Fundamental Analysis

US Equities Recovered Some Ground


Market movers today

Today is another quiet day in terms of data releases. In the afternoon, the euro area consumer confidence indicator for May is due out , which we expect to show a rise to -3.1 from -3.6 in April. Although political events seem to have limited effect on consumer confidence, the election of Emmanuel Macron could potentially give further tailwind to consumer confidence

A few central bank speeches are scheduled but we do not consider them market movers.

In Denmark, the consumer confidence indicator for May is due out this morning, which we expect to be largely unchanged from April at 7.4.

Selected market news

Asian stocks are mixed this morning after US equities recovered some ground yesterday as focus shifted from political risks in the US back to economic data. The Philly Fed Index showed a stronger-than-expected rise in factory activity in the mid-At lantic region, abating the risk-off mood somewhat after the biggest sell-off in US stock markets in eight months on Wednesday. However, investors remain cautious due to uncertainties surrounding US President Trump and his capacity to push through with promised tax cuts and infrastructure spending, bringing 10Y US Treasury yields down to 2.23%, their lowest level since April. Former FBI Director James Comey's testimony to the Senate next week will be watched closely by the market for any new clues on Trump's involvement in the federal investigation , after he denied any wrongdoing yesterday.

In the ECB minutes from the April meeting released yesterday, policymakers indicated a cautious approach to changes in policy communication to prevent undue market upheaval. This confirms our view that the ECB will take only very small and gradual steps in moving in a more hawkish direction and we still believe it is less likely the ECB will change its forward guidance at the June meeting (see more here ECB research: Hawkish wording but changed forward guidance less likely, 10 May). However, this should not exclude that the ECB will argue that the options for providing additional accommodation have become less likely.

Presenting the Conservat ives' manifesto yesterday ahead of the elect ion on 8 June, Theresa May pledged voters to press on with her approach to Brexit , cut immigrat ion and introduce corporate reform. Our main scenario remains that the Conservatives will consolidate their majority after the election, reducing the risk of a 'no deal Brexit '.

Reports alleging that the Brazilian President Michel Temer gave his blessing to an attempt to pay to silence a potential witness in the country's biggest-ever graft probe brought back investor concerns about a possible government collapse and added to market jitters across the Americas, causing Brazilian stocks and the real to fall sharply.

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