Danske Daily
Today's Key Points
- ECB maintains leading rate at 4%, no significant changes in the statement, which was supportive for bond yields. 2Y German bond yields declined 8bp after ECB, but ended day down 6bp.
- Oil price above USD 124 on supply concerns and rice price gains of almost 5%.
- US stocks close on a positive note, but Asian stocks decline after Toyota forecast lower profits.
- Key events today - no major events apart from NOK inflation data and ECB lending survey.
Markets Overnight
Crude oil continues to set new records and broke through the USD 124-level yesterday in NY trade on concerns that supplies of diesel and gasoline may be insufficient to meet rising consumption during the summer driving season. Refinery maintenance and production cutbacks amid a decline in refining profits have curbed diesel supplies this year.
The price of rice also continues to rise as Nigeria and the Philippines, the world's two largest importers, sought shipments, adding pressure to global supplies strained by the devastation caused by a cyclone in Myanmar. Rice price rose almost 5% yesterday and have risen by more than 14% since 1 May. Despite the rising oil and commodity prices the ECB maintained an unchanged statement. This was a relief for the bond market, and bond yields fell. The US bond market showed a similar picture and the Asian bond markets have followed the positive trend. It is going to be interesting to see ECB's lending survey today to find out if credit conditions have tightened in Euroland.
The US stock market closed on a positive note after Wal-Mart Stores and News Corp. reported sales that topped analysts' estimates and commodity producers rallied. S&P rose by 0.4% yesterday. However, Asian stocks declined after Toyota Motor Corp. and Olympus Corp. forecast lower profits on rising raw material costs. Toyota, the world's second-largest automaker, slumped after saying higher gasoline prices and a US economic slowdown will erode profit. Nikkei has dropped 1.5% while Hang Seng is down 1.7% this morning.
There are no major events today apart from NOK inflation data.
No major movements in global currencies - EUR/USD has been stable at the 154-level, while USD/JPY has moved from 104 towards the 103.5-level this morning. EUR/NOK and EUR/SEK have been stable overnight.
Global Daily
The main news today will be the release of ECB's lending survey at 10.00 CET. At the ECB press conference yesterday ECB president Trichet commented very briefly on it saying that banks had continued to tighten credits. If the survey shows a strong tightening this could be bullish for bond markets. Overall ECB seemed a little more concerned over the possible negative effects from credit tightening yesterday. As we have also seen in the Senior Loan Officer survey from Fed credits standards are being tightened quite significantly and this is becoming an increasing headwind - on top of the strong headwind from rising oil prices and in Euroland's case, the strong currency. The rise in oil prices is very negative for Euro growth as it sucks out purchasing power and makes it harder for ECB to stimulate the economy through rate cuts.
Scandi Daily
The Norwegian market will keep a close eye on the CPI numbers. We expect in line with consensus that the core measure will jump from 2.1% in March to 2.3% in April. Inflation is boosted by food, clothing and shoe prices. The rent indices are the uncertain factor. We expect slightly higher rates in Norway. It will once again underline that a rate cut is not in sight in the foreseeable future, whereas a rate hike certainly cannot be ruled out.
In Sweden Riksbank's vice governor Irma Rosenberg, who as you might be aware is tilted to the dovish side, speaks on 'Commodity prices, relative prices and monetary policy' and we will watch closely given the newly (re-)adopted communication policy. The speech will be released at 8.00. The March activity index which will be released at 9.30 could provide an indication for first quarter GDP where our current projection spells 2.6%.
Danske Bank
http://www.danskebank.com/danskeresearch
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