Originally published by Rivkin Securities
On Friday Euro-zone inflation data showed that prices dipped more than forecast, vindicating recent ECB official’s stance to continue ahead with the current QE program until the end of 2017. Year-on-year headline prices rose +1.5%, down from +2.0% previously and forecasts for +1.8%. The core measure also rose at a slower pace at +0.7%, down from +0.9% previously. In reaction the euro declined -0.23% against the US dollar while equity markets were higher with the Euro STOXX 600 gaining +0.18%, as did the DAX up +0.46%.
The yen strengthened +0.46% against the dollar on Friday after core inflation rose for the second consecutive month. Year-on-year prices excluding fresh food rose +0.2% in February after rising +0.1% in January shown on the first chart below. The stronger Yen weighed on Japanese equities with both the Nikkei 225 and TOPIX indices closing -0.81% and -0.98% lower for the session.
Sticking with inflation the US also released the personal consumption expenditure index on Friday, which is the Fed’s preferred measure of inflation. Year-on-year the core measure increased +1.8%, modestly higher than the +1.7% forecast. Still the U.S. dollar weakened -0.06% along with the yield on two-year treasuries which declined -3 basis points as the personal spending component of the reading disappointed. Month-on-month for February personal spending rose +0.1%, lower than the +0.2% forecast and after adjusting for inflation actually declined -0.1%. US equities finished the session lower, with both the S&P 500 and Nasdaq 100 closing down -0.23% and -0.06% respectively, taking the S&P 500’s gain over the first quarter to +5.53%.
Looking ahead for the week we have lots of data to assess. Today we will see the Australian retail sales (MoM Feb), following by PMI reports for both Europe and the US and producer prices for Europe. Tuesday will see the RBA’s decision for April with no changes expected following by Eurozone retail sales (MoM & YoY Feb) and a speech by Mario Draghi. Wednesday will see further Eurozone and UK PMI reports, the U.S ISM Services Composite survey (MoM Mar) and the release of the FOMC minutes form the March meeting. To cap the week off on Friday we’ll also see the U.S. non-farm payroll data for March.
Locally the S&P/ASX 200 index closed -0.53% lower on Friday and we look set for a slightly stronger start to trading this morning with ASX SPI200 futures finishing +7 points higher on Friday.
Data releases:
· Australian Retail Sales (MoM Feb) 11:00am AEDT
· Eurozone Manufacturing PMI (MoM Mar) 6:00pm AEDT
· Eurozone Producer Prices (MoM & YoY Feb) 7:00pm AEDT
· US ISM Manufacturing Survey (MoM Mar) 12:00am AEDT
Chart 1 – Japanese Core Inflation
Source: TradingEconomics.com