20140424

Good morning,

Stock indices Europe and the US were in red after some solid bull runs. Weak US Housing data made investors take profits and reallocate to fixed income, also following the 5-year Note auction, showing a tad higher rates than previously. In the European session, PMI data proved to be supportive of the economy, but it should be noted that the import prices fell, making it even harder for the ECB to balance the monetary policy. In FX markets, EUR/USD tested the 50-day SMA, but did not manage to break below. Short term key support at 1.3785. GBP was on the offer following an unchanged BoE vote and very soft public sector net borrowing. cable fell post the BoE, but found support at 1.6760 and is currently back above 1.68. Key resistance at the 1.6840-area.

Overnight, the RBNZ decided to raise interest rates 25bp to 3.0% as expected, but no real reaction has been seen in the NZD (NZD/USD up +0.4% on the news). The RBNZ has upgraded the near-term outlook, which spilled over into other Asian currencies such as the Aussie. In China, the Leading Economic Index for March came out stronger than expected at 1.2 vs. 0.9 exp. Although this is indeed positive, the bigger news which hit the market from China overnight was the fact that China will roll out a pilot project to support growth. This is being done by private capital being allowed to invest in infrastructure, which should lower government debt and increase incentives to get Chinese growth at a solid pace. Hang Seng and ASX took the news positively, rising 0.04% and 0.24%, but the Nikkei fell 0.97% on back of a significant drop in foreign bond investments and rumors that growth forecasts had to be revised down.

Today, focus will be on German IFO figures at 08:00 GMT and US Durables and Jobless Claims at 12:30GMT. Also at 18:00, there is a rather large 7Year Note Auction in the US, which, if higher than prior, will hurt equity markets.

Have a nice day!