Beige book shows US still on track while Asia moves higher

Good Morning,

It seems some of you have not been receiving this report this week. My apologies, all should now be resolved.

Shares in Asian pushed back to highs not seen since 2008 during last night’s session as markets managed to post strong gains despite a week of mixed numbers out of China. The MCSI index, which is a benchmark index for Asian stock markets has recovered from a poor performance at the start of the year and back end of 2014 to trade at multi year highs, despite a week of mixed data out of the region. Today session although somewhat mixed again in Asia has managed to a positive one overall with only the Nikkei holding back on gains.

A lot of the positivity stems from yesterday’s beige book out of the US that showed, despite fears over the harsh weather seen in the US, growth in February and March remained on track. There had been fears going into the beige book number that we would see signs that the poor weather that has hampered a lot of economic data at the start of the year in the US was actually the start of an extended period of slowdown for the US economy. With most traders and markets still desperate for any news from central banks, an extended slowdown in the US would leave many looking at a push back in the timing of the US rate hike from June or September to Q1 2016. However the beige book report showed that there is still strength in the US economy in the last couple of months, and this has mainly been driven by the lower oil price. One area that has seen pretty solid gains as been the retail sales, and this is despite a moderate miss in the number earlier this week. Citing consumer savings on lower energy prices the beige book reported in February and March most areas had seen a boost in consumer based transactions.

The report last night saw the major US indices hold on to gains from the session and post strong number at the close. Today’s session is yet again another one with a lot of economic data due out for release, as well as the continued corporate readings, as earnings season continues drive on. Later this afternoon housing starts, building permits and the weekly initial jobless figures will be the main headlines in the US as well as a bit more Fed speak. This afternoon Fischer, Lockhart, Mester and Rosenberg all speak, and after yesterday’s beige book showed the slowdown at the start of the year wasn't as bad as expected all eyes will be on a hint as to when we see the rate hike. This is still a tough one for me, although I remain in the Q1 2016 camp for now, with the only reason I see for Janet Yellen to move rates sooner rather than later being the reliance on the major markets and the potential market impact of leaving them low for too long.

At the close in Europe yesterday the FTSE had yet again set a new closing high as optimism over more stimulus in China boosted sentiment. Retailers and mining stocks gave the benchmark index a boost, and the fact that we got no surprises from the ECB also left markets feeling a little better. As expected the ECB press conference was a non event, despite Mario Draghi almost being confettied to death. With the stimulus program only in its infancy we have to expect to give this time to bare fruits and until it does we can expect Mario Draghi at his press conferences to continue to reiterate the job he expects the asset purchasing program to do, rather than start to measure its effectiveness.

Ahead of the open we expect to see the FTSE100 open higher by 5 points with the German DAX higher by 4 points.