Daily FX & Market Commentary
Please note and carefully read the Important Disclosure on the last page Daily FX & Market Commentary Apr 15, 2015 Published from Tuesday to Friday Market Recap • HK/China stocks fell: HSI and HSCEI fell 1.6% and 2.2% respectively after an 8-day winning streak. M2 growth in March was lower than expected at 11.6%. • European stocks fell: Stoxx 600 fell 0.5% on worries about the Greece debt, despite positive news that Nokia announced in talks with Alcatel-Lucent for a potential take-over arrangement. • US stocks rose: S&P 500 rose 0.2% with the support from energy shares and quarterly earnings reports by companies that beat market’s expectations. Table: Daily Market Movement (Apr 14, 2015) Equity Market Indices U.S. Close Change % Commodity Futures Energy & Metals Close % S&P 500 Index Dow Jones Industrial Average NASDAQ Composite Index Europe 2,095.84 18,036.70 4,977.29 +3.4 +59.7 -11.0 +0.2% WTI Crude Oil (USD/bbl) +0.3% Brent Crude (USD/bbl) -0.2% Natural Gas (USD/MMBtu) COMEX Gold (USD/oz) 53.29 58.43 2.53 1,192.6 +2.7% +0.9% +0.8% -0.6% Stoxx Europe 600 Index DAX Index Japan TOPIX Index Nikkei 225 Stock Average China / Hong Kong Hang Seng Index Hang Seng China Enterprises 411.70 12,227.60 -1.9 -111.1 5,990.0 0.0% 1,590.82 19,908.68 +4.6 +3.2 27,561.49 14,264.81 -454.8 -325.6 -0.5% LME Copper (USD/MT) -0.9% Bond Yields & CNY U.S. Treasuries - Yields +0.3% 3-Month - Yield (%) +0.0% 5-Year - Yield (%) 10-Year - Yield (%) -1.6% 30-Year - Yield (%) -2.2% USD/CNY 4,135.57 +13.9 +0.3% China Renminbi Spot Shanghai SE Composite Close Change 0.02 +0.01 1.34 -0.03 1.90 -0.03 2.54 -0.03 Close % 6.21 -0.1% Data Source: Bloomberg L.P. Hot News: Remain constructive on U.S. equities in the medium term as earnings season unfolds Chart: S&P500 EPS Growth Estimates Source: Bloomberg and Citi Research as of Mar 27, 2015 U.S. stocks up slightly despite weaker retail sales • Yesterday, U.S. reported retail sales in March, rising 0.9% from the previous month. The figure was lower than market’s expectation despite a rebound for the first time after three months of steep declines. • S&P500’s gained slightly up 0.2% on the day supported by better than expected earnings announced from JPMorgan Chase and Johnson & Johnson, as the first quarter earnings season begins to unfold. Citi analysts’ view: • Market’s bottom-up consensus shows expectations of the first quarterly earnings decline in six years, with a 5-6% year-on-year drop (see Chart). • Meanwhile, Citi analysts’ forecast calls for a 1% year-on-year pick in first quarter earnings. • Sectors are expected to be weaker year-on-year growth across all sectors, with 4 out of 10 sectors (namely consumer staples, energy, materials and utilities) potentially seeing a decline. • Energy sector are expected to plunge 60% YoY accounting for the entire index’s profit decline. The trade weighted dollar is also up 10% YoY and is restraining quarterly results. • However, looking at short-term EPS revision momentum, REITs, Software & Services, Capital Goods and Household & Personal Products may be poised to bounce off of revision low. • Over the longer run, job growth and early signs of wage pickup should bolster the US and it seems likely that outlooks will improve in 3Q15 and 4Q15. More market volatility may remain before that. • Citi analysts remain constructive on U.S. equities and from a 6 to 12-months investment perspective, would prefer sectors including technology, banks, household products and retailing. © 2015 Citibank Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited 1 Please note and carefully read the Important Disclosure on the last page Daily FX & Market Commentary FX & Commodity Technical Corner YESTERDAY PERFORMANCE FX TREND TECHNICAL CCY USD EUR/USD USD/JPY GBP/USD USD/CAD AUD/USD NZD/USD USD/CHF USD/SGD GOLD Close Price Day High Day Low 98.73 1.0655 119.40 1.4782 1.2485 0.7626 0.7522 0.9723 1.3605 1192.76 99.70 1.0707 120.18 1.4802 1.2603 0.7649 0.7553 0.9795 1.3732 1201.65 98.37 1.0532 119.07 1.4604 1.2445 0.7555 0.7439 0.9673 1.3573 1184.03 Short Term Comment Bullish Bearish Neutral Bearish Neutral Bearish Neutral Neutral Neutral Neutral Support Resistance 95.52 1.0458 118.18 1.4231 1.2390 0.7533 0.7177 0.9486 1.3459 $1,131 101.79 1.1098 121.85 1.5000 1.2835 0.7914 0.7631 1.0129 1.3941 $1,255 Citi Foreign Exchange Forecast: 0-3 Months 99.82 1.06 122.00 1.49 1.30 0.73 0.70 1.02 1.42 1190 6-12 Months 111.14 0.93 130.00 1.37 1.35 0.70 0.66 1.18 1.45 1170 FX Rate Source: Bloomberg L.P. (cut off time is NY Time 5:00pm) • EUR rose on dollar’s retreat, as U.S. retail sales in Mar grew by 0.9%, weaker than 1.1% forecast, while NFIB small business sentiment falls to 9-month low at 95.2. • JPY rebounded: Koichi Hamada, an adviser to Abe on monetary policy, said a dollar level above ¥120 was excessively weak for the yen. • GBP rose, although U.K. Mar core CPI came in at 1.0%, weaker than 1.2% forecast. Daily FX Focus EUR/USD may trade inside 1.0458-1.1052: 1.1031-1.1052 (55MA & 26 Mar top) 1.0458 (Mar low) 1.0113 (bottom of downtrend channel) Source: Bloomberg L.P., data as of Apr 14, 2015 Technical Analysis: • The pair is inside the downtrend channel and capped below 55MA • EUR/USD may trade inside 1.0458-1.1052 with downside bias. Below 1.0458 may extend weakness to 1.0113 EUR Outlook: • The weak U.S. retail sales is due to smallerthan-expected rise in motor vehicle sales and a decline in gasoline station sales. • The details show the sectors hit by weather bounced back in Mar, such as furniture, restaurants etc. • These reversals confirm the weather depressed sales in winter and we anticipate further large gains in retail sales in coming months. • The rebound in U.S. economy may fuel expectation of rate hike by the Fed. Strong USD may weaken EUR. • The ECB announces rate decision today. • Despite the improving in Eurozone data, Citi analysts believe the outperformance of Germany and Europe may not sustain as Chinese trade data showed global trade remains depressed. • Therefore, we expect the ECB is unlikely to say anything about early tapering but talk about the problem it faces, eg Greece, weak global trade. NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD. © 2015 Citibank Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited 2 Please note and carefully read the Important Disclosure on the last page Daily FX & Market Commentary GBP/USD may trade inside 1.4566-1.4981: 1.4981-1.5070 (6 Apr top & 55MA) 1.4566 (13 Apr low) 1.4231 (May 2010 low) Source: Bloomberg L.P., data as of Apr 15, 2015 Technical Analysis: • 1) The pair recovered after a brief breach of 1.4635 support; 2) RSI: turning up from bottom • GBP/USD may trade inside 1.4566-1.4981 with mild downside bias. Below 1.4566 may extend weakness to 1.4231. GBP Outlook: • The weakness in core inflation is due to the decline in clothing prices. • We expect that YoY CPI inflation will turn marginally negative in Apr (-0.1% YoY). • We do not believe the UK is set for sustained deflation. Wages continue to rise, real incomes are buoyant, business surveys suggest that the economy continues to grow at a solid pace and the weakness in inflation is exaggerated by declines in prices for food, energy and imported items. • Nevertheless, with modest wage gains and weakness in external costs, the UK probably is set for a sustained period of “low-flation” – ie inflation that is above zero but below the 2% target — over the next few years. • The low inflation may reduce the need for the BoE to raise the rate, which may be negative for GBP. EUR/GBP may test lower to 0.7014: 0.7394 (fibo 0.382) 0.7014 (Mar low) Source: Bloomberg L.P., data as of Apr 15, 2015 EUR/GBP Outlook: • The EUR may underperform as the current ECB’s QE measures may not be big enough to turn the inflation up. • Citi analysts expect the ECB may add easing measures beyond Sep-16 when the current program finishes. • The GBP may outperform as the data (eq composite PMI in Mar rose from 56.7 to 58.8) shows U.K. economy remains robust, suggesting the BoE may keep its monetary policy unchanged until starting rate hike in 2016. • The divergent monetary policy stance will likely pressure EUR/GBP in medium term. Technical Analysis: • 1) The pair fell sharply after failure to penetrate resistance at 0.7394; 2) RSI; falling • The technical indicators suggest EUR/GBP may test lower to 0.7014, with resistance at 0.7394. NOTE: The brackets are the exchange rates in terms of Hong Kong dollar, with HKD $7.75 exchange rate for reference, and 1,000 yen per unit for JPY/HKD. © 2015 Citibank Citibank and Arc Design is a registered service mark of Citibank, N.A. or Citigroup Inc. Citibank (Hong Kong) Limited 3 Daily FX & Market Commentary Important Economic Data (Apr 13, 2015 – Apr 17, 2015) Time Importance Event Period Actual Survey Prior Monday 04/13/2015 CH !! Trade Balance Mar $3.08B $40.10B 04/13/2015 07:50 JN ! Machine Orders YoY Feb 5.90% 04/14/2015 09:30 AU ! NAB Business Confidence Mar -3 -- 0 04/14/2015 16:30 UK !! CPI YoY Mar 0.00% 0.00% 0.00% 04/14/2015 20:30 US !! Retail Sales Advance MoM Mar 0.90% 1.00% -0.50% 4.30% $60.62B 1.90% Tuesday Wednesday 04/15/2015 10:00 CH !! Industrial Production YoY Mar -- 7.00% -- 04/15/2015 10:00 CH !!! GDP YoY 1Q -- 7.00% 7.30% 04/15/2015 17:00 EC !! Trade Balance SA Feb -- -- 21.6B 04/15/2015 19:45 EC !! ECB Main Refinancing Rate Apr -- 0.05% 0.05% 04/15/2015 21:15 US !! Industrial Production MoM Mar -- -0.30% 0.10% 04/15/2015 22:00 CA !!! Bank of Canada Rate Decision Apr -- 0.75% 0.75% 04/16/2015 09:00 NZ ! ANZ Consumer Confidence Index Apr -- -- 124.6 04/16/2015 09:30 AU !!! Employment Change Mar -- 15.0K 15.6K 04/16/2015 09:30 AU !!! Unemployment Rate Mar -- 6.30% 6.30% 04/16/2015 20:30 US ! Building Permits Mar -- 1080K 1092K 04/17/2015 16:00 EC ! ECB Current Account SA Feb -- -- 29.4B 1.80% Thursday Friday 04/17/2015 16:30 UK !!! Average Weekly Earnings 3M/YoY Feb -- 1.70% 04/17/2015 16:30 UK !!! ILO Unemployment Rate 3Mths Feb -- 5.60% 5.70% 04/17/2015 17:00 EC !! CPI YoY Mar -- -0.10% -0.10% 04/17/2015 20:30 CA !! CPI YoY Mar -- 1.00% 1.00% 04/17/2015 20:30 CA ! Retail Sales MoM Feb -- -- -1.70% 04/17/2015 20:30 US !! CPI YoY Mar -- 0.10% 0.00% 04/17/2015 22:00 US !! U. of Mich. Sentiment Apr -- 93.7 93 For any enquiries, please call (852) 2860-0333. Source: Source: Bloomberg L.P. (K = Thousand, M = Million, B = Billion) This document is based on information provided by Citigroup Investment Research, Citigroup Global Markets, and Citigroup Global Wealth Management. It is provided for your information only. It is not intended as an offer or solicitation for the purchase or sale of any security. Information in this document has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on the information, consider its appropriateness, having regard to their objectives, financial situation and needs. Any decision to purchase securities mentioned herein should be made based on a review of your particular circumstances with your financial adviser. Investments referred to in this document are not recommendations of Citibank (Hong Kong) Limited (“Citibank”) or its affiliates. Although information has been obtained from and is based upon sources that Citibank believes to be reliable, Citi analysts do not guarantee its accuracy and it may be incomplete and condensed. All opinions, projections and estimates constitute the judgment of the author as of the date of publication and are subject to change without notice. Prices and availability of financial instruments also are subject to change without notice. Past performance is no guarantee of future results. The document is not to be construed as a solicitation or recommendation of investment advice. Subject to the nature and contents of the document, the investments described herein are subject to fluctuations in price and/or value and investors may get back less than originally invested. Certain high-volatility investments can be subject to sudden and large falls in value that could equal the amount invested. Certain investments contained in the document may have tax implications for private customers whereby levels and basis of taxation may be subject to change. Citibank does not provide tax advice and investors should seek advice from a tax adviser. Investment products: (i) are not insured by the Federal Deposit Insurance Corporation; (ii) are not deposits or other obligations of any insured depository institution (including Citibank); and (iii) are subject to investment risks, including the possible loss of the principal amount invested. Citi Foreign Exchange: Forecasts are a joint venture between Citi’s foreign exchange, global macro and technical strategy groups and our developed and emerging markets economists. Under normal circumstances, we expect to present Forecasts on a monthly schedule although we may offer intra month updates if circumstances dictate. Technical Trend: All views, opinions and estimates derived from CitiFX Technicals (i) may change without notice and (ii) may differ from those views;, opinions and estimates held or expressed by Citi or other Citi personnel, including Citi Foreign Exchange: Forecast. Should CitiFX Technicals not cover any major currency pairs, the indication of short-term technical "bullish", "bearish", or "neutral" trends will be based on the result of analysis with various widely known short-term technical analysis tools, namely RSI, MACD, fibonacci, stochastics, bollinger bands, and simple moving averages. 4
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