Equities rebound at start of the week
Equities had a good start to the week, with the S&P 500 rising 0.9% for the day, breaking a run of 6 consecutive days of daily loses, and taking the index back to over 5,000. This will be a key week for earnings in the US with a number of major corporates due to report in the coming days with analysts, for the most part, expecting positive news from the majority – or tech firms at least – to give equities a small boost. In FX markets, there was little movement on a quiet news day with the euro edging down a little to just under $1.0650 to the dollar and remaining above 86p to sterling while the GBPUSD cross is down a touch to around $1.2350.
Government yields also saw very little movement yesterday, with US 10-year yields largely unchanged at 4.6%. German 10-year yields ticked down just a few bps to just below 2.5% while the fall in the UK 10-year yields was similarly small, down 2bps to 4.2%.
Euro area consumer confidence rose to -14.7 in April from -14.9 in May. Economic growth remains sluggish in the major European economies and the consumer remains subdued though the trend in sentiment is upwards, although slowly, as easing inflation takes some of the pressure off households.
New ECB Governing Council member Patsalides said ECB rates are at the right level now to meet the inflation target. He said that ECB is not committed to a future rate cuts or rate hikes but was data dependent. The Bank he said ‘has not determined its course’. It maintains ‘flexibility’ which depends on economic data ‘at the moment’. On the other hand, other ECB members are more dovish on the rate path with Portuguese Governor Centeno saying the Bank could cut by up to 100bps this year depending on ‘confirmation of reality’ as the 2% inflation target will be reached faster than the Bank thought at the March meeting and even if 100bps were cut from the ECB rates, they would still be higher than the neutral rate and monetary policy would still be in restrictive territory.
On the economic data front today we have provisional April PMIs in the major economies and new home sales in the US. On the speaker front, Huw Pill and Jonathan Haskel from the BoE is due alongside Panetta and Nagel from the ECB.