News and views

A more downbeat session last night, on lingering caution. There was no specific event to ascribe the mood to, rather continued concerns around possible tightening by China, as well as the possible regulatory tightening of US bank trading activity. The Senate Banking Committee is about to introduce a financial regulation bill for debate. The S&P500 is currently down 0.5% after falling 0.7% at the open, and financials are 1.3% lower. Earlier, the Shanghai Composite fell 1.2%. Commodities remained in a six-day slump, oil losing 2.1% to $79.50 and copper 2.0%. Gold held steady at +0.4%. US treasuries across the curve were little changed ahead of tomorrow's FOMC, initially bid before the US data (IP and the NY Fed factory survey just beat expectations, although the survey detail was strong) took it higher in yield. Foreign buying of US securities in January fell due to record selling of corporate debt, but treasuries remained in demand.

The US dollar bounced 0.7% after the Sydney close to 80.40, risk aversion the driver. EUR slid from 1.3760 to 1.3640. A range of comments from various Eurozone officials left the market not much clearer on the extent of any bailout for Greece. GBP underperformed from 1.5200 to 1.5040. The yen was slightly stronger at 90.40.

AUD fell from 0.9160 (reached just after the domestic close) to 0.9096, partly recovering to 0.9125, a bearish key reversal in formation.

NZD initially spiked to 0.7055, then fell to 0.6990, and currently sits at 0.7000. AUD/NZD fell to 1.2980, but recovered to 1.3040.

US NY Fed index business activity headline fell 2 points to 22.9 in March but the key detail on orders, shipments and jobs was all much stronger in March than in February. That pretty much reversed the February story, when the headline rose but the detail was mostly softer.

US industrial production rose 0.1% in Feb. The factory sector contracted but overall output managed a gain thanks to a further 0.5% rise in utility output due to the cold weather and a 2% rise in mining production. Auto production was down sharply last month (problems at Toyota probably); positives included the third straight rise in business equipment output, a surprise 0.3% rise in construction supplies (despite the weather) and another solid defence outcome (1.3%).

The NAHB housing market index slipped from 17 to 15 in March, further evidence that the housing market is losing momentum even despite the extended tax credit for home-buyers. There may also be homebuilder concern about the end of Fed support for the housing finance market later this month.

US TIC data showed a surprise outflow of $33.4bn in Jan on the broader measure, mainly due to the official sector.

UK house prices rose 0.1% in March according to the Rightmove index of asking prices. That is the weakest March gain on record, and the survey also showed very compressed supply - very few potential sellers are putting their homes on the market. The annual pace of price gain on this measure fell from 6.1% yr to 5.3% yr.

Canadian auto sales were flat in January, in line with previous guidance from StatCan. Their guidance for February is for a 7% gain.

Outlook

AUD/USD and NZD/USD outlook next 24 hours: AUD's bearish technical signal, as well as our own models' pointers, suggest it should trade heavily today with minor resistance at 0.9160 and support at 0.9100 more likely to be tested. It's hard to see NZD above 0.7050 today, more likely a move towards 0.6960.