price index.
Year-on-year for March producer price rose +4.3%, higher than the +4.3% forecast and +3.9% previously. Producer prices tend to be a leading indicator for inflation and despite the recent dip in prices, this adds further evidence to support the ECB’s continued progress towards their inflation target by the end of the year. Finally Euro-zone unemployment decreased to +9.5% from +9.6% in February, in line with estimates. While prices pressures are expected to ease in the EU in the coming months as the rebasing effect of oil prices diminishes, the trend for EU data continues to be positive adding to the growing optimism.
In reaction the euro traded +0.18% higher against the US dollar and +0.64% higher against the pound. European equity markets finished the session lower, led by declines in the Euro STOXX 600 of -0.49% and DAX of -0.46%.
In the US the dollar index bounced +0.15% as the ISM Manufacturing survey (MoM Mar) remained in expansionary territory with a reading of 57.2 as forecast, down from 57.7 previously. Importantly the sub-index of prices paid rose to 70.5 from 68 previously while measures of supplier deliveries and order backlogs also rose, highlighting the continuing pressure on prices in the US. Still treasury yields dropped with both the two and 10-year yields declining -3 and -7 basis points respectively after disappointing US car sales.
Oil prices declined for the first time in five sessions shown on the first chart below after a move towards the technical resistance level around US$50.95, being the 50% Fibonacci retracement level of the February to march declines. Both WTI and Brent crude traded -0.69% and -0.82% lower this morning after gains of around +6% over the past week. At this stage to suggest recent gains are an early indication of a change in the downtrend, we would be on the lookout for a higher low to form above the March lows around US$47.
Locally the S&P/ASX 200 index reversed initial declines to finish +0.13% higher on Monday however we can expect to take a negative lead from Wall Street overnight with ASX SPI200 futures down -10 points in overnight trading. The RBA will also meet today to discuss monetary policy, no changes are expected with the meeting likely to be a non-event.
Data releases:
· ANZ Roy Morgan Weekly Consumer Confidence (Apr 2nd) 9:30am AEDT
· Australian Trade Balance (MoM Feb) 11:30am AEDT
· RBA Rate Decision 2:30pm AEDT
· Euro-zone Retail Sales (MoM & YoY Feb) 7:00pm AEDT
· ECB President Mario Draghi Speaks 11:30pm AEDT
· U.S. Factory and Durable Goods orders (MoM Feb) 12:00am AEDT
Source: Rivkin, RivkinTrader