Good morning OVERNIGHT DATA AND HEADLINES Global stock markets dipped in volatile trading as investors assessed the economic damage from the coronavirus pandemic. Wall Street's three major indexes tumbled, with the Dow registering its biggest quarterly decline since 1987 and the S&P 500 suffering its deepest quarterly drop since the financial crisis on growing evidence of massive economic damage from the coronavirus pandemic. Dow Jones fell 410.32 points, or 1.84%, to 21,917.16, S&P 500 lost 42.06 points, or 1.60%, to 2,584.59 and the Nasdaq dropped 74.05 points, or 0.95%, to 7,700.10. U.S. consumer confidence dropped to a near three-year low in March as households worried about the economy's near-term outlook amid the coronavirus pandemic, which has upended life for Americans. The Conference Board said its consumer confidence index decreased to a reading of 120.0 this month, the lowest since July 2017, from an upwardly revised 132.6 in February. Economists polled by Reuters had forecast the index falling to 110.0 in March from the previously reported reading of 130.7 in February. The smaller-than-expected decline in confidence is likely because the cutoff date for the survey was March 19, before many states and local governments ordered residents to stay at home or shelter in place, and shuttered restaurants, bars and other social-gathering venues. Euro zone inflation plunged this month on crashing oil prices, signalling the start of a possible deflationary spiral as government lockdowns in response to the coronavirus trigger a dramatic slowdown in economic activity. Inflation in the 19 countries sharing the EUR fell to 0.7% from 1.2% in February, undershooting already modest expectations of 0.8%. cid:image004.png@01D5A360.4D161B60 CURRENCIES
The US DXY index was off its highs, falling from 99.95 highs down towards 99.10 into the session close. China's CNY was initially weaker, rising from 7.0870 towards 7.0995 however found some strength falling back towards 7.0786. EUR was originally weaker, falling down to 1.0932 but made steady traction higher up to 1.1020. GBP followed other currencies, dipping to 1.2290 but made steady gains up to towards 1.2466. USDJPY saw gains from 108.66 to 107.57 in the last trading day of Japan’s fiscal year. AUD was down 0.70% on the day after early gains at 0.6208 couldn’t continue, falling to a 0.6083 low. Rebounded to 0.6145. NZD saw 1.11% drop in price, from 0.6033 to 0.5909. Was back up at 0.5946 in late NY trading. AUDNZD made solid gains overnight, rising 0.58% from around 1.0250 up towards 1.0324 highs and closing just above 1.0300. AUDEUR fell lower from an earlier 0.5635 high down to 0.5548 but was back up at 0.5570. cid:image005.png@01D5A360.4D161B60 TREASURIES
U.S. Treasury yields were little changed as the Federal Reserve continued its aggressive purchases and managers rebalanced their portfolios with the end of the first quarter. The benchmark 10-year yield was up less than a basis point at 0.677%. The two-year U.S. Treasury yield was down less than a basis point at 0.224% in afternoon trading and was as low as 0.206%, a level not seen since 2013. Italian government bond yields held steady - Italy's benchmark 10-year yield was up six basis points in late trade at 1.54%, but still nearly half what they were on March 18. High-grade 10-year bond yields, such as Germany's, rose five to six basis points across the board on improved risk sentiment.
COMMODITIES Gold prices dipped over 2% to their lowest level in a week but on track for a sixth straight quarterly rise. Spot gold fell 2.1% from $1,620 to $1,580.50 per ounce. Chinese iron ore futures picked up, fuelled by demand hopes after China reported an unexpected growth in its factory activities in March. That helped the Dalian Commodity Exchange's iron ore futures contract gain as much as 1.5%, before ending 0.9% up at 650.5 yuan ($91.77) per tonne. Spot prices of the benchmark 62% iron-content ore fell for the third straight session to $84.5 per tonne on Monday. Copper prices rose after data showed an unexpected rebound in factory activity in China. LME 3 month copper was up 3.5% at $4,935.50 a tonne. Crude oil benchmarks ended a volatile quarter with their biggest losses in history, as both U.S. and Brent futures were hammered throughout March on the global economic freeze due to the coronavirus pandemic and the eruption of a price war between Russia and Saudi Arabia. Both benchmarks lost roughly two-thirds of their value in the quarter, with March's declines of about 55% accounting for the lion's share of the losses. WTI settled 39 cents higher at $20.48 per barrel. May Brent crude futures ended the session 2 cents lower at $22.74 a barrel ahead of expiration. The international benchmark fell 66% in the first quarter and 55% in March, the worst quarterly and monthly percentage declines on record. ECONOMIC DATA TODAY Australian Economic data releases: March PMI (last 44.3) & Corelogic home value index (last 1.2%). Australian Feb dwelling approvals (last -15.3%, forecast +4.5%). Disruptions from bushfires and COVID-19 could see a further fall. Australian RBA minutes will be released (from the ad-hoc meeting on March 18th). Japan - Q1 Tankan large manufacturing index (last 0, forecast -10). Japan’s corporates to be highly cautious over outlook. China - March Caixin China PMI (last 40.3, forecast 46.0) Europe - Feb unemployment rate (last 7.4%, forecast 7.4%). Job losses to accelerate the number in months ahead. US - ADP employment change ‘000 (last 183, forecast -100). Claims point to a big shock in coming months. US - Feb construction spending (last 1.8%, forecast 0.6%). Investment to fall further through 2020. US - March ISM manufacturing (last 50.1, forecast 46.0). Surprised in Feb but will deteriorate in March. AUD THOUGHTS AUD found fresh selling interest overnight, dropping from yesterday’s high of 0.6208 to a 0.6085 low before recovering half its fall to open this morning at 0.6145. In trading hours yesterday, the PMI reports from China revealed that the economic activity in both the manufacturing and the service sectors expanded in March after posting record-low readings in February. Although the data helped the AUD rise above 0.6200, early broad-based USD strength didn't allow it to stay in positive territory. The USD then gave up early gains after the Fed made yet another effort to add liquidity to financial markets, and the USD accelerated losses just after the London fix before stabilising around break-even in New York afternoon trade. The quarter-end produced less USD buying in anticipation of the fix than was suggested by earlier trade. The new Fed facility broadened the ability of dozens of foreign central banks to access USD through repo transactions in exchange for Treasuries as collateral. Still, the early session risk-on theme faded, with U.S. equity markets giving up early gains while U.S. and global bond yields softened during U.S. hours. Today we have a raft of local and offshore data to keep currencies on its toes. In Australia, the focus will be on the release of the RBA minutes (from the March 18th meeting). Over in Asia we have Japanese Q1 Tankan and Chinese March PMI. Offshore the data releases in Europe and U.S. will largely concentrate on the February months however as we start to progress through April the March readings will begin to paint an Economic deterioration in the outlook. For the AUD, looking for guidance from the RBA minutes whilst the Asian data releases poses a threat for directional movement. Any further direction higher past 0.6200 to be met with solid resistance at 0.6237 (61.8% level) as well as the 21 day moving average. Supports building around the 3 times recently challenged 0.6080/85 zone.