European cash equity markets have begun the week on a firm footing with broad gains at the closing bell (DAX +1.0%, CAC +0.2%, FTSEMIB +0.8%). We saw gains on Wall Street evaporate in the latter stages of today’s session (DJIA +0.4%, S&P +0.3%, NASDAQ +0.8%).

European Closing Report

Energy stocks have outperformed, boosted by further gains in oil prices with US crude futures adding around 1.5% at the highs. The French CAC 40 has lagged slightly amid heavy losses for Air France while UK markets remain closed for a bank holiday. 

We also saw a positive open on Wall Street with energy stocks again leading the broader market higher. We have seen some divergence in the bond market with US yields edging higher but German borrowing costs offside after some soft data releases earlier today including German factory orders, Euro Zone retail PMI and Sentix investor confidence. 

The data has also knocked the Euro in currency space while the Swiss Franc was hit by soft CPI data. The Dollar has risen against most of its G10 rivals meanwhile although has struggled against the pound with M&A news (Shire/Takeda) being cited. 

In recent trade, we heard from Atlanta Fed President Bostic repeated his view for two more rate increases this year. He also said he is comfortable with some degree of two-percent inflation overshoot. 

We do expect further Fed speak later today with Barkin, Evans and Kaplan all due to speak before the US close and US consumer credit data also due.

Key Headlines/Data:

* German Factory Orders Data (Mar):
– Factory Orders M/M -0.9% versus +0.5% expected, previous +0.3% revised to -0.2%
– Factory Orders Y/Y +3.1% versus +5.0% expected, previous +3.5%

* Swiss CPI Data (Apr):
– CPI M/M +0.2% versus +0.3% expected, previous +0.4%
– CPI Y/Y +0.8% versus +0.9% expected, previous +0.8%

* German Construction PMI (Apr) 50.9, previous 47.0

* Euro Zone Retail PMI (Apr) 48.6, previous 50.1

* Euro Zone Sentix Investor Confidence (May) 19.2 versus 21.2 expected, previous 19.6

* Italian Five Star Movement leader Di Maio said his party are now willing to vote for any technocratic government, adding that an early vote is the only alternative if a government cannot be formed. It was later reported that Di Maio agreed with League’s Salvini agree election should be held in July if there is not agreement on forming a government.

* Italian official said a vote in July in likely if the parliament fails to elect a new premier.

* Riskbank’s Jochnick said they are nearing the time when they can start rate hikes again, at the end of the year.

* Bank of Canada Deputy Governor Lane said growing economies will face the challenge of changing that stimulus without causing disruption.

* US Employment Trends Index (Apr) 108.1, previous 107.7 revised to 107.4

* Atlanta Fed President Bostic repeated his view for two more rate increases this year. He also said he is comfortable with some degree of two-percent inflation overshoot.
































































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US Closing Report

Energy stocks had led the broader market for most of the session but turned lower as oil prices did the same post-settlement after US President Trump confirmed he will be announcing his decision on the Iranian nuclear deal tomorrow. 

Elsewhere, US yields have turned higher, albeit slightly, as equities and oil declined. Comments from the FOMC provided no real surprises meanwhile with Richmond Fed President Barkin noting that he does not see outsized wage pressures while the US economy is on a good growth trajectory. 

Chicago’s Evans added that structural changes may create inflation headwinds. Switching to the ECB, Chief Economist Praet played down the drop in core inflation as a temporary due to a decrease in services inflation. 

Jan Smets meanwhile said the ECB are likely to move over the summer to gradually phase out its bond-buying program. 

On the data front, US consumer credit was lower-than-expected in March at $11.62 Bln (f/c. $16.20 Bln)

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Key Headlines/Data:

* ECB Chief Economist Praet played down the drop in core inflation as a temporary due to a decrease in services inflation. He also said that an ample degree of monetary accommodation remains necessary.

* Jan Smets Says ECB Could Take Steps to Phase Out QE This Summer (WSJ):
– The European Central Bank is likely to move over the summer to gradually phase out its bond-buying program, perhaps announcing a decision after its July 26 policy meeting, a top ECB official said.

* The ECB have pledged to make up in the coming months for the undersized purchases of German government bonds.

* Italian President Mattarella said meetings today showed there was no chance to form a government, adding that a minority government will lead to new elections. He said if the parties would not support a neutral government, new elections will be called in July or the autumn.

* Richmond Fed President Barkin said he does not see outsized wage pressures while the US economy is on a good growth trajectory. He also said inflation was essentially at the two-percent target.

* Chicago Fed President Evans said structural changes may create inflation headwinds.

* @realDonaldTrump – I will be announcing my decision on the Iran Deal tomorrow from the White House at 2:00pm.

* OPEC Secretary General Barkindo called for continued joint work to preserve gains.

* White House Press Secretary Sanders said the Chinese Premier is visiting Wahsington next week.

* US Consumer Credit (Mar) $11.62 Bln versus $16.20 Bln expected, previous $10.60 Bln revised to $13.64 Bln

* US crude futures settled at $70.73 (+$1.01)











































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