Intraday Market Thoughts

March Opens with a Sprint

by Adam Button
Feb 29, 2016 23:17

Markets race into March with a series of major economic releases in the hours ahead along with the reaction to the Chinese RRR cut. The yen was the top performer while the New Zealand dollar lagged in the final day of Feb trading. Negative Eurozone CPI, deepening contraction in Chicago PMI and an unexpected drop in US pending home sales were among the list of macro disappointments. There are four big events to watch for next. A new EUR trade was issued in the Premium trades in addition to the existing 5 trades. A video for Premium subscribers focusing on FX and oil has been posted earlier. Tomorrow we follow with a video on commodities and indices to back up our equity indices trades.

March Opens with a Sprint - Videosnapshot Feb 29 (Chart 1)

1) Japanese employment/capex/spending

USD/JPY quickly dropped close to 112.00 in early Asia-Pacific trading. Two February trips near 111.00 were harshly rejected in February and the Bank of Japan will be closely watching. The odds of BOJ action rise if the data today disappoints. The first release is at 2330 GMT but jobs data rarely moves the yen. Unemployment is expected at 3.3%. Watch household spending, which is expected to drop 2.7% y/y in a sign that Abenomics needs a fresh jolt. Companies are expected to carry some of the spending load by increasing capital spending 8.7% y/y in Q4. Watch the sales component as well.

2) Australian accounts/building approvals

Two Australian reports are out at 0030 GMT. The Q4 current account balance is expected to show a $20 billion deficit, worse than $18.1B in Q3. The same data from Canada beat expectations in a sign that developed-market commodity exporters are faring better than believed. Expectations for building approvals are for a 3.0% decline in January. The Aussie would be sensitive to this data if the RBA wasn't up later.

3) China PMIs

The official manufacturing and non-manufacturing PMIs are due at 0100 GMT. The manufacturing report is expected unchanged at 49.4 but perhaps the RRR cut was in response to some kind of deterioration. The prior non-manufacturing reading was 53.3. Forty-five minutes later the Caixin China PMI is also expected unchanged at 48.4. Equally important to the PMIs is how the Chinese stock market reacts to the RRR cut.

4) RBA decision

The day builds towards the 0330 GMT RBA decision. Stevens has been upbeat and the Australian dollar has slowly recovered since mid-January. No economists expect a move from the 2.00% cash target so the focus will be on guidance. The China cut may encourage Stevens to deliver more upbeat commentary on trade but also expect the usual dose of anti-AUD jawboning.

If all that wasn't enough, there is also the Nikkei Japan PMI (final) at 0200 GMT and a speech from the Fed's Dudley in China at 0430 GMT.

Act Exp Prev GMT
Chicago PMI (FEB)
47.6 52.0 55.6 Feb 29 14:45
Markit Manufacturing PMI (FEB)
51 Mar 01 14:45
ISM Manufacturing PMI (FEB)
48.8 48.2 Mar 01 15:00
RBC PMI Manufacturing (FEB)
49.3 Mar 01 14:30
Nikkei PMI Manufacturing (FEB)
Mar 01 2:00
49.3 49.4 Mar 01 1:00
53.5 Mar 01 1:00
48.2 48.4 Mar 01 1:45
Eurozone Markit PMI Manufacturing (FEB)
51 51 Mar 01 9:00
Pending Home Sales (JAN)
-2.5% 0.7% 0.9% Feb 29 15:00
Overall Household Spending (JAN) (y/y)
-2.7% -4.4% Feb 29 23:30
Capital Spending (Q4)
11.2% Feb 29 23:50
Building Approvals (JAN) (m/m)
-2.0% 9.2% Mar 01 0:30
Building Approvals (JAN) (y/y)
-2.5% Mar 01 0:30
Current Account Balance (Q4)
-20.0B -18.1B Mar 01 0:30
Eurozone Unemployment Rate (JAN)
10.4% 10.4% Mar 01 10:00

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