March 31, 2020
Chinese PMIs surprise to the upside
Risk Rally stalls
Nikkei -0.88% Dax 1.22%
UST 10Y 0.69%
Asia and the EU
CNY Manufacturing PMI 52 vs. 35
North America Open
USD Chicago PMI 09:45
USD Consumer Confidence 10:00
Markets were mildly up in Asia and early European trade but gave up most of their gains ahead of the US open as investors turned cautious into North American session.
In Asia sentiment was boosted by news that Chinese PMI rebounded from their worst showing ever to print in expansionary territory. Chinese Manufacturing PMI recorded a reading of 52 versus 35 the month prior, shocking the market with the strength of the rebound. To be sure many market players treated the news with a healthy dose of skepticism given the fact the most of the Chinese industry was not even working at full capacity in March.
Regardless of the Chinese manufacturing data, COVID-19 toll on the consumer is expected to be very heavy. There are already reports in China of massive consumer defaults on credit cards and loans and its difficult to imagine that the nascent retail sector will be able to rebound quickly without some sort of credit forgiveness program by the government.
In North America, the state of the consumer will also be the key focus of trade today. Aside from the Chicago PMI, the market will also get a look at Consumer Confidence which could see a massive plunge given the shelter in place directives that have been in effect for the past few weeks. It’s difficult to tell just how much of lag there will be in today’s data given the fact that the majority of the country has only realized the true risk of coronavirus last week. Still, any sharp break in sentiment is likely to weigh on stocks today as investors consider the long term implications of demand destruction.
The dollar has been bid in overnight trade – a sure sign of risk-off concerns as we open for North American trade and a sign that equities will likely follow suit to the downside as the day proceeds.