Market movers today
Today we get some interesting data out of the US with the Empire manufacturing PMI, the first regional survey for May, retail sales for April and preliminary consumer confidence for May from the University of Michigan.
The Empire index dropped like a stone in April to -78.2 and is expected to rise slightly in May to -64.0 by consensus. It would still signal a sharp decline in production, though.
US retail sales are also set to show a big drop in April. The important number is the socalled control group, where consensus is a decline of 4.4% m/m.
The consumer confidence index for May from University of Michigan will likely also show a further move lower in optimism as big job cuts continued this month.
We should also start to look out for any news about US President Trump’s possible sanctions on China. It cannot be ruled out that he would pull out of the phase-one trade deal and start putting tariffs back on China. He would risk hurting the economy even further as well as jeopardise important farmer votes in key swing states if China pulls the plug on agricultural purchases. On the other hand, he could gain politically from taking a tough stance on China.
Selected market news
Chinese data for industrial production, retail sales and fixed investments in April published overnight were close to expectations. Industrial production rose 3.9% y/y – higher than the 1.5% expected by consensus, retail sales fell 7.5% y/y below the expectations and fixed assets were down 10.3% YTD y/y – about as expected. Overall, the data point to signs of recovery in the Chinese economy.
US initial jobless claims amounted to 3m last week; hence, unemployment in the US continues to rise. Over the past eight weeks it now totals 36.5m. The continued rise in unemployment supports the view that the US economy needs more stimulus, e.g. it could be an extension of the temporary increase in unemployment benefits or another round of direct payments.
Bank of England’s Governor Andrew Bailey said yesterday that the central bank is not currently considering using negative rates as negative rates would create problems for banks. Bailey’s comments follow Fed chair Jerome Powell’s on Wednesday when he also dismissed the possibility of negative rates.
Brent crude was on the rise overnight climbing above USD31/bbl. Supply cuts from OPEC+ and outside OPEC+ are helping the market rebalance. It is a costly rebalancing for producers, though. IEA yesterday forecast that world oil supply would hit the lowest level in nine years due to the collapse in consumption following lockdowns of major economies.
Fed has started its programme to directly support the corporate debt market. It bought USD0,3bn of ETFs on the first day of the programme. Fed’s supply of reserves further rose close to USD100bn last week to USD3,263bn in total.
