Risk appetite encouraged by US manufacturing data

Wednesday, April 02, 2014

Wall Street pushed higher yesterday with the S&P 500 closing at a record high just above 1885.50, starting off the second quarter on a strong footing. Investors were not disappointed with the release of the ISM manufacturing report which offered further signs of recovery after disruptions at the start of the year caused by adverse weather conditions. The index pushed higher to 53.7 in March from 53.2 the previous month while domestic vehicle sales beat expectations of 12.3m in March, registering sales of 12.78m and hinting at the continued recovery in consumer confidence and demand.

Asian equity indices rallied higher as investors carried over the bullish sentiment from US trading. The Nikkei and TOPIX both posted steady gains while Chinese mainland stocks and H-shares rallied higher on the encouraging US demand outlook. The dollar strengthened against the yen for the fourth consecutive session yesterday with early morning trade today testing levels towards a ten week high of 103.94 as risk appetite improves.

Front month raw sugar prices continued their correction lower yesterday losing 3.3% on heavy volumes as a combination of triggered stops and easing concerns over Brazilian rainfall put pressure on prices. After an impulsive rally saw raw sugar touch 18.00 towards the end of March, front month futures have sold off aggressively since Monday, targeting support levels around 17.00 on mounting concerns that the recent impulsive rallies may have been overdone. Late rainfall in Brazil has further eased concerns of a significant drop in crop yield and with the market still in surplus downward pressure could see prices pull back towards technical support around 16.50.

A steady stream of economic data will keep investors engaged today with eurozone producer prices expected later this morning and ADP employment numbers, EIA crude inventories and factory orders for the US due later this afternoon. Market participants surveyed by Bloomberg expect 195K jobs to be added in March, up from 139K positions added the previous month and any positive surprises could provide the impetus for risk assets to rally higher.

ISM manufacturing index rises to 53.7 in March

NAPMPMI Index ISM Manufacturing 2014 04 02 07 24 14

JPY weakens against the dollar as risk appetite improves

JPY Curncy Japanese Yen Spot 2014 04 02 07 33 19

Front month raw sugar futures pull back sharply on overbought concerns

SB1 Comdty Generic 1St SB Fut 2014 04 02 07 44 24



Events for today

0600

UK

Mar

House Prices

0900

EZ

Feb

Producer Prices

1500

US

Feb

Factory Orders

1530

US

w/e

EIA Energy Stocks

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