Asia appears to be showing signs of post-coronavirus life this morning, with data released from across the region showing some pleasing signs of a rebound. The results are doubly pleasing as the resurgence is broadly based across the key economies of the region and not just China, bringing a welcome respite from months of virus doom and gloom.
China’s official March Manufacturing and Non-Manufacturing PMI’s rebounded very strongly in March. Manufacturing PMI leapt back into expansionary territory, printing 52.0 from February’s dire 35.7. Non-Manufacturing PMI, meanwhile, nearly doubled to 52.3 from 29.6 previously. Japan’s February Industrial Production rose 0.40% with Retail Sales climbing by 0.60%. Not spectacular, but a pretty good result all in all. South Korea, meanwhile, saw Retail Sales for February slump by 6.0%, but Industrial Production YoY for February leaped 11.40% while Construction Output rose 5.60%.
New Zealand Building Permits rose 4.70%, albeit the February number coming before the national lock-down. Australian Private Sector Credit held steady at 0.40%. Less pleasing, but hardly surprising, was NZ ANZ Business Confidence for March, which collapsed to -63.50.
Overall though, the impression seems to be one of first in, first out. Asia, having led the world into the coronavirus epidemic, appears to be showing signs of a tentative, if uneven, recovery. That should ensure that Asian stock markets enjoy a positive day after another strong showing by Wall Street overnight. With so much of the world still mired in their own Covid-19 lockdowns and with the worst to come, it perhaps gives the world hope that even in these darkest of days, better times will come.
Oil prices hit 10-year lows overnight, and that seems to have prompted the White House to finally get directly involved in Saudi Arabia and Russia’s price war. President Trump called Vladimir Putin, and it seems to have had the desired effect, with Russia prepared to talk at least. Oil demand may never truly return to pre-virus levels. One suspects the airline landscape will be dramatically different going forward, with many famous names consigned to the annals of history. Nevertheless, the first signs of sensible conversations amongst the big boys mean that oil may finally be closer to a longer-term bottom in prices than has previously been the case.
Equities
Health care stocks led Wall Street higher overnight with the S&P 500 climbing 3.35%, the NASDAQ rising 3.62% and the Dow Jones rising 3.19%. In after-hours trading, this morning, both the S&P e-mini and NASDAQ futures are 0.50% higher.
Australia and New Zealand have reacted very positively to the robust economic data from Asia’s powerhouses this morning. The ASX 200 is up 2.20%, the All Ordinaries’ by 2.85% and the NZX 50 by 2.75%. The ASX 200, in particular, appears to have traced out a medium-term low around the 4800 region over the last two weeks. Boosted by the fiscal and monetary kitchen sinks thrown at the economy by the government and RBA, and with apparent green shoots appearing across Asia.
Across the region, Japan has shrugged off the postponement of the Olympics, with the Nikkei 225 up 0.80% today. The KOSPI has climbed 1.50% with the Shanghai Composite rising 0.70%. The Hang Seng has risen by 1.50% with the global trade-centric Singapore Straits Times liking what it sees today, jumping 2.70%.
Asian equities should continue their strong showing throughout the session as the data this morning as undeniably positive. The picture is less glossy in Europe, with much of the continent still neck-deep in their own coronavirus tragedy. Europe will likely be one of the last blocs to trace a bottom, with the extent of the fiscal wreckage on the continent as yet unclear. Their day in the sun will have to wait.
Currencies
Strong demand for U.S. Treasuries and tier-1 corporate bond issues saw the U.S. dollar strengthen overnight after a torrid few days. With the trajectory of coronavirus ex-Asia still in its infancy across much of the world, the U.S. dollar’s haven appeal should remain the dominant theme for the weeks ahead, even if we get a few multi-day blips along the way.
The DXY rose 0.70% to 99.04 overnight, and the greenback strengthened against all the major currencies, notably the euro, which fell 1.0% to 1.1040 overnight.
Both the antipodean currencies have outperformed this morning, boosted by the recovery in Asian economic data today. The AUD/USD has risen 0.40% to 0.6190, and the NZD/USD has increased by 0.40$ to 0.6030 today. Both are likely to continue outperforming throughout the rest of the session.
Across Asia, regional currencies are mostly unchanged versus the greenback with traders content to sit out the recent volatility from the side-lines. Recoveries in beleaguered Asian currencies will need more than one day of decent data to move the sentiment needle after a torrid two-months.
Oil
Oil fell to 18-year lows overnight as the Saudi/Russia price war and collapsing demand from the West continued to sap confidence in any sort of recovery story. Brent crude fell 9.0% to $22.50 a barrel, and WTI fell 6.0% to $20.00 a barrel brings back memories of the bad old days around the turn of the century.
President Trump’s apparent direct intervention, contacting Vladimir Putin overnight, looks to have put a floor under prices at the levels. Albeit most likely temporarily. It is clear that both Russia and Saudi Arabia want the US involved in any price and production solution. That is challenging from a legal standpoint, but it is hard to fault their logic. Why should they should all the pain of managing oil prices, when US Shale gets a free ride. President Trump’s challenge will be reconciling these two opposite sides, and in the end, it may require legislation to cross Capitol Hill, least the US Shale industry ceases to exist.
Oil likes what it sees though, with both contracts performing strongly in Asia today, albeit from a shallow base. Brent crude has risen 3.0% to $23.40 a barrel, and WTI has leapt 7.0% to $21.60 a barrel.