Overnight Markets and News
Jun E-mini S&Ps (ESM18 -0.10%) this morning are down -0.18% and European stocks are down -0.05%. Higher interest rates are undercutting stocks as the 10-year T-note yield rose to a 4-week high of 2.89% and the 10-year German bund yield climbed to a 4-week high of 0.574%. An increase in inflation expectations is boosting government bond yields as the 10-year T-note breakeven inflation rate climbed to a 3-1/2 year high of 2.16% due to the recent surge in metals and energy prices. Strength in energy stocks is limiting the downside in U.S. and European bourses with May WTI crude oil (CLK18 +1.29%) up +0.54% at a new 3-1/3 year nearest-futures high. Oil prices are extending gains from Wednesday after the EIA reported a surprise drop in weekly U.S. crude inventories. Oil prices are also moving higher ahead of Friday’s OPEC meeting in Saudi Arabia where the cartel may signal an extension of their production cuts past this year. Asian stocks settled higher: Japan +0.15%, Hong Kong +1.40%, China +0.84%, Taiwan +1.14%, Australia +0.33%, Singapore +1.15%, South Korea +0.46%, India +0.28%. Japan’s Nikkei Stock Index rallied to a 1-1/2 month high as trade tensions eased when U.S. President Trump and Japanese Prime Minister Abe agreed to work closely on bilateral trade.
The dollar index (DXY00 -0.02%) is up +0.03%. EUR/USD (^EURUSD +0.01%) is down -0.08%. USD/JPY (^USDJPY +0.17%) is up +0.18%.
Jun 10-year T-note prices (ZNM18 -0-050) are down -5 ticks at a 4-week low.
Boston Fed President Rosengren said the capacity of the U.S. to respond to an economic or financial shock has been diminishing as historically low interest rates mean conventional monetary policy response will be limited and unconventional tools may encounter resistance.
UK Mar retail sales ex auto fuel fell -0.5% m/m and rose +1.1% y/y, weaker than expectations of -0.4% m/m and +1.4% y/y. Mar retail sales including auto fuel fell -1.2% m/m and rose +1.1% y/y, weaker than expectations of -0.6% m/m and +1.9% y/y.
U.S. Stock Preview
Key U.S. news today includes: (1) Fed Governor Lael Brainard speaks on regulatory reform at the 2018 Global Finance Forum in Washington, (2) weekly initial unemployment claims (expected -3,000 to 230,000, previous -9,000 to 233,000) and continuing claims (expected -26,000 to 1.845 million, previous +53,000 to 1.871 million), (3) Apr Philadelphia Fed business outlook index (expected -1.3 to 21.0, Mar -3.5 to 22.3), (4) USDA weekly Export Sales, (5) Fed Governor Randal Quarles speaks at an Institute of International Finance event in Washington, (6) Mar leading indicators (expected +0.3% m/m, Feb +0.6% m/m), (7) Treasury auctions 5-year TIPS, (8) Cleveland Fed President Loretta Mester (voter) discusses the outlook for the economy and monetary policy at the University of Pittsburgh Joseph M. Katz Graduate School of Business.
