OVERNIGHT DATA AND HEADLINES
U.S. stocks gyrated before ending slightly higher, as investors worried about increased China-U.S. trade hostilities and disappointing retail sales figures, while signs of a pick-up in crude demand boosted oil prices.
The Trump administration on Friday moved to block global chip supplies to blacklisted telecoms equipment giant Huawei Technologies, spurring fears of Chinese retaliation and hammering shares of U.S. producers of chipmaking equipment. China said it would put U.S. companies on an "unreliable entity list.”
U.S. retail sales endured a second straight month of record declines in April putting the economy on track for its biggest contraction in the second quarter since the Great Depression. Retail sales plunged 16.4% last month, the biggest decline since the government started tracking the series in 1992, with only online merchants reporting an increase in receipts. That followed a 8.3% drop in March. Economists polled by Reuters had forecast retail sales would plummet 12.0% in April. Retail sales crashed 21.6% on a year-on-year basis in April.
The University of Michigan consumer sentiment index rose in early May as some households received their share from the nearly $3 trillion fiscal package passed by Congress, and cheered price discounts and low interest rates. However, consumers' perceptions of personal financial prospects for the year ahead continued to weaken, falling to the lowest level in almost six years.
U.S. Industrial production dropped by a historic 11.2% in April, pulled down by a record 13.7% dive in output at factories. That led capacity utilisation to drop 8.3 percentage points to an all-time low of 64.9% last month.
Wall Street's three major indexes closed higher after swinging between gains and losses as investors weighed worries about Sino-U.S. trade relations and weaker-than-expected U.S. economic data against growing optimism that easing coronavirus restrictions would boost activity this month. Dow Jones rose 60 points, or 0.25%, to 23,685, the S&P 500 gained 11 points, or 0.39%, to 2,863 and the Nasdaq added 70 points, or 0.79%, to 9,014.
The German economy contracted by 2.2% in the first quarter, its steepest three-month slump since the 2009 financial crisis as shops and factories were shut in March to contain the spread of the coronavirus, preliminary data showed on Friday. On the year, GDP in Europe's largest economy fell by 2.3% from January to March after a 0.4% expansion in the previous three months, seasonally adjusted figures from the Federal Statistics Office showed.
The USD rose on Friday to notch a 0.66% weekly gain - DXY index was up 0.13% to 100.50.
EUR gained some strength into late trading, up from 1.0788 to a 1.0851 high.
GBP remained under pressure, falling 0.91% to 1.2110, its lowest since March 26.
USDJPY initially fell to 106.85, rebounded back up to 107.38 and was back down into the close.
AUD continued its recent sell off, trading back lower towards 0.6400 but unable to break (0.6402 low).
NZD followed lower, unable to hold 0.6000 gains and falling to a 0.5920 low.
AUDNZD saw another leg higher, breaking through 1.0800 resistance to record a 1.0826 high (highest since 13th Nov, 2019).
AUDEUR dropped a further 55 points, from 0.5980 down to around 0.5925.
U.S. Treasury yields were slightly higher as investors looked for signs that public health steps have readied the economy to reopen.
Auctions of 10-year notes and 30-year bonds added supply last week with a Treasury auction of a new 20-year bond on May 20 expected to have a greater impact on yields.
The benchmark 10-year yield was up 2.5 basis points to 0.6444%, putting it close to the middle of the note's range all week
The two-year U.S. Treasury yield was up less than a basis point at 0.1511%.
The 2 and 10 year Treasury notes gap was at 49 basis points, 2 basis points steeper than on Thursday's close.
Core euro zone bond yields were steady, largely disconnected from swings in global risk appetite, before a key meeting between euro area finance ministers.
Germany's 10-year government bond yield was up 1 basis point in late trade to -0.53%, Italian government bond yields rose, led by the short-end, last up 7 bps to 0.77%.
Gold jumped more than 1% to levels last seen in 2012 on renewed U.S.-China trade tensions. Spot gold rose 0.7% to $1,741.65 per ounce (hit its highest since November 2012 at $1,751.25).
Chinese iron ore futures scaled a 9-1/2-month peak - the most traded September contract on the Dalian Commodity Exchange closing up 3.3% at 668 yuan ($94.12) a tonne. The contract gained 5.5% last week, the most since the week ended March 6. Spot prices of iron ore with 62% iron content for delivery to China rose to $91.7 per tonne.
Copper prices fell and were set for a weekly loss as rising stockpiles and dire economic data around the world hammered home fears that demand will remain weak despite a rebound in Chinese factory activity. LME copper was down 0.3% at $5,185 a tonne and more than 1.5% lower last week - its biggest weekly loss since late March.
LME aluminium was down 0.9% at $1,462 a tonne, zinc was 0.2% higher at $1,961, nickel fell 1.8% to $11,855, lead lost 1.2% to $1,600 and tin was down 0.9% at $14,900.
U.S. crude prices jumped 7% to their highest since March. U.S. crude gained 19.7% in the week and Brent crude rose 5.2% after a week of bullish news. Both contracts gained for the third consecutive week. WTI oil settled up $1.87, or 6.8% at $29.43 a barrel & Brent crude settled up $1.37, or 4.4% a barrel at $32.50.
ECONOMIC CALENDAR TODAY
Australia - May ABS economic measurement. ABS special release on job situation and economic accounts.
Japan - Q1 GDP (last -1.8%, forecast -1.1%). To slip into recession, and a steeper fall likely in Q2.
UK - May house prices (last -0.2%). Housing market set to come under increasing pressure.
US - May NAHB housing market index. Homebuilder confidence at lowest level in seven years.
AUD THOUGHTS AND TECHNICAL ANALYSIS
AUD neared towards the lower end of its recent range on Friday, weighed down by growing fears of a China/Australian trade war dispute and escalating tensions, reaching a 0.6402 low from a previous 0.6473 high.
Australia urged China on Sunday to respond to its requests to discuss easing tensions between the two trading partners after Canberra called for an international enquiry into the origins of the novel coronavirus. China, accusing Australia of playing "petty tricks", has recently suspended beef imports from four of Australia's largest meat processors and is considering imposing hefty tariffs on imports of barley. Australian Trade Minister Simon Birmingham has requested discussions on the trade issues with his Chinese counterpart, he said in a television interview on the Australian Broadcasting Corp (ABC) on Sunday. "That request has not been met with a call being accommodated at this stage," he said on the ABC's 'Insiders' programme. "We are open to have that discussion, even where there are difficult issues to be discussed." Australia is set to join other countries in pushing for the probe when the World Health Assembly, the decision-making body of the World Health Organisation, gathers next week in Switzerland for its first annual meeting since the COVID-19 pandemic began. COVID-19 is the respiratory disease caused by the coronavirus. Today’s Economic calendar is rather light with Australia’s only major release, April leading index, released on Wednesday. Tomorrow we have the RBA minutes (may provide a little more colour on views set out in the statement of monetary policy) as well as May 2 ABS weekly payrolls. For the AUD, opens this morning around 0.6415 with no reaction seen from any of the weekend commentary / events (suspect a further Chinese retaliation from the latest rules by the U.S. against Huawei which will see China take all necessary measures to safeguard Chinese firms' rights and interests…no doubt a continuation in the risk off/risk on saga). Copper's fall & AUD/JPY selling see technicals lean bearish; AUD below 10- & 21-DMAs while daily, monthly RSIs fall. AUD support at 0.6400 unbroken for the time being and remains a drawcard for sellers. A break of this level sets up a retest of the 0.6373/0.6378 previous lows. Topside resistance at 0.6445-50, 0.6470-75.