In the bond markets, US yields have retreated after some mixed macro releases – ISM non-manufacturing, unit labour costs and non-farm productivity all fell short of expectations while jobless claims and factory orders beat. Euro Zone yields also declined after Euro Zone CPI came in below forecasts with the core rate dropping to +0.7% (f/c. +0.9%) from +1.0%. UK yields were weighed by a soft service PMI print.
* Norges Bank left their benchmark rate on hold at 0.50% as expected:
– The Executive Board’s assessment of the outlook and balance of risks suggested that the key policy rate would most likely be raised after summer 2018.
– The Executive Board’s assessment is that the upturn in the Norwegian economy appears to be continuing broadly in line with the picture presented in the March Report. Underlying inflation is below the inflation target, but the driving forces indicate that it will rise.
– “The outlook and the balance of risks do not appear to have changed substantially since the March Report. This suggests keeping the key policy rate unchanged at this meeting”, says Governor Øystein Olsen.
* Riksbank’s Skingsley said the rate path is a forecast and not a promise, adding that they are not at the point where hikes can begin
* Riksbank’s Jansson said there is a limit for how expansionary policy can be, but they have not reached that point yet.
* UK Service PMI (Apr) 52.8 versus 53.5 expected, previous 51.7
– New orders increase at accelerated and sharp pace
– Upturn in business activity quickens
– Business confidence highest since May 2015
* Euro Zone CPI Data (Apr A):
– CPI Y/Y +1.2% versus +1.3% expected, previous +1.3%
– Core CPI Y/Y +0.7% versus +0.9% expected, previous +1.0%
* Euro Zone PPI Data (Apr):
– PPI M/M +0.1% versus +0.1% expected, previous +0.1%
– PPI Y/Y +2.1% versus +2.1% expected, previous +1.6%
* Italian President Mattaerlla has called for a new round of consultations over the formation of a possible government on May 7th.
* ECB Chief Economist Praet said data points to a moderation of the Euro Zone economy. He added that an ample degree of accommodation remains necessary and called for patience, prudence and persistence.
* Iranian Foreign Minister Zarif said Iran will not renegotiate or accept a ratification of the nuclear deal.
* US Initial Jobless Claims (Apr 30) +211K versus +225K expected, previous +209K
– Continuing Claims 1.756 Mln versus 1.838 Mln expected, previous 1.837 Mln revised to 1.833 Mln
* US Trade Balance (Mar) -$49.00 Bln versus -$50.00 Bln expected, previous -$57.60 Bln revised to -$57.70 Bln
* US Non-Farm Productivity Q/Q (Q1) +0.7% versus +0.9% expected, previous +2.7% revised to +0.3%
– Unit Labor Costs Q/Q +2.7% versus +3.1% expected, previous +2.5% revised to +2.1%
* Canadian Trade Balance (Mar) -C$4.14 Bln versus -C$2.30 Bln expected, previous -C$2.69 Bln revised to -C$2.93 Bln
* US Service PMI (Apr F) 54.6 versus 54.4 flash/expected
* US ISM Non-Manufacturing (Apr) 56.8 versus 58.1 expected, previous 58.8
* US Factory Orders M/M (Mar) +1.6% versus +1.3% expected, previous +1.2% revised to +1.6%
* U.S. and China Dive In for Prolonged Trade Talks (WSJ):
– Trade negotiators from the U.S. and China are digging in for the first round of what they expect to be recurring, difficult talks that don’t produce an immediate settlement.
US Closing Report
AIG, Tesla and Cardinal Health are all posting heavy declines after their respective corporate updates while Boeing and Microsoft are leading the Dow. Investors also have one eye on the US-China trade meetings that begun today and a White House official said talks so far have been pretty positive.
Elsewhere, US yields have edged lower as market commentators continue to debate how to interpret yesterday’s FOMC statement.
The Japanese Yen has been the outperform meanwhile, boosted by safe-haven demand which has also lifted gold prices. In energy space, US crude futures settled at $68.43 (+$0.50).
* Atlanta Fed GDPNow revised to +4.0% from +4.1%
* White House Economist said the first day of trade talks with China was pretty positive. He also said he was optimistic if a tentative NAFTA deal before June.
* Feds tapped Trump lawyer Michael Cohen’s phones (NBC):
– Federal investigators have wiretapped the phone lines of Michael Cohen, the longtime personal lawyer for President Donald Trump who is under investigation for a payment he made to an adult film star who alleged she had an affair with Trump, according to two people with knowledge of the legal proceedings involving Cohen.
* Trump set to scale back spending cut plan to $11B (POLITICO):
– The White House will formally ask Congress on Monday to slash $11 billion from old spending accounts, according to two Republican aides on Capitol Hill familiar with the plan.
* US crude futures settled at $68.43 (+$0.50)
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