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Markets Update: US CPI Report Looms as Fed's Williams Indicates Potential for Future Rate Hikes; Debt Progress Lacking; China Financials Plunge Following Spike; Toyota's Strong Earnings Guidance and Buyback Boost Shares
Today's important market events:
[EUR] German CPI (MoM - Apr) - 08:00 CEST
German CPI in line with expectations at 0.4% (previous 0.8%)
[USD] CPI (MoM/YoY - Apr) - 14:30 CEST
[USD] Crude Oil Inventories - 16:30 CEST
The Asia Pacific (APAC) stock market experienced a general decline as investors absorbed various earnings reports and reacted to the negative trend in Wall Street. Despite President Biden's scheduled meeting with congressional leaders on Friday, there appears to be no significant advancement in debt limit negotiations. Meanwhile, the Federal Open Market Committee (FOMC) has conveyed its readiness to raise interest rates, if necessary, according to Fed's Williams, who also stated his position that there is no reason to reduce rates this year.
In contrast, European equity futures suggest a modestly positive opening, with the Euro Stoxx 50 up 0.2% following yesterday's 0.6% decrease in the cash market. The DXY index remains steady above 101.50, while the foreign exchange (FX) markets display little fluctuation, with EUR/USD maintaining its 1.09 status.
Australia and New Zealand's ASX 200 opened at -0.2% at 7,248, with Treasurer Chalmers delivering the budget speech and forecasts. Australia sold A$800M versus A$800M indicated in 3.25% Apr 2029 bonds, with an average yield of 3.2198% versus 3.0282% prior, and a bid-to-cover ratio of 3.34x versus 2.37x prior. The Australian Office of Financial Management (AOFM) plans to issue approximately A$75.0B in Treasury bonds in FY23/24.
Hong Kong's Hang Seng opened flat at 19,860, while China's Shanghai Composite opened -0.3% at 3,347. The China PBOC Open Market Operation (OMO) sold CNY2.0B versus CNY2.0B prior in a 7-day reverse repo, net injecting CNY2.0B versus injecting CNY2.0B prior. The Shanghai Banks Index extended its volatility from the previous session, down by 2.5%. Meanwhile, the US Trade Chief (USTR) Katherine Tai will meet China Commerce Minister in Detroit later this month.
Japan's Nikkei 225 opened at -0.2% at 29,189, with Bank of Japan (BOJ) offering to buy 5-10 year JGBs at a fixed rate of 50bps and opening a window to buy an unlimited amount of 10-year JGBs at 0.50%, as expected. BOJ Governor Ueda reiterated that ETF purchases are part of large-scale easing and sees no significant problem with ETF buys now. Japan's Top FX Diplomat Kanda discussed the possible collapse of US banks at G7 and how to respond, including the US debt ceiling. Additionally, Japan's FX Reserves for April reached $1.27T versus $1.26T prior, the highest since August 2022.
South Korea's Kospi opened at -0.2% at 2,505, with the unemployment rate for April at 2.6% versus 2.7% prior and the current account for March at +$0.3B versus -$0.5B prior.
In other Asian countries, the Philippines Q1 Agriculture Output Y/Y was at 2.1% versus 1.0% prior, while Vietnam's Central Bank is said to consider additional rate cuts, and Malaysia's end-April Foreign Reserves reached $114.4B versus $115.5B prior. Singapore passed a bill for banks to share data to fight crime, and Indonesia's April Retail Sales Estimate Y/Y is 1.0%.
North America:
- The US NFIB Small Business Optimism Index for April fell to 89.0, missing the expected 89.7 and marking its lowest level since 2013.
- According to US Fed's Williams, there are indications that tighter credit conditions are impacting the economy and that some of the tightening goes beyond rate hikes.
- US President Biden has reiterated that he has been considering the 14th amendment on debt and will discuss why Congress must avoid default at a meeting at 1:30 PM ET.
- House Speaker McCarthy has stated that he did not see any new developments in the White House meeting on the debt limit today, and he hopes that Biden will negotiate over the next two weeks.
Europe:
- Sweden Central Bank (Riksbank) Deputy Governor Floden stated that bringing down inflation is the top priority, and the policy rate is likely to be raised further.
- ECB's Vujcic (Croatia) believes that further rate hikes are necessary and a change in core inflation is required.
- ECB's Nagel (Germany), a hawk, believes that interest rates should rise further as inflation is extremely high, and the step size is not as central as it was last year.
- The UK Halifax Price Index for April shows a monthly decline of 0.3% versus a prior increase of 0.8%, while the year-on-year rate stands at 0.1% compared to a prior rate of 1.6%, the smallest annual pace since December 2012.
Commodity markets were largely subdued due to a cautious risk sentiment. Crude futures declined following a surprise build in crude stockpiles and mixed inventory data. Reports that Russia nearly achieved its oil output cut targets in April and the US government's plans to refill the Strategic Petroleum Reserve provided some support. The Energy Information Administration's (EIA) latest Short-Term Energy Outlook (STEO) showed an upward revision of 120k BPD to the 2023 world oil demand growth forecast and a downward revision of 130k BPD to the 2024 forecast. Meanwhile, UK's Unite union announced a two-day strike by 1,200 offshore workers across various operators, including BP, Shell, and Repsol. Spot gold and copper futures remained uneventful, with the latter receiving support from Peru's energy and mining ministry, which reported a 20.4% year-over-year increase in copper production for March.
Looking ahead, significant events include the release of US CPI and Chinese M2, as well as reports on supply from the United Kingdom, Germany, and the United States. Earnings reports from major corporations such as ABN AMRO, Credit Agricole, Continental, E.ON, Telecom Italia, Nexi, and Disney are also expected to attract attention.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team
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