A late profit-taking move whipped out most of the US stock markets’ intraday gains ahead of the long weekend. There was no immediate trigger available after markets earlier bluntly ignored US eco data. High(er than expected) April PCE deflators were the most eye-popping release, but the inflation theme momentum ebbed away the past two weeks. US Treasuries and German Bunds eked out minor gains in a daily perspective. US yields fell by 0.1 bp to 1.6 bps (5-yr) with the belly of the curve outperforming the wings. German yield declines ranged between -0.4 bps and -1.4 bps with the curve behaving in the same way as in the US. 10-yr yield spread changes vs Germany barely moved with Greece marginally outperforming (-3 bps). EUR/USD in a technical move temporarily slid below the recent lows near 1.216, but the higher inflation outcome soon started a return towards 1.22 as Fed governors recently closed ranks again on allowing for the overshoot. The trade-weighted greenback closed almost unchanged at 90. Sub EUR/GBP 0.86, sterling managed to hold on to most of the hawkish BoE Vlieghe comments from Thursday.
Chinese PMI’s more or less stabilized in May as expected. The composite’s increase from 53.8 to 54.2 resulted in a somewhat better services momentum (55.2 from 54.9) while manufacturing held at 51 from 51.1. Details showed a further increase in supply-related and inflationary subindices while the demand-side suggested slacking momentum going further. New export orders fell below the 50 boom/bust line. PMI’s and a weaker-than-expected PBOC fixing can’t hold back the Chinese yuan. USD/CNY trades near 6.3650 at the strongest level since May 2018. Asian stock markets are mixed this morning with Japan underperforming, losing 1%+. Disappointing April production and especially retail sales numbers weigh together with fears over extended states of emergency to tackle the pandemic. Main FI and FX markets trade directionless and that might become the story of the day with UK (Spring Bank Holiday) and US (Memorial Day) markets closed. German inflation numbers and the OECD economic outlook are wildcards in an otherwise backwardly loaded eco calendar. US ISM’s and labor market indicators (ADP & payrolls) are key together with an avalanche of Fed speakers. Tomorrow’s OPEC+ meeting is expected to confirm the planned July output hike but could already give some guidance about next steps and in that way influence oil markets. Brent crude last week again failed to take out the $70/b handle.
The Belgian debt agency aims to raise €2.9-3.4bn in today’s regular OLO auctions. Three bonds are on offer: OLO 74 (0.8% Jun2025), OLO 92 (0% Oct2031) and OLO 88 (1.7% Jun2050). Year-to-date, the Kingdom raised €18.19bn mainly via two syndicated deals and via tap auctions in February and April. That’s almost half of the stated €36.41bn2021 OLO funding goal.
PM Netanyahu might be on his way out after one of his former allies agreed to join the alternative government opponents are trying to form. Bennett of the Yamina party said he intends to “work with all my might” to form a coalition with ex-Finance Minister Yair Lapid. Both would be expected to share power if they manage to gather enough support for their government. Even if the Yamina party joins the “government of change”, an uncommon alliance of parties across the political spectrum, are still four short of a majority. They would have to rely on the support of an Arab party in what would be another rare development in Israeli politics.
The RBNZ would rather have a monetary stimulus in place for a longer time than take it away too quickly, assistant governor Hawkesby said. His comments came after the RBNZ hinted at a first interest rate hike in September next year. Hawkesby said the central bank felt it was the right time to re-introduce projections of the OCR as the main policy signal for markets to focus on, adding that it remains conditional on the economy’s trajectory. On the bank’s bond-buying program, he said it doesn’t necessarily has to end before the RBNZ would start raising rates.