OVERNIGHT DATA AND HEADLINES U.S. manufacturing activity contracted less than expected in March, but disruptions caused by the coronavirus pandemic pushed new orders received by factories to an 11-year low. The economy's outlook was further dimmed by other data showing private payrolls dropped last month for the first time in 2-1/2 years as businesses shut down in compliance with strict measures to contain the highly contagious virus. The Institute for Supply Management (ISM) said its index of national factory activity fell to a reading of 49.1 last month from 50.1 in February. A reading below 50 indicates contraction in the manufacturing sector, which accounts for 11% of the U.S. economy. Economists polled by Reuters had forecast the index would drop to 45.0 in March. ADP private payrolls fell by 27,000 jobs last month, the first decline since September 2017. Private payrolls advanced by an unrevised 183,000 in February. The payrolls drop in March was concentrated among small businesses, while larger companies added workers. Economists had forecast private payrolls would fall by 150,000 jobs in March. The smaller-than-expected decline was due to establishments being surveyed in mid-March, before many states and local governments ordered residents to stay at home unless on essential business. President Donald Trump warned Americans on Tuesday of a "painful" two weeks ahead in fighting the coronavirus, with a mounting U.S. death toll that could stretch into the hundreds of thousands even with strict social distancing measures. In perhaps his most somber news conference to date about the pandemic, Trump, who has faced criticism for playing down the threat of the outbreak in its initial phases, urged the population to heed guidance to limit groups to no more than 10 people, work from home and not dine in restaurants or bars. "It's absolutely critical for the American people to follow the guidelines for the next 30 days. It's a matter of life and death,”. Germany's export-dependent manufacturing sector saw the steepest decrease in output in almost 11 years in March. IHS Markit's Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of the German economy, fell to 45.4, lower than both a flash reading of 45.7 and February's mark of 48.0. A reading below 50 indicates a contraction in activity. The sharpest drop in manufacturing output since April 2009, when the global financial crisis was raging, was led by a sharp decrease across the investment goods category, which includes carmakers and machine equipment. Italian manufacturing activity plunged in March at the steepest rate for 11 years, hit by a lockdown imposed by the government to try to contain the country's coronavirus outbreak. The IHS Markit Purchasing Managers' Index (PMI) dropped to 40.3 in March from 48.7 in February. The latest figure was the lowest since April 2009, during the global financial crisis. IHS Markit said its sub-index for output at manufacturers dived to 27.8 from 46.9, the lowest reading since the series began in June 1997. The new orders index also plummeted. The U.S. benchmark S&P 500 stock index fell more than 4% after a dire warning on the U.S. death toll from the coronavirus sent investors running from even the most defensive equities. Dow Jones fell 973.65 points, or 4.44%, to 20,943.51, the S&P 500 lost 114.09 points, or 4.41%, to 2,470.5 and the Nasdaq dropped 339.52 points, or 4.41%, to 7,360.58.
CURRENCIES The USD initially advanced with the DXY index up 0.8% at 99.84 however fell late in NY afternoon to 99.45 lows. China's yuan eased further, following its worst monthly performance in seven. The midpoint rate at 7.0771 quickly weakened to 7.1054 but dropped later to 7.0990. EUR fell 0.68%, dropping from 1.1030 highs down towards 1.0900, recovering to 1.0950. GBP set an alternative course from EUR, appreciating from 1.2340 lows up towards 1.2438. Ended the session at 1.2390. USDJPY strengthened from 107.86 to 106.95. AUD tumbled lower, falling initially from 0.6125 to 0.6047 lows, back up to 0.6130 and then lower to end at 0.6065. NZD traded lower, falling from 0.5950 down to 0.5879, back to 0.5943 and then lower to end 0.5915. AUDNZD continued its descent from the 1.0300 highs, falling to a 1.0255 low. AUDEUR rallied back up towards an early 0.5610 high but gains gradually gave way as it dropped towards 0.5533 lows.
TREASURIES Longer-term U.S. Treasury yields fell as investors grew more cautious about the economic impact of the coronavirus and braced for further equity market declines. The benchmark 10-year yield was down 7.5 basis points in afternoon trading at 0.6238%, about the middle of its range during the session. Shorter-term yields were little changed, leaving flatter a closely-watched portion of the U.S. Treasury yield curve measuring the difference between yields on two- and 10-year Treasury notes. It was at 38.6 basis points, down about 3 basis points from Tuesday's close. The two-year U.S. Treasury yield was up 1.2 basis points at 0.2395% in afternoon trading. Euro zone bond yields held near recent lows - Germany’s benchmark 10-year Bund yield closed slightly down at -0.46%. cid:image006.png@01D5A361.9EED6190 COMMODITIES
Gold prices firmed as investors sought safe-haven assets after sombre U.S. economic data exacerbated fears of a economic downturn. Spot gold was up 0.6% at $1,580.29 an ounce, having earlier risen as much as 1.8%. Iron ore futures on the Dalian Commodity Exchange tumbled, slumping as much as 2.9%. Spot prices of benchmark iron ore with 62% iron content stood at $84.5 per tonne, unchanged from the previous session. Industrial metals prices fell sharply after data showed global factory output shrinking fast, with expectations of a vast supply surplus pushing aluminium below $1,500 a tonne for the first time since 2016. LME aluminium down 1.8% at $1,498 after falling as low as $1,483.50. LME copper down 3.1% at $4,797 a tonne, zinc fell 2.1% to $1,866, nickel lost 2% to $11,255, lead slipped 2% to $1,706 and tin 1.3% down at $14,415. Oil prices fell after data showed U.S. crude inventories rose last week by the most since 2016 while gasoline demand suffered its biggest weekly drop ever due to the coronavirus pandemic. Crude inventories rose by 13.8 million barrels last week, the U.S. Energy Information Administration said. That was the biggest one-week rise since 2016, and analysts expect similar reports in coming weeks, as refineries curb output further and gasoline demand continues to decline. WTI crude fell 29 cents, or 1.5%, to $20.19 a barrel after hitting a low at $19.90. June Brent crude fell $1.45, or 5.5%, to $24.90 a barrel. The global benchmark fell to $21.65 on Monday, its lowest since 2002. cid:image007.png@01D5A361.9EED6190 EVENT RISK TODAY
No Australian Economic data today. US - Feb trade balance $bn (last -45.3, forecast -43.6). COVID’s effects will delay a clear read for many months. US - Initial jobless claims ‘000 (last -3.283, no forecast). A further deterioration is expected. US - Feb factory orders (last -0.5%, forecast -0.3%). Core durable orders remained weak in Feb. AUD THOUGHTS AUD saw some wild price swings overnight as it tossed to and fro between 0.6050 and 0. 6130, eventually ending the session lower at this mornings 0.6065 opening. The U.S. data overnight, led by the ADP report, was weak however offered some clues ahead of the government's more comprehensive employment report for March, which is scheduled for release on Friday. According to a Reuters survey of economists, the non farm report is likely to show payrolls dropped by 100,000 jobs last month after a robust increase of 273,000 in February. The unemployment rate is forecast to rise three-tenths of a percentage point to 3.8% in March. Today there is no Australian Economic data releases scheduled however the main drawcard tonight will be the U.S. jobless claims report. The deteriorating labour market picture is likely to show the number of Americans filing claims for unemployment benefits at a new all-time high after vaulting to a record 3.28 million in the week ended March 21. For the AUD, technical outlook has shifted bearish as price action remains capped ahead of the 21-DMA whilst the 10 DMA ignites selling action closer towards 0.6000. The daily and monthly RSIs continue to turn lower from recent peaks, suggesting market more inclined to sell into strength as opposed to establishing fresh long positions.