After another remarkable day of days on Wall Street, trading sentiment has just lost its positive tone coming into this morning. There has been no decisive trigger, but assets at the safer end of the spectrum are performing better as we come into the European session.
Treasury yields falling back helping the dollar to claw back some losses is not the move of a normal/confident market and serves as a warning that any return to outright risk aversion will result in renewed strength of the dollar once more.
The past week has seen decent risk recovery as traders take the positives from the discussion and some implementation of exit strategies from their lockdowns. However, this morning, traders seem to be a little reticent to follow Wall Street’s lead. The yen is outperforming on major forex, whilst equities are slipping back. Market reaction around the recovery uptrends on silver and Aussie/Yen will be interesting barometers of broad sentiment now.
Reaction around US corporate earnings in addition to what will likely prove to be shocking data for March’s US retail sales and industrial production could also be a key gauge for whether the glass is half full or whether it is now half empty.
Wall Street closed another positive session with good gains, with S&P 500 +3.1% at 2846. However, the E-mini S&P futures are -0.4% early today and Asian markets have met that decline (Nikkei -0.4%, Shanghai Composite -0.5%). European markets are also similarly slipping early today.
In forex, there is a risk aversion resulting in JPY outperformance, whilst USD is regaining some of its recent lost ground against major forex. AUD and NZD are the key underperformers. In commodities, there is a mixed look to oil after another rout of selling yesterday, whilst the precious metals are beginning to slip back from recent strong gains, with gold a-$15 and silver -2.3%.
It is all about the US data for March on the economic calendar today. US Retail Sales are at 1330BST, with core ex-autos sales expected to dive by -5.0% in March as the bit cities went into lockdown (down from a decline of -0.4% in February). The US Industrial Production for March is also expected to decline by -4.0% on the month, whilst there will also be special attention given to the capacity utilization proportion which is expected to decline to 73.9% (from 77.0% in February). The Bank of Canada is not expected to change rates at 1500BST from the +0.25% (+0.25% previous) so the outlook will be all important.