Market movers today
FOMC minutes are released today and we will look for clues on what to expect, as the Fed has hinted more easing is on its way. However, it is likely to be a non-event.
In the euro area, we get preliminary consumer confidence in May. It is probably too early to expect a rebound in consumer confidence but that is one of the things we will be looking for in coming months, especially now that we are seeing a gradual reopening of many countries.
We continue to follow the COVID-19 infection data and the gradual re-opening of many countries. One of the big unknowns is whether there will be a second wave or not, as things start to normalise after the lockdowns.
In the UK, three Bank of England policymakers, including Governor Bailey, are talking this afternoon. We will look for signs where the policy committee is in terms of cutting the Bank Rate down to negative territory.
We also get Norges Bank’s expectations survey, which measures how various players view the outlook for the likes of inflation.
Selected market news
Yesterday, US stocks fell for the first time in four trading sessions, as news broke that the vaccine study by Moderna Inc. has not produced enough data yet to support the positive conclusions that drove stocks higher on Monday. The movements highlight how important a vaccine is for risk sentiment (and the economy). Asian stocks are mixed this morning but S&P futures are up.
US President Trump said that he expects ‘a really great third quarter’ in terms of GDP growth, partly because the US is now testing more people. The US Congressional Budget Office has updated its economic projections and expects a GDP decline of 11% q/q in Q2 (38% in annualised terms). US Treasury Secretary Mnuchin said that the Treasury is ready to ‘take losses’ on its USD500bn rescue fund.
Fed Chair Jerome Powell did not say anything new in yesterday’s hearing and repeated that the Federal Reserve is ready to use its ‘full range of tools’ to support the economy. He also said that both the US Congress and the Federal Reserve may need to do more to support the economy but refused to take part in the ongoing political discussions on a new emergency spending package, which the Republicans and the Democrats disagree on.
The UK’s chief Brexit negotiator David Frost said yesterday that the EU is only offering a ‘low-quality’ trade deal and not ‘a fair free trade relationship’. The UK continues to refuse to follow EU standards and rules on certain topics, which the EU thinks is necessary for reaching an agreement. We continue to think that the negotiations will get worse before they get better (including that we do not expect an extension of the current transition period ending by the end of this year), which is the main reason why we are still looking for more GBP weakness in coming months. The next round of negotiations begins early June.
