In focus today
In the euro area, we receive data on the unemployment rate in April. The labour market is still historically strong, and employment grew 0.3% q/q in Q1. We expect the unemployment rate remained unchanged at 6.5%.
In the euro area, we will also look out for Spanish inflation which will give a clue as to where we can expect the euro area HICP print to land tomorrow.
In Japan we get an array of interesting data overnight, which include Tokyo May inflation, April retail sales, and industrial production. As for the Tokyo May inflation, price pressures have muted in Japan recently and Tokyo data will indicate whether this trend continued in May.
In Sweden we get both GDP data for Q1 2024 as well as wages data. We expect the GDP print to come out at 0.5% q/q seasonally adjusted, up from Q4 2023 which saw negative growth at -0.1% q/q, despite a weak (unofficial) indicator. Due to a history of significant revisions to the indicator, as well as the fact that March consumption and production data (released after the indicator) have seen significant increases we maintain our expectation of a decent positive print.
At 09.00 CET we also receive NIER’s Economic Tendency Survey, which will yield the latest (survey-based) insights of the Swedish economy including consumer sentiment.
In Denmark we receive gross unemployment figures for the month of April at 08.00 CET.
Fed’s Williams (Vice Chair of the FOMC) speaks at 18.05 CET. The ECB commence their ‘silent period’ ahead of the 6 June General Council meeting.
Economic and market news
What happened overnight
Asian equity markets are in the red this morning, with the Nikkei in Japan leading the fall, as it is around 1.2% down. The drop in equities comes aback rising yields because of the German CPI figures and another weak UST auction last night, whereas the latter pushed the benchmark 10Y US Treasury yield above 4.60% in the evening, a near one-month high.
US equity futures are all in the red this morning, indicating lower prices by opening bell.
In commodities, gold, silver and copper, metals that have all seen otherwise relatively strong performance in May, takes a breather as they are down this morning between around 0.4% and 1.9%. Brent is trading flat at USD84/bbl.
What happened yesterday
German inflation stood at 2.8% y/y for headline HICP, thus slightly higher than the 2.7% consensus amongst analysts. It is however worth noting that headline inflation was affected by the so-called ‘German ticket’, a discount on public transportation which has lowered headline inflation. Given its introduction more than a year ago, the base effects of the discount are no longer affecting the inflation print.
Core inflation remained at 3.0% y/y and was 0.24% m/m seasonally adjusted. Hence core inflation remains on the high side month-to-month. The elevated core inflation is due to services inflation increasing to 3.9% y/y from 3.40% y/y. The momentum in services inflation is key for the ECB, and we see that service prices increased 0.46% m/m seasonally adjusted – above the 0.3-0.4% m/m average seen in the past three months. The 3m/3m seasonally adjusted annualised rate of services inflation thus stood at 4.78%, which is ‘too hot’ to yet ‘declare victory over inflation’ to paraphrase ECB Chief Economist Philip Lane.
In the euro area, the M3 monetary aggregate rose 1.3% in April from 0.9% in March. A key metric to keep your eyes on for growth outlook is credit provided to the private sector. The lending channel is still recovering, and loan dynamics continue to point to a slight improvement in lending dynamics. Loans to households rose 0.2% in April (prior: 0.2%) whereas loans to non-financial corporations rose 0.3% (prior: 0.4%).
