Stan Shamu, Research Analyst, IG
FTSE 6585 +1
DAX 9315 -3
CAC 4405 -1
IBEX 10285 +17
MIB 21530 -35
Asia is mixed heading into the Easter break in a relatively quiet session. There has been some activity out of Japan with BoJ Governor Haruhiko Kuroda on the wires along with weekly fund flows data. Kuroda remained optimistic about the recovery and reinforced he will be ready to act if needed. There is also an interesting situation emerging with Finance minister Aso hinting the government pension fund will make a move on the equity market in June.
Despite the developments, the Nikkei has actually been quite timid today with a relatively flat performance as some profit taking kept a lid on gains. Meanwhile China hasn’t managed to take advantage of yesterday’s positive data with no real conviction among buyers today. Perhaps comments by Premier Li Keqiang suggesting China is comfortable with growth of ‘around 7.5%’ and that the country isn’t necessarily considering strong stimulus were enough to deter investors.
However, China also announced it will lower reserve ratios at some rural lenders and some feel this is a first step to a wider cut in RRRs. No doubt, China growth will remain a major talking point for a while.
Europe in for a flat start
Looking ahead to European trade we are calling the major bourses mixed heading into the Easter break. While there is no real direction in equities, there are some interesting developments in the FX space. The pound just continues to grow from strength to strength with some solid jobs numbers helping to drive sentiment yesterday. Unemployment dropped to a remarkable 6.9% from 7.2% and this fuelled the pound higher with cable trading at its highest level since November 2009. GBP/USD traded as high as 1.6823 in February and traders will be hoping to see a close above this level before adding to longs.
There is a school of thought that given the trend in UK house price and employment that perhaps the Bank of England could actually raise rates in Q4 this year. Most still believe the UK central bank will hike in Q2 2015, perhaps Q3 2015, however there are growing calls that this is a touch pessimistic. This will be a key talking point in coming months and any change in consensus to a Q4 hike could see the pound soar.
For the rest of the region, investors will be hoping there is no fresh negative tape out of Ukraine heading into the weekend. There isn’t much on the economic calendar in Europe but in the US we have unemployment claims and the Philly Fed manufacturing index. After having a poor run last week, the Nasdaq is looking far more constructive now with significant support around 3,420.
(Nasdaq finding support)
Energy stocks in focus locally
The local market is positive for the week, only slightly though with focus having been pinned on the resource names. Big iron ore miners impressed earlier in the week but today it was the energy names that stole the limelight. Woodside has had a positive day after reporting a rise in output which was a touch ahead of estimates. However its revenue was relatively in line with estimates and continues talks on the Leviathan deal. While there was no real game changer in the result, it was enough to keep investors encouraged. Meanwhile Santos wasn’t as fortunate, its 1Q revenue missed estimates. However, it maintained FY output guidance and said the PNG LNG project is ahead of schedule. Banks have held their ground fairly well today and have helped offset weakness in some of the materials plays.