Tue, Dec 01, 2020 @ 06:22 GMT
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US Equity Markets Traded Lower Yesterday

Market movers today

Final Euro CPI data should confirm that core inflat ion fell to 0.7% y/y in April, but more det ails will be revealed wit h t oday’s release.

In the US, housing starts and indust rial product ion are due out , but they are not likely to move markets unless we see a big deviat ion from consensus. Housing starts are expected to fall 0.7% m/m whereas consensus looks for a rise in indust rial product ion of 0.6% m/m.

China’s t op economic adviser, Vice P remier Liu He, yesterday arrived in Washington for further t rade talks. He will stay unt il Saturday.

In Sweden, it is t ime for the Valueguard house price data. Earlier this morning, the Maklarstat ist ik showed that Swedish apartment prices dropped 1% m/m while house prices were flat in April. In cent ral Stockholm, apartment prices were unchanged on th e month. See page 2 for further comment .

Selected market news

10Y US Treasury yields increased significantly yesterday and the 10Y US government bond yield broke through both its 2018 and 2014 highs to a new high of 3.09%. There was no particular trigger behind the break higher in US yields, which merely seems to be a consequence of a sustained underlying selling pressure on the US fixed income market .

US equity markets traded lower yesterday, likely in part due to the increase in US yields and USD. The S&P 500 index ended the day 0.68% lower, and most regional indices in Asia are also t rading lower this morning. In the FX market , the USD gained versus all other G10 currencies, primarily supported by higher US yields.

US data released yesterday was relatively solid: Retail sales came out more or less in line with expectat ions although the core control group was a bit weaker than expected (0.3% m/m versus consensus of 0.4%). However, taking the up revisions in the previous month into account it was st ill a solid report , confirming that private consumption will remain a main growth driver this year. The Empire Manufacturing index has risen to 20.1 in May from 15.8 in April and thus provided a posit ive first read on manufacturing activity in May.

In Italy, talks between the Five Star Movement and League part ies on forming a new government have entered their final lap, the leader of the League party, Mat teo Salvini, said last night . Talks will cont inue this morning.

In Japan, data released overnight shows that the economy shrank for the first t ime in two years, with GDP cont ract ing 0.6% q/q (annualised) in Q1. The decline was much steeper than expected and GDP growth in Q4 was revised down from 1.6% q/q (annualised) to 0.6% q/q. The main explanat ion behind the weak GDP figure in Q1 was an unexpected decline in business spending and flat private consumption.

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