Good morning. Here’s what you need to know.
Chinese trade. Chinese exports fell 6.6% from a year earlier in March and imports tumbled 11.3%. Economists were looking for gains of 4.8% and 3.9%, respectively. The surprise drop in both imports and exports brought China’s trade surplus to $US7.71 billion in March, well above the $US1.8 billion surplus predicted by economists. “Exports by destination show growth was dragged down by weakness in the U.S. and Hong Kong, highlighting the negative impact on exports of soft U.S. demand in Q1, as well as companies’ fake export reporting early last year,” say economists at Barclays. “Exports to the U.S. grew 1.2% in March and an average of 1.3% in Q1, down from 9.4% in Q4. Exports to Hong Kong declined 43.6% in March and an average of 31.3% in Q1, down from 0.6% in Q4, likely due to distortions caused by fake trade reporting. Meanwhile, exports to other developed and emerging markets look more in line with expectations.”
Greek offering. Greece issued €3 billion of 5-year notes at a final yield of 4.95% this morning, marking a return to the bond market for the first time since before the euro crisis. “The ability of Greece to conduct issuance emphasises the overwhelming strength of positive sentiment for peripherals,” say interest rate strategists at Rabobank. “Greece still has an extremely high debt stock — albeit much is owned by official creditors and the average maturity is high — but the market is instead focusing on the more positive flow metrics).”
Euro zone consumer prices. France, the Netherlands, and Greece all reported consumer price growth below expectations this morning. In France, the consumer price index advanced only 0.6% year over year in March, slowing from February’s 0.9% rate and missing expectations for a 0.7% rise. In the Netherlands, the consumer price index rose 0.8% from a year earlier in March, down from 1.1% in February and below estimates for an unchanged reading. In Greece, deflation accelerated faster than expected — the consumer price index fell 1.3% year over year, down from February’s 1.1% drop and worse than expectations for a 1.2% price decline.
Euro zone industrial production. Industrial production data in France and Italy, two of the euro zone’s three biggest economies, also surprised to the downside. French industrial output rose only 0.1% in February from a month earlier, failing to meet expectations for a 0.2% advance. Italian industrial output fell 0.5% — economists were looking for only a 0.3% drop. “This underscores the fact that both governments are touting a new push for growth and how this will be reconciled with the EU demands for austerity are not yet clear,” says Marc Chandler, global head of currency strategy at Brown Brothers Harriman. “Although in an uncoordinated fashion, a Paris-Rome (and maybe Madrid) bloc could be coming together and, if we are right about the EU parliamentary elections, the tide in Europe may turn in the coming months.”
Bank of England. In its monthly decision on monetary policy, the Bank of England elected to leave its benchmark interest rate unchanged at 0.5% and its asset purchase target unchanged at £375 billion.
Mixed markets. In the United States, S&P 500 futures point to a slightly negative open, while Treasuries are getting a boost. The dollar-yen exchange rate is down another 0.3% today following Tuesday’s big sell-off, trading near ¥101.70. The euro is up slightly against the dollar. The London FTSE 100, the French CAC 40, and the German DAX are advancing, while Spain’s IBEX 35 and Italy’s FTSE MIB are in the red. Gold is up 1.3%, trading near $US1322 an ounce.
Jobless claims. The latest weekly jobless claims data are due out at 8:30 AM ET. Economists predict 320,000 initial claims for unemployment insurance were filed in the week ended April 5, down from 326,000 the week before. Continuing claims filed in the week ended March 29 are expected to have ticked down to 2.835 million from 2.836 million.
Import prices. Monthly import prices data are also released at 8:30 AM. Economists predict prices rose 0.2% in March from the previous month but fell 0.9% from a year earlier after gaining 0.9% on the month but losing 1.1% on the year in February.
30-year auction. The U.S. Treasury will auction $US13 billion of 30-year notes at 1 PM ET. 30-year yields are down 40 basis points this year following the Fed’s decision to unwind its large-scale asset purchase program and continue down the path toward monetary policy normalization. “Given the data-light calendar for the next two weeks or so, the return of carry trades could steer demand away from the long end and into the belly of the curve,” say interest rate strategists at Nomura. “We expect more concession, either outright or on the curve, heading into the auction.”
Monthly budget statement. The U.S. Treasury releases its monthly budget statement at 2 PM ET. Economists predict the monthly budget deficit shrank to $US36 billion in March from $US106.5 billion a year earlier.