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The G20 Conference in London stole the Press Inches …..

…. but it was the yesterday’s economic and trading data plus financial announcements that provided the market with more interest.

Let us start with the Australian Trade numbers for February reported earlier today. As expected, the surplus rose sharply to report a surplus of A$ 2.1 billion as exports rose following a recovery in agriculture plus the anticipated increase in Chinese buying of relatively cheap hard commodities. The currency remains firm with attention turning to the May budget with hopes of additional stimulus measures being revealed. As a bell-weather for global activity, the Aussie economy is as good as any to watch.

From the US we had several very interesting pieces of news - both good and not so good, but Wall Street ended focusing on the positive and the DJIA closed on an up note, +2.01% higher. On the positive, we had auto sales better than anticipated, probably supported by heavy discounting but good news nonetheless with numbers at both GM and Chrysler less negative than had been feared. We also had some positive news on the economic data front including a strong bounce in the ISM survey, although the ADP jobs number did come in marginally worse than had been predicted yesterday. An indication of how slow the recovery of the US economy is going to be is the massive stock building of petroleum products as reported in yesterday Oil Inventory Data Release. The number is running at 4 times the 5-year average and indicates that OPECs best efforts to stabilise their market are not working.

More important for markets was an announcement from the US that the Fed would be buying Treasuries today and that the Treasury would not be issuing. This should leave longer term yields lower as QE begins to leave its mark but effects on currencies are more difficult to call. With the ECB meeting scheduled for later today, this might very well leave Sterling as the Buyer’s choice (for today anyway) but the European Central Bank have been known to scupper the best laid plans before…..

Today, the main event will be the ECB meeting and the conference that follows. It is almost unanimous that rates will be cut by 50 basis points but the jury is still out as to what the press conference will contain. The favoured view is that the ECB will give details of a Corporate Bond buying programme which would get its QE measures on the way. As mentioned above though, the ECB rarely miss the chance to disappoint and therefore a less market-friendly outcome is still a distinct possibility. The unknown is not a favoured position for market players hence the current Euro weakness on the exchange markets.

From the UK, other than anything from G20, the interest will surround the DMO’s (attempted) auction of £2.25 billion of 30-year gilts. This, remember, is outside of the BoE Reverse Auction buying range as was the 40-year auction that the DMO failed to fully get away last week. Will they have learnt from the previous failed attempt? We will be told later…. Earlier this morning, the Nationwide revealed that house prices in March rose by 0.90% month-on-month versus a 1.90% fall in February, this, the first rise in the index since October 2007. A turning point or aberration?

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