Wall Street was higher overnight as diminished worries over inflation and declining Treasury yields offered support. Big tech took the lead, boosting the USA100 over 1.5% higher, with the USA500 up over 1% and the USA30 0.7% firmer.
While it may be early to pull down the inflation red flags, the 10-year breakeven fell the most last week since September, indicating less concern over prices. Investors will look toward Friday’s release of the PCE deflator, the Fed’s favourite indicator.
Asian bond markets still benefited from soothing words on inflation from the Fed yesterday and yields dropped in Australia and New Zealand, while stock markets mostly moved higher, despite a mixed news flow that included further reports that Japan will extend the state of emergency on Covid developments and new local restrictions in Australia. The US State Department warning not to travel to Japan due to Covid may have some bearish repercussions on the markets in early trading. FTSE Russell will add China’s Xiaomi Corp to its global indexes next month.
- Fed’s Bostic said the economy has been more resilient than expected.(voter)
- Fed’s Bullard said he does not want to discuss adjusting policyduring the pandemic. (non-voter)
- Fed Governor Brainard confined her prepared remarks on digital currencies. (voter)
- UK: BoE members, including Governor Bailey, continued to argue that inflationary pressures are transitory in nature.
European News – In Europe, Germany had the second look at Q1 GDP, presenting that the Covid-19 hit on the German economy was bigger than expected in the first quarter. German Q1 GDP was revised slightly lower – to show contractions of -1.8% q/q, and -3.1% y/y (wda), versus -1.7% and -3.0% reported with the first release. Lockdown measures were the main reason for the sharp decline in activity, with restrictions severer than in France, Italy or Spain, at least initially.
In FX markets, there were reports of Yuan intervention from China. Presently the Yen is mostly weaker and USDJPY little changed at 108.60. EURUSD lifted to 1.2252 and Cable skyrocketed to 1.4200. USOIL is trading at USD 66.05 per barrel as Iran suggested that there are still open questions in negotiations over a deal to end US sanctions on its crude. The Bloomberg Commodity Spot Index rose the most in about a week. Bitcoin reversed to 38.8K and GOLD jumped to 1886 on EU open from 1872.
Bloomberg Commodity Spot Index
Today – The European data calendar today has Q1 trade data, along with the May Ifo business climate report. The UK has April public sector borrowing figures. The US calendar includes new home sales, home price data, and consumer confidence.
