Calmer market conditions

US stocks and bonds rose yesterday, a welcome change from the latter part of last week when both were selling off together at times and a sign of some improvement in investor confidence. Indications from Trump that US imports of auto parts might be exempt from tariffs helped sentiment, though he again threatened tariffs on pharmaceuticals. The dollar had a mixed session, though it did firm a touch against the euro and trades sub $1.1350 this morning. Sterling benefited from the calmer conditions in markets, having underperformed last week. It has strengthened to around $1.32 against the dollar, up around a cent from Friday’s close, and has recovered to just under £0.86 versus the euro from lows north of £0.87 late last week.

US stocks ended off the very best levels of the day, closing with gains of just under 1%, while European stocks had a positive start to the week, finishing almost 3% higher having lost ground last week. In bond markets, US bonds rallied strongly (prices up, yields lower) with 10-year yields falling by more than 10bps (to just under 4.40%), bringing the cumulative decline from last week’s highs to around 20bps. Equivalent UK yields also fell by around 10bps, also reversing some of last week’s sharp increase, while German 10-year yields were around 5bps lower on the day.

Labour market data released in the UK a short while ago were something of a mixed bag. Employment on the Labour Force Survey measure rose strongly (+206k) in December-February (versus September-November), but the number of employees fell in March (-78k) according to Revenue-based estimates. The unemployment rate was unchanged at 4.4% in the three months to February, while the year-on rate of growth in whole-economy regular earnings remained elevated at 5.9% over this period.

Looking to the day ahead, it is reasonably quiet on the economic data front with Euro area industrial production, the ZEW economic sentiment index in Germany, and import/export prices in the US the main releases of note.