Forex Investment and Currency Trading

Monday’s equity markets were mixed. In Asia the Nikkei fell 2.3% led lower by electronics stocks, finishing the quarter down 18.18% the worst start to a year since 1990. Stocks in Europe were little changed, except Spain’s Ibex Index which fell 1.29%. US stock markets gained slightly led by financials, with the S&P500 finishing the quarter 9.92% down, its worst start to the year since 2001. Front-month WTI fell USD4.10 to USD 101.50. The futures market was largely unchanged with the odds of a 50 bps cut in FFR on April 30th, now giving a 52% chance of a 25bps cut and 48% chance of a 50bps cut, vs. a 54%/46% split on Friday. Two-year UST yields dropped 5 bps while ten-year yields fell 3bps, lifting the the 2s-10s spread 2bps to 181bps.

Tuesday in the US brings the ISM Manufacturing (Mar) and Total Vehicle Sales (Mar). The highlights of the week will be Bernanke’s testimony before the Joint Economic Committee on Wednesday and Payrolls on Friday.

ISM Manufacturing (Mar) is expected to show a slight decline, with the market looking for 47.5 vs. 48.3 prior. This would be the lowest since 2003 and the balance of risk is probably for a lower number. Manufacturing is only about 15% of the economy but the manufacturing survey is more closely watched than the services reading (Thursday) - it is much longer established and manufacturing is a more volatile component of GDP. The previous regional PMI’s gave a mixed picture with the Empire State PMI (Mar) printing its all time low, at -22.2 from -11.7, although both Employment and New Orders subcomponents picked up. The opposite was true for the Philly Fed (Mar) which printed slightly higher than the expected -19.0 at -17.4 vs. -24.0 prior.

Total Vehicle Sales (Mar) is expected to print 15.2mn vs. 15.3mn prior. This would see the Q1 average print 15.2mn vs. 16.2mn in Q4 of last year, mainly due to tighter credit conditions and consumers putting off durable good purchases whilst sentiment remains weak.