It was a whipsaw session on Friday, dominated by a plethora of headlines that kept traders on their toes but ended with a weaker US$, slightly firmer stocks and a small recovery in the oil price, albeit that WTI still remained down by 6% on the week. The dollar was not helped by the April US Durable Goods Orders, which came in below expectations (@ -2.1% versus the expected -2.0%) and, on top of Thursday’s poor manufacturing data, added to the concerns that the US economy is slowing which could yet force the Fed to act by cutting rates although this currently remains some way off, if at all.
The headlines started early in the European day, with the resignation of Theresa May, and fired the starting gun for a UK leadership race that will start when May steps down on June 7 and end in July. Brexit is the never-ending issue and Boris Johnson put some pressure on Cable when he raised the possibility of a “no-deal” Brexit, although by the end of the day Sterling had held its ground and finished near session highs. There have been more devolpments over the weekend with various MP’s standing for the leadership of the Conservative Party , who will have the job of steering the path towars Brexit, presumably by the 31 October divorce date. With regards to EU politics, the EU election results are starting to come in following the voting of that last 3 days, and, in the UK, the Brexit Party is expected to do very well at the expense of the major parrties, with the Tories in particular looking set to be wiped out.
Elsewhere, other stories running through the markets on Friday included an easing of US/China trade tensions after Donald Trump said that a deal could include Huawei in some form, which helped to underpin stocks, while from the EU the Euro was underpinned after Dutch Labor Party leader, Frans Timmermans, won a surprise victory in the EU elections. The Australian dollar also finished higher against the US$ despite a call from an Australian bank who are now predicting 3 rate cuts this year, rather than 2.
Looking ahead, the coming week is light on market moving data and it would seem that political headlines will be the creators of any potential volatility. Today is a US/UK holiday so interest/liquidity will be diminished, while Germany will be out for Ascension Day on Thursday. The EU election results will be a centre of focus.
There is nothing on the calendar to move the markets either today or tomorrow, while Wednesday is little better, although the NZ Financial Stability Report and the RBNZ Governor, Orr, may create some waves in the Kiwi. Thursday sees a bit of US data, the focus being on the Q1 GDP figure, while Friday will be busy in Asia, with a sizable dump of Japanese data along with the China Mfg/Non-Mfg PMIs and the Australian Private Sector Credit.
I will be travelling for most of next week, so there will be no reports, but normal service resumes the following week. The week will then wind up with the German CPI and then, from the US, the US Personal Consumption/ Expenditure/Spending/Income, Michigan Consumer Sentiment Index and the Chicago Purchasing Managers Index.
I am travelling this week so full service will resume when I return – next Wednesday.
Economic data highlights will include:
Mon: US/UK Holiday, BOJ’s Kuroda Speech, Japan Coincident Index, Leading Economic Index
Tue: UK Inflation Report Hearing, EU Economic Sentiment Indicator, Industrial Confidence, Services Sentiment, Business Climate, US Case Shiller House Price Index, Dallas Fed Mfg Business Climate, Consumer Confidence,
Wed: RBNZ Financial Stability Report/Governor Orr Speech, NZ Activity Outlook, Business Confidence, German Import/Export Index, Unemployment, US Richmond Fed Mfg Index, API Weekly Crude Oil Stock Inventory
Thur: German Holiday, NZ Building Permits, US Q1 Preliminary GDP, Pending Home Sales, Wholesale Inventories, Jobless Claims, EIA Crude Oil Stocks Weekly Change, Fed’s Clarida Speech
Fri: Japan Unemployment, Tokyo CPI, Retail Trade, Construction Orders, Housing Starts, Consumer Confidence Index, China Mfg/Non-Mfg PMIs, Australian Private Sector Credit, German Retail Sales, German CPI, US Personal Consumption/Expenditure/Spending/Income, Michigan Consumer Sentiment Index, Chicago Purchasing Managers Index
Market moves, in brief:
FX: DXY 97.60 (-0.26%)
Bonds: US10Y; 2.322% (-0.29%), German 10Y; -0.116% (+3.25%), UK 10Y; 0.955% (+0.12%), Australian 10Y; 1.533% (-3.65%), NZ 10Y; 1.745% (-1.69 %), China 10Y; 3.331% (0.64%)
Stock Indices: DJI; +0.37%, S+P; +0.14%, NASDAQ; +0.11%, EUStoxx50; +0.71%, FTSE100; +0.65%, Shanghai Composite; +0.02%,
Metals: Gold $1284 oz (+0.08%), Silver $14.56 oz (-0.18%), Copper $2.6975 lb (+0.54%), Iron Ore $98.14 per tonne (NYMEX) (+0.85%),
Oil: WTI $ 59.02 pb (+1.46%)
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