Chinese data signals risk on, commodity prices continue gains, ASX SPI200 futures 38 points higher

European equity markets closed higher overnight, despite Euro-Zone industrial production missing analyst estimates of 1.30% with a reading of 0.80%. Data from China showed that trade activity beat expectations, with Chinese exports increasing 11.50% year on year for the month of March, while imports declined only 7.6% from a year earlier vs a prior 13.80% decline, as we continue to see signs the world’s second largest economy is stabilizing on the back of stimulus measures. European indexes were up across the board, with the DAX30 gaining 2.71%, FTSE100 +1.93% and Italy’s FTSEMIB index +4.13%. To currencies, and the British Pound and Euro were both weaker against the US Dollar, down 0.40% and 0.80% respectively.

Looking to the U.S. advance retail sales, which gives insight into consumer demand and confidence, the numbers missed expectations coming in at -0.30% vs expectations of 0.10%. The S&P500 index closed 1% up at 2082, the highest level since December 7th, while the Nasdaq100 gained 1.31%. Sticking with North America, the Bank of Canada left interest rates unchanged at 0.50% as widely expected. The chart below highlights the Canada dollar (USD/CAD) which has been strengthening since late January on the back of the increase in oil prices.

Oil prices closed lower overnight following data from the U.S. Department of Energy that showed US inventories for April rose more than anticipated, with Brent & WTI Crude futures down 1.14% & 0.97% respectively. Copper futures and the iron ore price increased following positive Chinese data, up 0.75% and 2.13%. The second chart below highlights the correlation between the iron ore price and Fortescue Metals since January, and I expect to see continued strength in FMG today following a positive production update out on Wednesday.

A ‘risk on’ mentality seems to be returning to the market, signaled by a weaker spot gold price which closed 1.05% lower, while the USDJPY appears to have put in a near term low, up 0.50%, both asset prices are generally correlated with risk appetite.  Australian equities are set to open stronger this morning with ASX SPI200 futures up 38 points in overnight trading.

Data releases:

·         Australia Consumer Inflation Expectations (Apr) 11:00am AEST

·         Australian Unemployment Rate (Mar) 11:30am AEST

·         Euro-Zone CPI (Mar YoY & MoM) 7:00pm AEST

·         Bank of England Rate Decision (Apr) 9:00pm AEST

·         U.S. Initial & Continuing Jobless Claims (Apr) 10:30pm

·         U.S. CPI (Mar YoY & MoM) 10:30pm AEST

·         U.S. CPI excluding Food & Energy (Mar YoY & MoM) 10:30pm AEST

Source: Rivkin, Bloomberg, Updata

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This article was written by James Woods - Global Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via or by phoning +612 8302 3600.

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