Market Drivers April 23, 2015

HSBC PMI at 12 month low
EZ Flash PM, UK Retail Sales all miss
Nikkei 0.27% Europe -1.39%
Oil $56/bbl
Gold $1188/oz.

Europe and Asia:
CNY HSBC PMI 49.2 vs. 49.5
EUR EZ PMI 51.9 vs. 52.6
EUR EZ PMI Svc. 53.7 vs. 54.5
GBP UK Retail Sales -0.5% vs. 0.4%

North America:
USD Weekly Jobless Claims 8:30
USD New Home Home 10:00

A set of disappointing economic releases from across the globe reversed much of yesterday’s anti-dollar flows as traders sold Aussie euro and cable and plowed back into the greenback on diminished prospects for global growth.

In Asia the HSBC Flash PMI reading printed at 49.2 versus 49.5 forecast. This was the second consecutive month that the gauge has fallen below the 50 boom/bust line and the lowest reading for manufacturing in 12 months. The data is clearly showing a slowdown in Chinese manufacturing growth although the falloff is not precipitous. Still it remains a slow drag on the region and a result both Aussie and kiwi drifted lower in the session, with kiwi getting further hit by market fears that RBNZ may begin to consider rate cuts sometime in the foreseeable future.

In Europe the economic news was dour as well with EZ Flash PMI readings recording a surprising decline in both manufacturing and service sectors. The French readings were particularly bad with manufacturing slipping to 48.4 from 48.8 the month prior as the sector remains in contraction. In Germany PMI manufacturing fell by nearly 2 points dropping from 52.4 to 50.8.

Overall EZ PMI Manufacturing came in at 51.9 versus 52.2 while services declined to 53.7 vs. 54.2 as activity slowed. The flash PMI readings are the very latest guage of conditions on the ground and as such must be viewed as a disappointment in light of the QE efforts by the ECB. Although the drop in today’s data is not significant, it is alarming and if the numbers do not rebound by next month, more stimulus may be needed in the region.

The euro dropped to a low of 1.0670 in the aftermath of the release, but rebounded on fresh reports that Greece may close to a deal with EZ authorities. A resolution of the Greek crisis would be a welcome relief for the unit, but the rally may be short lived if the economic data continues to disappoint.

Lastly in UK the Retail Sales also missed their mark printing at -0.5% versus 0.4% eyed. However much of the decline was in gasoline sales which was actually a positive for the UK economy. Overall Retail sales increased for 24th consecutive month on a year over year basis indicating that the UK consumption continues to grow at a steady pace. Still, the lack of any inflationary pressures could keep BoE on the sidelines for a considerably longer than the market expects.

In North America today the market will get a glimpse at the weekly jobless claims and the New Home Sales data. If yesterday’s surprising rise in Existing Homes could be confirmed by a similar increase in New Home Sales the buck could get a further push higher especially against USD/JPY as signs of recovery in the housing market would bode well for the overall US economy in the coming summer months. The pair has retaken the 120.00 figure in overnight trade and may now gun for 120.50 as the day proceeds.

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