Rise and shine everyone
Not a lot of great news coming out of Europe today. The decline in German Retail Sales accelerated; Eurozone Headline Inflation came in higher; Eurozone manufacturing PMI fell to a 35-month low. All this data comes before the ECB rate decision on Thursday and may weigh on the decision.
The US Markets shrugged off the news of a major bank rescue to close almost flat yesterday. S&P futures down 0.1% in Tuesday morning trading after US equities finished slightly lower in a fairly uneventful Monday session in which stocks failed to sustain some early upside. Treasuries firmer with curve flattening following a big backup in yields on Monday. Dollar little changed on the major crosses. Aussie strength the big story in FX. Gold off 0.1%. Bitcoin futures down 3.7%. WTI crude down 0.2%.
Asia and Australia
Asian markets finished mostly higher Tuesday in cautious trade ahead of the Fed decision on Wednesday.
RBA unexpectedly raised cash rate by by 25 bp to 3.85%. Decision came as a big surprise given very low probability of a rate hike so soon after April's pause. This just goes to show that nothing is ever a given. Australian inflation, particularly services, reaccelerated and a rate hike had to be done, even after a pause.
South Korea inflation eases, manufacturing PMI posts longest contraction in six years. Headline CPI rose 3.7% y/y in April, matching expectations, following 4.2% in the previous month. Given the challenging situation with production, it may not be surprising if the government decides to ease a little.
Weak yen pushes Japan inflation expectations to four-month high. This is something the government wants to see but, the sustainability of this inflation is what will be a focus.
Europe, Middle East, Africa
European markets softer following the Asian markets and the weaker economic data.
Eurozone inflation update for April was mixed. Headline rate firmer at 7.0% y/y versus consensus 6.9% and prior 6.9%, but core eased at 5.6% versus 5.6% forecast and prior 5.7% reading.
April Eurozone manufacturing PMI in at 35-month low of 45.8 vs preliminary 45.5 and prior month reading of 47.3.
The ECB quarterly bank lending survey saw notable tightening in credit standards in April. Credit conditions in Q1 saw further substantial tightening in Q1 and stronger than banks expected in prior survey.
The British Retail Consortium's (BRC) monthly shop price data showed an easing in price rises to 8.8% from prior 8.9%. It’s a slight decline but good news for inflation overall.
The Americas
Treasury Secretary Yellen says the US could run out of cash by June 1.
Morgan Stanley to cut 3K jobs this quarter
Diesel demand declines and the drop in energy prices are kindling fears of a recession in the US.
The FDIC is discussing an increase to the $250,000 cap on deposit insurance. “Though 99 per cent of US accounts are fully covered by deposit insurance, uninsured domestic deposits at FDIC-covered institutions increased by nearly 10 per cent a year between 2009 and last year, from $2.3tn to $7.7tn.”
Calendars
(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)
