US Dollar Rises as Stock Markets, US Index Futures Turn Lower in Asian Trading (Euro Open)
The US Dollar gained against most major currencies as stocks tumbled across Asian exchanges and US equity index futures traded down as much as 1% ahead of the opening bell in London. Overnight data saw New Zealand’s input PPI fell the most since 1976 in the first quarter while Japanese consumer confidence beat economists’ expectations in April.
Key Overnight Developments
• New Zealand's Producer Input Prices Fell Most Since 1976 in Q1
• Japanese Consumer Confidence Beat Expectations in April
The Euro trended lower, shedding as much as 0.5% against the US Dollar. The British Pound followed suit, testing as low as 1.5117 to the greenback.
Asia Session Highlights
New Zealand Producer Input Prices tumbled -2.5% in the first quarter, the most since records began in 1976, as falling commodity prices drove down production costs. Output prices, the costs paid to manufacturers by re-sellers of finished goods, also fell by a record -1.4%. The metrics came in substantially below economists’ expectations: forecasts had called for input prices to remain unchanged and for output prices to gain 0.5%. The data suggests continued downward pressure on consumer prices, the headline inflation gauge, as a slimmer manufacturing bill translates into lower final price tags. Easing inflation will give the Reserve Bank of New Zealand substantial room to follow through on recent statements arguing that it is “appropriate to provide further policy stimulus to the economy [and keep interest rates] at or below the current level through until the latter part of 2010.”
Japan’s Consumer Confidence registered better than economists expected in April, rising to 33.2 from 29.6 in the previous month. The rise was foreshadowed by a similar result in April’s Eco Watchers survey. As with that reading, the reading remained below the 50 “boom-bust” level, suggesting consumers’ outlook continued to deteriorate, albeit at a slower pace. Rising stock prices and a robust government stimulus plan may have helped boost sentiment: the Nikkei has rallied 18.4% over the past two months; meanwhile, Prime Minister Taro Aso has pushed through a record-large spending package. Looking ahead, lackluster overseas sales are likely to keep a tight lid on industrial output levels, weighing on employment and discouraging spending. Indeed, the International Monetary Fund (IMF) has forecast that global trade volume (including both goods and services) will shrink by a whopping -11% this year and add just 0.6% in 2010.
Euro Session: What to Expect
The Euro Zone Trade Balance report is expected to show a deficit of -0.3 billion euro in March, a narrowest monthly shortfall since June 2008. However, the reading is unlikely to be seen as encouraging as the headline figure would suggest considering the improvement will probably owe to falling imports rather than robust cross-border sales, underscoring acute weakness in employment and lackluster consumer spending. Indeed, the latest industrial production data saw output fell by the most on record as the global economic downturn weighed on overseas demand.
On balance, risk trends are likely to guide price action in European hours. Stocks tumbled across Asian exchanges and US equity index futures traded down as much as 1% ahead of the opening bell in London. This hints that risk aversion is creeping back into the market, boosting the safety-linked US Dollar and Japanese Yen.
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