Morning Update – 03/04/2017 – by Arjun Lakhanpal

Morning all.. Wall St closed lower on Friday with the S&P down 0.23% in a rather quiet session for stocks but the dollar and bonds were reacting to a slightly more dovish Dudley from the Fed. However Asian markets have turned back up after a soft start with the Nikkei finishing up 0.67% but this not having much impact on USDJPY which remains close to Friday’s lows but off the session lows of 111.12. BoJ March Tankan survey: Big Manufacturing Index +12 vs +14 cons; see USDJPY avg 108.43 for FY17/18. Japan March final Mfg PMI: 52.4 vs 52.6 flash (Feb final 53.3); growth in new export orders slowed and output fell slightly. US yields are back above 2.4% and helping take USDJPY back to 111.50. Pres Trump (FT): will discuss N. Korea threat with China President Xi this week; if China is not going to solve N. Korea then we will, that is all I am telling you; Brexit would be a great deal for UK he said. Executive orders on trade will trigger revival in American manufacturing; will investigate all trade abuses; vows level playing field for US workers; won’t take long to turn around trade. This is seen as a big meeting for the US and neither can afford a breakdown in discussions. Any threat of trade wars will see asset markets take a hit. Elsewhere AUD the main mover in G10 FX, down ~35bps compared to end of last week’s close. Australian tier 1 data in retail figures came in unexpectedly negative, with a -0.1% slide against expected 0.3% rise. Over the weekend, China March Caixin manufacturing PMI missed expectations at 51.2 vs 51.7 expected which also weighed on AUD sentiment. Caixin economists noted continued downward trend in employment, weakest new export sales this year, and further slowdown in the rate of input price inflation, even though the overall figure was in expansion territory for the 9th straight month. This morning we get Manufacturing PMI data across Europe and the UK.. Good luck…