The Dollar has held on to its earlier gains meanwhile as US government bond yields continue their run higher – US 10 year borrowing costs rose above 2.95% this afternoon, their highest level since January 2014. At the Fed, both Chicago President Evans and San Francisco President Williams played down concerns surrounding the yield curve while Kashkari later said he was surprised Treasury yields have not gone higher.
In commodity space, US crude futures settled at $68.38 (+$0.09) as the Baker Hughes oil rig count rose another 5 to 820. There was also another ECB sources story, this time suggesting that the recent weakening in Euro Zone data will not impact their plans to normalize policy.
* New York Fed GDPNowcast revised higher for Q1 to +2.9% from +2.8%, and Q2 to +3.0% from +2.8%
* Chicago Fed President Evans said he is not that concerned about the flattening yield curve, adding that it will steepen as more debt is issued. He also said if inflation were to rise faster-than-expected, this would be a sign of a stronger economy that can withstand more rate increases.
* San Francisco Fed President Williams said they will continue gradual rate increases over the next couple of years amid stronger growth. He played down concerns regarding the yield curve, noting that long term rates should move up as they trim the balance sheet.
* Weak euro zone data will not slow ECB normalization: sources (Reuters):
– A recent string of sluggish euro zone data is not signalling a fundamental break in the bloc’s growth path and is not expected to impact the European Central Bank’s plans to normalize policy, three sources with direct knowledge of the bank’s thinking said.
* Baker Hughes:
– US oil rigs rise by 5 to 820
– Gas rigs unchanged at 192
* Canadian Foreign Minister Freeland said they are in a more intense period of NAFTA negotiations.
* OPEC Secretary General Barkindo said OPEC do not have a price objective, adding that their objective is restoring stability on a sustainable basis.
* Fed Governor Brainard said the outlook is consistent with further gradual rate increases. She said the economy outlook is solid while inflation is moving more in line with expectations and the labor market has moved towards full employment.
* Minneapolis Fed President Kashkati said he is surprised Treasury yields have not gone higher.
* US crude futures settled at $68.38 (+$0.09) | Brent crude futures settled at $74.06 (+$0.28)
European Closing Report
UK stocks have risen meanwhile, boosted by a weaker pound after dovish remarks from Bank of England Governor Mark Carney yesterday dampened expectations for a May rate increase.
His comments have also kept UK yields on the back foot as German and US government borrowing costs rose – the US 10 year yield touched 2.94% this afternoon, the highest since March 21st. Elsewhere in the US, Wall Street saw a lower open and has extended declines in recent trade with Apple leading the underperformance in the technology sector.
In currency space, the Dollar Index has risen to new highs as it gains against all of its G10 rivals while the Canadian Dollar is among the weakest after soft CPI and mixed retail sales data.
Euro Zone consumer confidence also rose to 0.4 (f/c. -0.2) from 0.1. Late in the session we heard from ECB President Mario Draghi who said remaining uncertainties still warrant patience, persistence and prudence with regard to monetary policy. In energy space, oil prices have dropped after US President Trump said oil prices are artificially very high and will not be accepted. Still to come today, the Baker Hughes rig count at 18:00 BST.
* US Corporate News:
– General Electric (+3.5%): Q1 EPS $0.16 versus $0.12 expected | Revenue $28.7 Bln versus $27.5 Bln expected | Sees FY EPS $1.00-1.07 versus $0.96 expected
– Honeywell (+0.6%): Q1 EPS $1.95 versus $1.91 expected | Revenue $10.39 versus $10.03 Bln expected | Sees FY EPS $7.85-8.05 versus $7.98 expected
– Schlumberger (-1.3%): Q1 EPS $0.38 versus $0.37 expected | Revenue $7.8 Bln versus $7.8 Bln expected
* @realDonaldTrump – Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!
* Saudi Energy Minister al-Falih said there is no such thing an artificial oil prices.
* Russian Energy Minister Novak said he does not think oil prices are artificially high.
* UK Finance Minister Hammond said the market view seems to have been out of line with BoE Governor Carney, adding that Carney wanted to confirm his view to the market.
* Canadian Retail Sales Data (Feb):
– Retail Sales M/M +0.4% versus +0.3% expected, previous +0.3% revised to +0.1%
– Ex. Auto 0.0% versus +0.3% expected, previous +0.9% revised to +1.0%
* Canadian CPI Data (Mar):
– CPI M/M +0.3% versus +0.4% expected, previous +0.6%
– CPI Y/Y +2.3% versus +2.4% expected, previous +2.2%
– Core CPI M/M +0.2%, previous +0.7%
– Core CPI Y/Y +1.4% versus +1.5% expected, previous +1.5%
* Belgium Consumer Confidence (Apr) 2, previous 3
* Chicago Fed President Evans says he sees no outsized risk of a breakout in inflation. He added that he would not react too strongly if inflation was 2.25% for a r4easonable period of time.
* Euro Zone Consumer Confidence (Apr P) 0.4 versus -0.2 expected, previous 0.1
* Bundesbank Chief Weidmann said they have had indications recently that the first-quarter is German was not so brilliant, adding that the air is getting thinner in the German economy. He did add however that he does not see any reason to assume that they are at an economic turning point.
* German Finance Minister Scholz said almost all G20 participants have stressed that trade is not a zero-sum game and benefits everyone. He added that exchange rates have not yet been discussed at all at the G20.
* According to sources, the ECB are said to see scope for waiting until July to signal the end of QE as they want more time to assess the recent slowdown. They also said the Governing Council have had no talks on the path of interest rates after QE ends.
* ECB President Mario Draghi:
– The euro area economy has been expanding robustly, with growth broad-based across countries and sectors
– While our confidence in the inflation outlook has increased, remaining uncertainties still warrant patience, persistence and prudence with regard to monetary policy.
– While recent data releases have overall been weaker than expected, risks to growth remain broadly balanced
– Notwithstanding the latest economic indicators, which suggest that the growth cycle may have peaked, the growth momentum is expected to continue.
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