European Closing Report
The Euro Stoxx 600 lost 0.1% versus yesterday’s close while the FTSE was flat, supported by BP shares after they beat on Q1 earnings and a weaker pound. Sterling dropped in response to a soft print for UK manufacturing PMI while mortgage approvals and consumer credit were also below expectations.
Elsewhere in FX, the Dollar Index has rallied to its best level since the turn of the year with little attention paid to soft ISM manufacturing and construction spending data. We saw a lower open on Wall Street with the DJIA extending declines to over one percent in recent trade although technology stocks have outperformed.
Oil prices are also in the red with losses of over two-percent at the lows for US crude futures. Still to come today, possible comments from Bank of Canada Governor Poloz at 19:30 BST and earnings after the US close from Apple.
* European Corporate News:
– BP (+1.5%): Q1 profit $2.59 Bln versus $2.20 Bln expected | Q1 production rose 6% YoY to 3.7 Mln BPD
– Carlsberg (+0.2%): Q1 revenue 12.7 Bln versus 12.9 Bln expected | Q1 total organic volume growth +1.0%
* Theresa May considering agreement with Brussels that Brexiteers fear would be ‘EU Mark II’ (Telegraph):
– Theresa May is considering signing up Britain to a catch-all agreement with Brussels that Brexiteers fear will amount to “EU Mark II”.
* Italian President Mattarella has ruled out fresh elections in June.
* UK Manufacturing PMI (Apr) 53.7 versus 54.8 expected, previous 55.1 revised to 54.9:
– UK Manufacturing PMI at 17-month low of 53.9 in April
– Slower growth of output, new orders and employment
– Inflationary pressures ease
* UK Consumer Credit (Apr) £0.3 Bln versus £1.5 Bln expected, previous £1.6 Bln revised to £1.7 Bln:
– Mortgage Lending £4.0 Bln versus £3.6 Bln expected, previous £3.7 Bln revised to £3.9 Bln
– Mortgage Approvals 62.91K versus 63.00K expected, previous 63.91K revised to 63.78K
* Israeli PM Netanyahu said no one is seeking a war with Iran.
* RBA Governor Lowe said the board agreed again that there was no strong case for a near term move in rates although it is reasonable to expect the next move will be up.
* Canadian GDP Data (Feb):
– GDP M/M +0.4% versus +0.3% expected, previous -0.1%
– GDP Y/Y +3.0% versus +2.8% expected, previous +2.7%
* Canadian RBC Manufacturing PMI (Apr) 55.5, previous 55.7
* US Corporate News:
– Boeing (-1.5%): Q1 EPS $3.64 versus $2.58 expected | Q1 Revenue $23.4 Bln versus $22.2 Bln expected | Sees FY18 EPS $14.30-14.50 versus $14.11 expected
– Merck (-2.4%): Q1 EPS $1.05 versus $1.00 expected | Q1 Revenue $10.0 Bln versus $10.1 Bln expected | Sees FY18 EPS $4.16-4.28 versus $4.19 expected
– Pfizer (-4.8%): Q1 EPS $0.77 versus $0.75 expected | Q1 Revenue $12.9 Bln versus $13.5 Bln expected | Reaffirmed FY18 gudiance
– Ford (-0.1%): April new vehicle sales -4.7% versus -5.0% expected
– Fiat Chrysler (-0.9%): April new vehicle sales +4.5% versus -1.4% expected
* US Manufacturing PMI (Apr F) 56.5 versus 56.5 flash/expected, previous 55.6:
– PMI rises to highest level in over three-and-a-half years
– Output grows at quickest pace since January2017
– Inflationary pressures intensify
* ISM Manufacturing (Apr) 57.3 versus 58.6 expected, previous 59.3:
– Employment 54.2 versus 57.0 expected, previous 57.3
– Prices Paid 79.3 versus 78.0 expected, previous 78.1
– New Orders 61.2, previous 61.9
* US Construction Spending M/M (Mar) -1.7% versus +0.5%, previous +0.1% revised to 1.0%
* US Commerce Secretary Ross said the US trade imbalance with China is too big and too chronic, adding that he has some hope for a trade deal with China. He also warned that NAFTA talks would have to wait until the end of the year if there is not a deal soon.
US Closing Report
Technology stocks have outperformed, led by Apple shares which have jumped over two-percent ahead of their second-quarter earnings due at 21:30 BST.
Meanwhile, heavy losses for Boeing, Merck and Pfizer following their respective updates have weighed on the Dow Jones Industrial Average while energy stocks have underperformed on lower oil prices – US crude futures settled at $67.25 (-$1.32).
In the bond markets, US yields have edged higher today with investors looking ahead to the FOMC policy decision due tomorrow. The US Dollar has also gained in currency space with the Dollar Index at its highest level since the start of the year.
We did also see some upside in the Canadian Dollar after Bank of Canada Governor Poloz said the view of the economy is quite good, even with the shadow cast by household debt.
He added that the economic progress they have seen makes them confident that higher interest rates will be warranted over time. Elsewhere, US Trade Representative Lighthizer said he is always hoping but not always hopeful of a trade deal with China.
He also said they are making good progress with the EU on steel and aluminium tariffs. The White House later said that the expect to complete negotiations with Canada, Mexico and the EU on aluminium and steel tariffs within thirty days.
* Theresa May expected to back EU ‘customs partnership’ (FT):
– Theresa May is expected to back a new hybrid “customs partnership” between Britain and the EU on Wednesday, defying critics who claim the system is “bonkers” and will see the UK forced to stay in a customs union by default.
* Atlanta Fed GDPNow (Q2) unchanged at +4.1%
* Canadian Foreign Minister Freeland again noted good progress on auto content rules.
* US Trade Representative Lighthizer said he is always hoping but not always hopeful of a trade deal with China. He also said they are making good progress with the EU on steel and aluminium tariffs.
* White House Trade Advisor Navarro said tariff relief will not be extended again for Canada and Mexico.
* White House said they expect to complete negotiations with Canada, Mexico and the EU on aluminium and steel tariffs within thirty days.
* US President Trump said the location of the North Korean summit could come within days.
* Bank of Canada Governor Poloz:
– Ultimately, the Bank’s job is to look at the economy as a whole and judge the outlook for inflation. Today, the view is quite good, even with the shadow cast by household debt. This debt still poses risks to the economy and financial stability, and its sheer size means that its risks will be with us for some time.
– But there is good reason to think that we can continue to manage these risks successfully.
– The economic progress we have seen makes us more confident that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed.
– We will continue to watch how households and the entire economy are reacting to higher interest rates. And we will be cautious in making future adjustments to monetary policy, guided by incoming data.
* US Auto Sales (Apr) 17.15 Mln versus 17.10 Mln expected, previous 17.48 Mln
* US crude futures settled at $67.25 (-$1.32) | Brent crude futures settled at $73.13 (-$1.56).
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