It was another day of ugly overnight macro data, all of it ouf of China, with industrial production (8.6%, Exp. 9.5%, Last 9.7%), retail sales (11.8%, Exp. 13.5%, Last 13.1%) and fixed asset investment (17.9% YTD vs 19.4% expected) all missing badly and confirming that in a world of deleveraging, the Chinese economy will continue to sputter. Which is precisely what the “bad news is good news” algos needs and why futures levitated overnight: only this time instead of latching on to the USDJPY correlation pair, it was the AUDJPY which surged after Australia – that Chinese economic derivative – posted its third best monthly full-time jobs surge in history! One can be certain that won’t last. But for now it has served its purpose and futures are once again green. How much longer will the disconnect between deteriorating global macro conditions and rising global markets continue, nobody knows, but sooner rather than later the central planner punch bowl will be pulled and the moment of price discovery truth will come. It will be a doozy.
In Europe, stocks traded mixed this morning, with the FTSE-100 index underperforming its peers following the release of less than impressive earnings by Morrisons, shares down around 10%. As a result, heading into the North American cross over, consumer services sector is among the worst performing, while the recovery by base metals also ensured that basic materials related stocks traded higher. Still, the move higher was led by financials, with Commerzbank trading with good gains following an upgrade by SocGen to buy rating.
Looking elsewhere, in spite of the bounce back by stocks this morning, USD/JPY traded lower, with Swiss rates also bid, as market participants remained vary of any future shocks stemming from China amid fears of more corporate defaults. On that note, Chinese Premier Li said that China is to take measures to regulate local financing vehicles and ensure no systemic financial risks arise from defaults. Of note, Ireland made a successful return to markets, selling its first 10y bond since entering the bailout in 2010.
Going forward, market participants will get to digest the release of the latest weekly jobs and retail sales reports from the US, while the US Treasury will auction off USD 13bln in 30y bonds.
Bulletin headline summary from Bloomberg and RanSquawk
- FTSE-100 index underperformed its peers following the release of less than impressive earnings by Morrisons, down 10% at the open.
- Chinese Premier Li said that China is to take measures to regulate local financing vehicles and ensure no systemic financial risks arise from defaults.
- Bundesbank’s Weidmann said that it is premature to declare euro zone debt crisis over, adding that ECB’s expansionary monetary policy stance is appropriate.
- Treasuries steady before week’s auctions conclude with $13b 30Y bonds, WI yield 3.675% vs 3.69% at February sale; retail sales due at 8:30am ET, est. +0.2%
- Yesterday’s $21b 10Y reopening was awarded at 2.729%, about 1.5bps below WI yield at 1pm according to Stone & McCarthy
- Other metrics strong, including highest bid-to-cover and lowest primary dealer award lowest since March 2013, as increase in direct award offset drop in indirects
- China’s industrial-output, investment and retail-sales growth cooled more than estimated in January and February, signaling an economic slowdown that makes the government’s 2014 expansion target harder to reach
- Chinese Premier Li Keqiang said there’s some flexibility around the nation’s target of 7.5% growth this year without specifying how much of a slowdown leaders would tolerate
- Russian government officials and businessmen are bracing for sanctions resembling those applied to Iran after what they see as the inevitable annexation of Ukraine’s Crimea region, according to four people with knowledge of the preparations
- Australia boosted payrolls in February by the most in more than 22 years, with the number of people employed full time rising by 80,500; overall employment climbed 47,300 vs 15k median estimate
- New Zealand raised its key interest rate, the first developed nation to exit record-low borrowing costs this year, and said it plans to remove stimulus faster than previously forecast to contain inflation
- The missing Malaysian airliner kept flying after it dropped off controllers’ radar screens, raising new questions about whether foul play was involved, according to people familiar with data gathered in the inquiry
- Sovereign yields mostly lower. EU peripheral spreads little changed. Asian equities mixed; Nikkei and Topix lower, Shanghai +1%. European equity markets, U.S. stock-index futures gain. WTI crude and copper lower, gold gains
