US Session Highlights
(US) APR PERSONAL INCOME: 0.4% V 0.4%E ; PERSONAL SPENDING: 0.4% V 0.4%E
(US) APR PCE CORE M/M: 0.2% V 0.1%E ; Y/Y: 1.5% V 1.5%E
(US) APR PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 1.7% V 1.7%E
(US) MAR S&P / CASE-SHILLER 20-CITY M/M: 0.87% V 0.90%E; Y/Y: 5.89% V 5.61%E; HOUSE PRICE INDEX (HPI): 195.39 V 193.50 PRIOR
(US) MAY CONSUMER CONFIDENCE: 117.9 V 119.5E
(US) MAY DALLAS FED MANUFACTURING ACTIVITY: 17.2 V 15.0E
(US) Dallas Fed Kaplan (moderate; voter): we should begin the process of bringing down the balance sheet soon; base case remains for two more hikes this year
(US) Fed’s Brainard (dove, voter): expects to begin shrinking bond portfolio before too long, perhaps this year; soft inflation is a source of concern; Another US rate hike is likely appropriate soon – comments in NY
US investors saw the markets resume amid a swath of US data releases and more tweets from President Trump. The President showed no inclination of calming the rhetoric that escalated between him and Germany’s Merkel coming out of the G7 meeting, while the latest economic figures suggest the Fed could still be on a course to raise rates next month. Crude prices remained heavy, having a hard time holding close to $50 in the WTI. The Dollar index has tried to consolidate just above 97, but the stabilization feels tenuous. The Euro is bumping up against 112 as focus has continued to shift towards the June ECB meeting and the cover the next round of staff projections may give officials to begin reshaping expectations. Stocks drifted lower on both sides of the pond, while US Treasury markets outperformed that of European fixed income.
US markets on close: Dow -0.2%, S&P500 -0.1%, Nasdaq -0.1%
Best Sector in S&P500: Telecom
Worst Sector in S&P500: Energy
Biggest gainers: FSLR +7.2%; BWA +3.3%; MU +3.2%
Biggest losers: KMI -4.3%; SWN -3.9%; DVN -3.7%
At the close: VIX 10.4 (+0.6pts); Treasuries: 2-yr 1.30% (+1bp), 10-yr 2.22% (-3bps), 30-yr 2.89% (-3bps)
US movers afterhours
EXAS: Strength attributed to circulation of notice from UnitedHealth Group indicating it will cover Cologuard effective 7/1; +8.1% afterhours
NX: Reports Q2 $0.11 adj v $0.06e, R$209.1M v $206Me; affirms outlook; +4.9% afterhours
MNK: Reportedly has hired advisers to explore sale of generic drug division; could be worth up to $2B – press; +2.1% afterhours
Politics
(UK) YouGov/Times general election poll: UK Conservative Party would fall short of outright majority by 16 seats
(US) Former National Security Adviser Flynn to provide some documents to the Senate Intelligence Panel – US press
Key economic data
(CN) CHINA MAY MANUFACTURING PMI (GOVT OFFICIAL): 51.2 (matches 7-month low; 10th month of expansion) V 51.0E; NON-MANUFACTURING PMI: 54.5 V 54.0 PRIOR
(JP) JAPAN APR PRELIMINARY INDUSTRIAL PRODUCTION M/M: 4.0% V 4.2%E (rises at the fastest pace since June 2011); Y/Y: 5.7% V 6.1%E
(AU) AUSTRALIA APR PRIVATE SECTOR CREDIT M/M: 0.4% V 0.4%E; Y/Y: 4.9% V 4.9%E
(NZ) NEW ZEALAND MAY ANZ BUSINESS CONFIDENCE: 14.9 (3-month high) V 11.0 PRIOR; ACTIVITY OUTLOOK 38.3 v 37.7 PRIOR
Asia Session Notable Observations, Speakers and Press
Asian indices traded mixed following modest declines in US markets, where multi-month low in annualized Core PCE inflation was balanced by commitment to near-term tightening from Fed’s Brainard and Kaplan. Probabilities for June rate hike are now around 88%, even as the outlook for a total of 3 hikes this year are still just below 50%. Yield curve is also flatter with a bid in Treasuries on the long end – spread on the 10-2-yr maturities has fallen to lowest level since Oct of last year.
China markets returned from a 2-day holiday and rallied as much as 1% in the morning session before giving it all back heading into the break. Official PMIs, which saw steady declines over the past couple of months, found some footing but still not giving much hope for Q2. April manufacturing PMI beat consensus with 10th straight month of expansion, but also matched a 7-month low. New Export Orders remained steady, but Employment contracted for 2nd straight month and Input Price gauge was at the weakest level in over a year. AUD/USD initially rallied on the results to session highs but then reversed its gains. Also of note in China, the latest Yuan fix was set firmer, and CNY hits its best level in the offshore market since early Feb around 6.803.
In other FX majors, GBP/USD fell abruptly after YouGov/Times general election study showed that based on latest pols, the Conservative Party would fall as many as 16 seats short of outright majority. Recall the April announcement of snap election was predicated on expectation of more broad support as PM May leads UK into Brexit negotiations, but her poor execution during the election season continues to backfire and cloud UK political landscape. Elsewhere, NZD rallied above $0.71 for the first time since early March after the release of ANZ business confidence, and its inflation outlook component for New Zealand was revised higher to 2.0% from 1.8%.
China
(CN) China National Stats Bureau (NBS): PMI shows external and domestic demand keep improving; Expect services sector to keep steady and fast growth
(CN) China may face liquidity issues in June amid higher Fed interest rates and mid-year inspections of banks – China Securities Journal
Japan
(JP) Japan may cut the settlement period for JGBs from May 2018 – Japanese Press
Australia/New Zealand
(NZ) New Zealand RBNZ Semiannual Financial Stability Report: financial system is sound but facing risks
(NZ) RBNZ Gov Wheeler: Very pleased house price inflation has slowed – press
Korea
(KR) South Korea to try and approve extra budget in June – Korean press
Asian Equity Indices/Futures (00:00ET)
Nikkei -0.1%, Hang Seng -0.1%, Shanghai Composite +0.1%, ASX200 +0.3%, Kospi +0.1%
Equity Futures: S&P500 flat; Nasdaq +0.1%, Dax flat, FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.1170-1.1195; JPY 110.75-111.20; AUD 0.7445-0.7475; NZD 0.7080-0.7115
June Gold -0.2% at 1,260/oz; July Crude Oil -0.6% at $49.37/brl; July Copper +0.1% at $2.57/lb
(CN) PBOC SETS YUAN MID POINT AT 6.8633 V 6.8698 PRIOR; Strongest Yuan fix since May 18th
(CN) PBOC to inject combined CNY210B v CNY40B prior
(HK) Overnight CNY HIBOR 21.0793% (highest level since Jan 6th)
(AU) Australia sells A$800M in 2.25% 2028 bonds; avg yield 2.4978%; bid-to-cover 2.83x
Asia equities notable movers
Australia
Shaver Shop (SSG) +2.3%; Guides FY17
Japan
NTT Docomo (9437) -1.1%; Cut at Goldman
Toshiba (6502) -4.0%; Working with auditor to file full earnings report by June 30th deadline; Also: signs agreement to split off three core businesses on July 1st – press
Hong Kong
Lenovo (992) +5.8%; CEO Yang denies press speculation that the company will go private
Yue Yuen (551) +0.5%; To continue to expand its capacity, product development and research
CRRC (1766) -0.8%; In final stage talks to acquire Skoda Transportation for CZK30B
