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Markets Update: US Inflation Sees Gradual Decline, While China's CPI Approaches Deflation and PPI Deflation Worsens; BOJ's April Policy Decision Unveiled, All Eyes on BOE's Upcoming Decision
Today's important market events:
[GBP] BoE Interest Rate Decision / BoE MPC Meeting Minutes - 13:00 CEST
[USD] Initial Jobless Claims - 14:30 CEST
[USD] PPI (MoM - Apr) - 14:30 CEST
[GBP] BoE Gov Bailey Speaks - 15:15 CEST
The Asia-Pacific (APAC) stock markets exhibited mixed trading after a lackluster performance in the US markets where stocks were volatile. The softer-than-anticipated Chinese inflation also impacted the regional bourses. Meanwhile, European equity futures are indicating a slightly positive open, with the Euro Stoxx 50 showing a 0.2% gain after closing down by 0.4% the previous day.
The DXY, a gauge of the US dollar against other major currencies, is hovering around 101.50, and the price movements in the FX markets are generally subdued. Cable is maintaining its status at 1.26, ahead of the Bank of England's (BoE) policy announcement.
According to the Wall Street Journal's Jon Hilsenrath, Federal Reserve officials are considering taking a "summer vacation" from raising interest rates, and the April Consumer Price Index (CPI) report may facilitate this decision.
- The ASX 200 in Australia opened down 0.1% at 7,258. Australia's Trade Minister Farrell stated that de-escalation will benefit exporters ahead of trade talks in China. Meanwhile, the Australian Securities and Investments Commission (ASIC) warned of increased focus on credit provider and debt manager misconduct. The Australia May Consumer Inflation Expectation Survey came in at 5.0% versus 4.6% prior, while the New Zealand April REINZ House Sales Y/Y was -15.3% versus -15% prior, and the New Zealand Apr Food Prices M/M was 0.5% versus 0.8% prior.
- The Hang Seng in Hong Kong opened up 0.4% at 19,842, and the Shanghai Composite opened up 0.1% at 3,323. China's April CPI M/M was -0.1% versus -0.3% prior, marking the third straight decline, while the Y/Y figure was +0.1% versus 0.3% expected, the slowest pace since February 2021. China's PPI Y/Y was -3.6% versus -3.3% expected, marking the biggest drop since May 2020. The People's Bank of China (PBOC) conducted an open market operation, selling CNY2.0B versus CNY2.0B prior in a 7-day reverse repo, net draining CNY31.0B versus injecting CNY2.0B prior. The PBOC set the yuan reference rate at 6.9101 versus 6.9299 prior. China is said to be asking banks to cut interest rate ceilings on some retail and corporate deposits from May 15th.
- The Nikkei 225 in Japan opened flat at 29,110. The Bank of Japan's (BOJ) April meeting summary of opinions stated that the BOJ should be careful to ensure that revision to the forward guidance will not be taken as its willingness to raise the policy interest rates. The Japan Apr Tokyo Avg Office Vacancies were 6.1% versus 6.4% prior. The BOJ offered to buy 5-10 year JGBs at a fixed rate of 50bps and opened a window to buy unlimited amounts of 10-year JGBs at 0.50% as expected. Japan's Apr Bank Lending Y/Y was 3.2% versus 3.0% prior, and Japan's Mar Current Account came in at ¥2.28T versus ¥2.891Te. Reportedly, two Japanese life insurance firms are cutting holdings of US Treasuries in favor of JGBs.
- The Kospi in South Korea opened up 0.4% at 2,505, while South Korea's May 1-10th Exports Y/Y came in at -10.1%.
- China reportedly seeks to resume and expand its communications with Taiwan, according to Chinese state press. The Philippines Q1 GDP Q/Q was +1.1% versus 0.7% expected, while the Y/Y figure was 6.4% versus 6.2% expected.
North America:
- According to the BofA Institute, household credit and debit card spending in the US declined by 1.2% year-on-year in April, marking the first negative reading since February 2021. This is indicative of a general slowdown in the labor market, and daily spending data post-Easter also appears to be weaker.
- The US April Consumer Price Index (CPI) showed a monthly increase of 0.4%, in line with expectations, while the annual rate of inflation slowed to 4.9%, the lowest since May 2021 and the 10th consecutive monthly deceleration. The core CPI also rose 0.4% month-on-month, meeting expectations, while the annual rate came in at 5.5%.
- Senate Republican Leader McConnell has stated that unilateral action by the White House to raise the debt ceiling without Congress is not a viable option.
- Blackstone is reportedly in discussions with regional banks in the US regarding lending.
Europe:
- The European Central Bank's (ECB) Muller has stated that interest rates still need to be raised, but at a slower pace than previously anticipated, to allow the ECB to assess the impact of its actions thus far.
- The ECB's Centeno has also commented on monetary policy, stating that key interest rates are currently at the maximum of this cycle, and that the terminal rate may be reached in June or July.
- Some ECB officials are reportedly beginning to consider the need for a September rate hike.
- The UK's April RICS House Price Balance came in at -39%, slightly better than the expected -40%.
- The National Institute of Economic and Social Research (NIESR) has forecasted that UK CPI will reach 7.4% in 2023, a slight improvement from its previous February forecast of 8.3%, while it predicts 4.2% for 2024.
Fixed Income:
10-year US Treasury (UST) futures maintained most of their gains following a rally triggered by softer inflation readings, resulting in bull steepening. The upward momentum was also supported by stock market volatility. Meanwhile, Bund futures retreated slightly from their recent highs, slipping below the 136.00 level. 10-year Japanese Government Bond (JGB) futures remained buoyant after the Bank of Japan Summary of Opinions failed to produce any major surprises. Furthermore, a robust 30-year JGB auction helped to underpin sentiment.
Commodities:
Crude oil futures saw marginal gains, but these were constrained by a cautious market tone and China's uneven economic recovery, as indicated by recent inflation data. Kuwait set its June KEC crude Official Selling Price for Asia at Oman/Dubai + USD 1.70/bbl. Meanwhile, Iraq and Iran signed a memorandum of understanding to invest in joint oil fields and collaborate on crude oil extraction and refining. Norway announced 92 new blocks for oil and gas licensing in mature areas of the Norwegian and Barents seas. Spot gold prices remained directionless amid a steady US dollar. Finally, copper futures mirrored the subdued sentiment in the stock market due to soft Chinese inflation figures.
Looking ahead, significant events for the day include the US Initial Jobless Claims and Producer Price Index releases, the BoE's Policy Announcement and Press Conference, the OPEC Monthly Oil Market Report, and speeches from US Treasury Secretary Janet Yellen, Fed's Christopher Waller, ECB's Isabel Schnabel, and Luis de Guindos. Additionally, there will be supply data from Italy and the US.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team