Mid-Day Report: Chinese Data Weigh on Sentiments, Gold Free Fall Continues, Euro Steady

Weak Chinese growth data was the main theme today which drove stock markets generally lower. US futures also point to lower opening after as Empire state manufacturing index dropped much more than expected to 3.1 in April. The biggest movers today were found in commodities where gold dropped over -5.5% at the time of writing and breached 1400 handle to as low as 1385. Silver was even worse by failing over -8.2% and even breached 23. Crude oil isn't much better as it broke 90 handle. In the currency markets, Aussie and Kiwi were hardest hit on risk aversion as well as free-falling commodity prices. Yen extended rebound from last week's short term bottom. European majors continue to be relatively steady against the greenback.

China's GDP grew 7.7% yoy in 1Q13, down from 7.9% a quarter ago. Growth was 1.6% qoq in the first quarter, down from 2% qoq in 4Q12. That was way worse than expectation of 8.0% annualized growth. Industrial production rose 8.9% yoy, compared with the 9.9% yoy gain combined in the first 2 months. Fixed asset investment excluding rural households soared 20.9% yoy in 1Q13, following a 21.2% yoy gain in the first 2 months. Retail sales rose 12.6% yoy in March. Aussie and Kiwi were hit hard on risk aversion while yen extended it's broad based rebound. European majors, though, were generally steady against dollar.

In Europe, Greece has reached a staff-level agreement with troika on "economic and financial policies" to ensure the program remains on track and cleared a hurdle for the next tranche of bailout loan of EUR 2.8b as well as May's EUR 6b installment. Prime Minister Antonis Samaras said that the program included dismissing as many as 15000 public sector staff by the end of 2014. 4000 posts would then be replaced by younger workers. Finance minister Stournaras said that Greece would target to achieve a primary budget surplus this year and troika has promised to considering granting more assistance should Greece be able to achieve this target. In Cyprus, the domestic bank transfer limit was raised over the weekend. Individual could transfer EUR 3000 a month, up from EUR 2000. Business can transfer EUR 50000, up from 10000. Other limits remain in place.

The World Bank stated in a report that Asian countries should consider lifting monetary easing so as to avoid asset bubbles and inflation. The world lender said that "near-zero interest rates and new and protracted rounds of quantitative easing in the United States, European Union, and Japan are inducing large capital inflows into emerging markets including in East Asia... The risk of an asset boom in the markets, in which global liquidity spills over is emerging, with asset valuations moving ahead of fundamentals and possibly a correction down the road". Last week, IMF director Lagarde stated that Asian central banks should "think about the timing and pace of withdrawing monetary support".

Latest CFTC data showed deterioration in GBP and CAD position again on April 9 comparing to the prior week. But positioning were relatively steady elsewhere. Euro net shorts dropped back from -65.7k to -50.9k. Yen position was relatively steady with -77.7k net shorts. Sterling net shorts rose again to -70k, comparing with prior week's -65k. Sterling positions had deteriorated since late December with just two weeks of recovery in between. Canadian dollar net shorts rose to -71.1k, from -64.5k. CAD's position has been persistently deteriorating since last September. Australian dollar net longs dropped slightly from 84.0k to 77.9k.

IMOH, Clement I.
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