European Closing Report
Following on from yesterday’s ECB sources report, a number of ECB officials advocated the end of the asset purchase program by the end of the year. Eur/Usd rose to just shy of $1.18 although a downturn in the US Dollar may have been more to blame despite some solid macro releases – unit labor costs were a touch stronger at +2.9% (f/c. +2.8%) while the trade deficit narrowed more than expected to -$46.20 Bln (-$49.0 Bln) from -$47.20 Bln.
The Atlanta Fed did later cut their GDP tracker to +4.5% from +4.8% for Q2. Canadian releases were on the soft side meanwhile with building permits and IVEY PMI both falling short of expectations. The Canadian Dollar also lost ground on reports the Trump administration could impose penalties on Canada yet it remains one of the better performing G10’s for the day.
Elsewhere, oil prices nosedived after the DoE inventory report showed a surprise build of +2.1 Mln (f/c. -2.0 Mln). Still to come today, possible comments from the BoE’s McCafferty at 17:00 BST.
* US Trade Balance (Apr) -$46.20 Bln versus -$49.0 Bln expected, previous -$49.0 Bln revised to -$47.20 Bln
* US Unit Labor Costs (Q1 F) +2.9% versus +2.8% expected, previous +2.9%
* US Non-Farm Productivity (Q1 F) +0.4% versus +0.6% expected, previous +0.7%
* Canadian Trade Balance (Apr) -C$1.90 Bln versus -C$3.40 Bln expected, previous -C$4.14 Bln revised to -C$3.93 Bln
* Canadian Building Permits M/M (Apr) +2.9% versus +2.7% expected, previous +2.7%
* RIA: Russia and the US are to seek opportunities for talks between Lavrov and Pompeo.
* Canadian Ivey PMI SA (May) 62.5 versus 69.7 expected, previous 71.5
* US House Speaker Ryan said he thinks they are pretty far into the deadline to renegotiate NAFTA this congress.
* Trump plans confrontational approach with world leaders at economic summit (Washington Post):
– President Trump plans to confront other world leaders at a summit in Quebec on Friday over what he believes is a global economic system tilted against the United States, several people briefed on the plan said, escalating tensions with U.S. allies who have expressed outrage at his pivot toward protectionism.
– In a sign Trump is looking to stoke divisions, White House officials are discussing ways to impose additional economic penalties against Canada
* US DoE Crude Inventories +2.1 Mln versus -2.0 Mln expected, previous -3.6 Mln
* Atlanta Fed GDPNow (Q2) cut to +4.5% from +4.8%
* David Davis revolts over Irish border plan (FT):
– Theresa May is engaged in a serious row with David Davis, Brexit secretary, over claims that she wants to tie Britain to the EU customs union indefinitely as part of a “backstop” plan on the Irish border.
* BoE’s McCafferty said low rates are likely to be around for a significant period of time while there is plenty of room for more QE in the event of a downturn. He did add that inflation pressures building up.
This was enough to produce a second consecutive record close for the NASDAQ while outperformance in the DJIA has been led by financials. US government bond yields have also risen with the 10-year up 5 basis points to 2.98%.
The same cannot be said for the Greenback however with the Dollar Index still languishing in negative territory for the day. Elsewhere in FX, the Canadian Dollar has given back earlier gains after White House Economic Advisor Kudlow said reports that Treasury Secretary Mnuchin asked for Canada to be exempt from tariffs are false.
The Euro remains the outperformer meanwhile, boosted by hawkish central bank impulses. Elsewhere, oil prices held higher with US crude futures settling at $64.73 (-$0.79) after a the DoE reported a surprise inventory build.
* Canadian PM Trudeau rejected the idea of NAFTA negotiations on a bilateral basis, adding that trilateral negotiations are better. He also said he expects difficult conversations with Trump at the G7.
* Canadian Foreign Minister Freeland said Canada has had no formal or informal notification of any additional US tariffs.
* White House Economic Advisor Kudlow said reports that Treasury Secretary Mnuchin asked for Canada to be exempt from tariffs are false. He also said no decisions had been made on ZTE.
* US President trump said from an economic standpoint, the US is the strongest it has ever been.
* US crude futures settled at $64.73 (-$0.79)
* Iraqi Oil Minister said the market is stable and prices are good, adding that there is no need for a production increases.
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