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Markets Update: Market Turmoil Ahead? US CPI and China Financials can Spark Volatility as Williams Takes the Stage
Today's important market events:
[BRL] BCB Copom Meeting Minutes - 13:00 CEST
[USD] EIA Short-term Energy Outlook - 18:00 CEST
[USD] FOMC Member Williams Speaks - 18:05 CEST
Stocks in the Asia-Pacific region were mixed following an indecisive performance on Wall Street, where the focus was on the Federal Reserve's Senior Loan Officer Opinion Survey (SLOOS). The report revealed that banks had tightened credit terms and that there had been a decline in demand for loans.
Meanwhile, Chinese trade figures showed that while there was stronger-than-expected export growth, imports were a disappointment with a surprise contraction.
European equity futures suggest a slightly higher open, with the Euro Stoxx 50 up 0.2% after the cash market closed up 0.2% yesterday. The DXY remains flat, and price action across the majors is relatively contained, with EUR/USD back on a 1.09 handle.
Australia and New Zealand:
- The ASX 200 opened slightly lower at 7,266, while ANZ/Roy Morgan Consumer Confidence rose by 2.1% and the CBA Apr Household Spending declined by 4.3% M/M. Australia's FY22/23 budget is expected to record its first surplus in 15 years at AUD 4.0 billion on May 9th. Australia sold AUD 150 million indexed bonds at an average yield of 0.5222% with a bid-to-cover of 4.17x. In addition, Q1 retail sales declined by 0.6% Q/Q, marking the second straight decline.
China and Hong Kong:
- The Hang Seng Index opened 0.2% lower at 20,252, while the Shanghai Composite rose 0.2% to 3,402. The EU Ambassador to China expressed interest in China's support to reach a just peace, which involves the withdrawal of Russian troops from Ukraine. The People's Bank of China (PBOC) injected CNY 2.0 billion through the 7-day reverse repo and set the yuan reference rate at 6.9255, the weakest CNY fixing since March 13th. In April, China's trade balance was $90.2 billion, higher than the estimated $71.3 billion. The Hong Kong Monetary Authority (HKMA) Chief, Eddie Yue, noted that the property market has rebounded quite nicely, and GDP may be on the high side of the government's estimates. Meanwhile, Bank of China reported no significant change in business after Monday's share spike.
Japan:
- The Nikkei 225 opened 0.2% higher at 29,020. Bank of Japan (BOJ) Gov Ueda stated that there was no specific policy in mind when conducting the previous review. Japan's labor cash earnings for March were 0.8% lower YoY, and real cash earnings were down 2.9% YoY. BOJ offered to buy 5-10 year JGBs at a fixed rate of 50bps and opened a window to buy an unlimited amount of 10-year JGBs at 0.50%, as expected. Japan sold JPY 746.1 billion in 6-month bills at an average yield of -0.1684% with a bid-to-cover of 3.93x, and JPY in 10-year JGB bonds at an average yield of 0.4260% with a bid-to-cover of 3.60x.
South Korea:
- The Korea Kospi opened flat at 2,512, and South Korea sold KRW 1.9 trillion in 2-year bonds at an average yield of 3.350% with a bid-to-cover of x v 2.52x prior.
North America:
The recently released Fed Apr Senior Loan Officer Survey (SLOOS) on Bank Lending Practices revealed that there was an overall tightening of credit and weaker demand for business loans in Q1. Moreover, banks expect to tighten standards across all loan categories over the rest of 2023. The Fed's Goolsbee (voter) emphasized that the Fed must be data dependent and keep a watchful eye on credit conditions. The Federal Reserve's Semi Annual Monetary Policy Report states that ongoing bank stress could lead to a significant economic slowdown. Although the recent turmoil in the banking industry has stabilized, it could still impact credit conditions in the future. Meanwhile, US Treasury Sec Yellen reiterated that the Treasury could run out of cash as early as June 1st. If Congress does not raise the debt ceiling, President Biden will have to make difficult decisions about the allocation of resources, but unfortunately, there are no good options.
Europe:
The EURO ZONE MAY SENTIX INVESTOR CONFIDENCE index has declined to -13.1, its lowest level since Jan 2023, as per the latest update. On a positive note, the ECB's Lane (Ireland, chief economist) noted that there is still a lot of momentum in food and core inflation. Additionally, the UK's Apr BRC LFL Sales Y/Y data showed a growth of 5.2%, surpassing the prior reading of 4.9%.
Fixed income markets saw a rebound in 10-year UST futures after yesterday's selling pressure, which was attributed to heavy corporate supply and the unwinding of risk from the Fed SLOOS. Meanwhile, Bund futures were lackluster after recent losses and hawkish rhetoric from the ECB. However, 10-year JGB futures experienced spillover selling from global peers, with softer demand at the 10-year JGB auction. In the commodities market, crude futures took a breather from their recent rebound amid a decrease in recession concerns and Goldman Sachs' assessment that demand fears were overblown. Spot gold traded sideways, reflecting the uneventful mood in the greenback, while copper futures remained subdued due to mixed risk sentiment and Chinese trade data.
Looking ahead, today's highlights include speeches from the ECB's Lane and Schnabel, as well as from the Fed's Williams and Jefferson. In addition, there will be supply from Germany and the US, and earnings reports from Daimler Truck, Ubisoft, Direct Line, Airbnb, and Occidental Petroleum.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team