Once again, the US$ is mixed and stocks have squeezed higher after the US retail sales unexpectedly fell in April (-0.2% vs +0.2% expected), further pointing to a slowdown in economic growth after a temporary boost from exports and inventories in Q1, and suggesting that the Fed are unlikely to change Monetary Policy any time soon. The monthly Capacity Utilisation and Industrial Production also missed their own expectations and did nothing to help the dollar, while earlier in the day the Chinese data had given a hint of a general slowing of the global economy. This gives possible credence another round of easing from the global central banks, underlined today by a sharp fall in US yields, with the US10Y now down at 2.37%, while German 10 Y yields are at -0.10%. Pointing in the same direction, the Atlanta Fed put out a dovish outlook, indicating that it sees Q2 growth at 1.1%, down from its previous report of 1.6%.
The Euro was also heavy for much of the session but recovered to end the day unchanged against the dollar after Trump’s conciliatary report on car tariffs. Earlier the Euro was under pressure due to the growing concerns over Italy’s budget, after the Italian Deputy Prime Minister said on Monday that he is prepared to let budget deficit rise above EU limits if it means a boost to Italian jobs.
While the FX markets have generally been choppy, Sterling was the big loser on Wednesday, in heading sharply lower on growing expectations that UK PM Theresa May will again fail to get her Brexit deal approved and could soon face a leadership challenge. Also not helping Sterling was some weak wages data, showing that wages have slowed to 3.2% in Q1 2019, lower than predictions of 3.4%, and down from the Q4 2018 reading of 3.5%.
The US stock Indices were underpinned after Donald Trump reportedly indicated that he will delay imposing tariffs on imported cars and parts for 6 months in order to avert a global trade war although the picture remains clouded, with conflicting headlines to see ongoing choppy conditions.
In other markets, Gold is a little lower and remains capped at 1300, while WTI is up by around 0.5%.
Looking ahead, Thursday will kick off with the Australian Unemployment (exp 5.1%, +14K, PR; 65.7%), China House Price Index, and a speech from the RBAs Bullock. The EU is pretty much empty (EU Trade Balance), while the US has the April Housing Starts/Building Permits (exp +7.0%mm/+0.5%mm), Philadelphia Fed Mfg Survey (exp 10.0) and the weekly Jobless Claims. There is also a EuroGroup meeting which may create some headlines. Other Central bank speakers will include Praet, De Guindos, Coeure (ECB), Weidmann (Buba), Haskell (BOE), Brainard (Fed) and Poloz (BOC). Have a good day.
Economic data highlights will include:
Thur: Eurogroup Meeting, China House Price Index, Australian Unemployment, RBAs Bullock Speech, US Housing Starts, Building Permits, Philadelphia Fed Mfg Survey, Jobless Claims BOE Haskell Speech
Market moves, in brief:
FX: DXY 97.57 (+0.06%)
Bonds: US10Y; 2.378% (-1.48%), German 10Y; -0.098% (-40%), UK 10Y; 1.067% (-3.06%), Australian 10Y; 1.704% (-0.47%), NZ 10Y; 1.81% (+1.12 %), China 10Y; 3.295% (-0.17%)
Stock Indices: DJI; +0.45%, S+P; +0.58%, NASDAQ; +1.13%, EUStoxx50; +0.64%, FTSE100; +0.75%, Shanghai Composite; +1.91%,
Metals: Gold $1296 oz (-0.05%), Silver $14.79 oz (+0.01%), Copper $2.747 lb (+0.85%), Iron Ore $94.92 per tonne (NYMEX) (+1.0%),
Oil: WTI $ 62.13 pb (+1.35%)
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