Markets rise as dollar continues advancing

US stocks advanced on Monday as factory orders increased 2.1 percent in March after a 0.1 drop in February. Manufacturing accounts for 12 percent of US economy, and a rebound in orders of new goods signals the economy is accelerating after the first quarter GDP growth slowed to 0.2 percent annual rate due to harsh winter and labor dispute at the West Coast ports. New orders recorded the largest gain since July last year boosted by a 13.5 percent increase in transportation equipment orders. Manufacturing has been hurt by strong dollar and falling oil prices, which lower profits of multinational corporations and oil companies. Energy sector companies have cut their capital expenditures for this year citing lower oil prices, while multinational companies have lowered their profit forecasts for the year because of the dollar. The dollar advanced as the treasury yields rose. The ICE US Dollar Index, a measure of the dollar’s strength against a basket of six rivals, gained 0.1%. Today at 13:30 CET March Trade Balance will be released in US. The tentative outlook is negative for the dollar. At 14:45 final Services and Composite PMIs for April will be released by Markit. The tentative outlook is neutral. And at 15:00 CET April ISM Non-Manufacturing PMI and May Economic Confidence Index by Investors Business Daily and TechnoMetrica Institue of Policy and Politics will be published. The tentative outlook is negative.

European stocks rose on Monday as data indicated the manufacturing sector in euro-zone expanded in April. Markit’s Manufacturing PMI for euro-zone was revised upward to 52.0 for April from the preliminary estimate of 51.9. At the same time, the survey results showed factories raised prices in April for the first time in eight months, providing the first indication inflation may soon start to rise. Germany’s Manufacturing PMI was also revised upward to 52.1 from 51.9 . The trading volume was thin because of a public holiday in Britain. Euro traded lower due to weak Manufacturing PMI readings in France and Spain. Today at 10:00 CET March Producer Price Index and European Commission Economic Forecast will be released in euro-zone. The tentative outlook is positive.

Today the Reserve Bank of Australia cut the cash rate from 2.25 percent to 2.0 percent in an effort to weaken the Australian dollar and support the economy as investments in the mining sector continue falling. The Australian dollar fell quarter of a cent but quickly rebounded as investors anticipate that the current easing cycle of the central bank may be over. Tomorrow at 2:30 CET March Retail Sales will be released in Australia. The tentative outlook is negative for the Australian dollar.

Oil prices fell on Monday as data indicated manufacturing activity in China declined in April. China is one of the largest importers of crude oil, and the contraction in manufacturing sector in China negatively impacts the prospects of future increases in crude oil demand. At the same time the Saudi foreign minister said on Monday the Saudi-led Arab alliance conducting air strikes against Houthi fighters in Yemen was considering calling a truce in some areas to allow humanitarian aide to reach the country.

Copper fell on Monday after the weaker than expected final estimate of China’s Manufacturing PMI for April spurred concerns global supply will outstrip lower demand for the metal.

 

Source: IFC Markets