Waiting for the FOMC Statement Later Today

May 3, 2017

Markets were closed today in Japan (Constitution Day) and both South Korea and Hong Kong (Buddah’s birthday).

Lower U.S. share prices are indicated likely in the wake of disappointing data released yesterday. All six automakers reported lower sales in April, and Apple’s 1Q earnings missed expectations.

The yen’s recent slide continued. The dollar shows gains of 0.7% against the Australian dollar, 0.3% relative to the euro¬†and kiwi, 0.2% versus the yen and peso and 0.1% vis-a-vis the loonie and sterling.

Stocks dropped 1.0% in Australia, 0.5% in Indonesia, and 0.3% in China. European share prices are down 0.3% in the U.K., 0.2% in France and Italy and 0.1% in Germany.

Yesterday’s sizable tumble in the price of oil was trimmed somewhat. West Texas Intermediate crude oil recovered 0.7% to $47.99 per barrel. But other commodity prices such as for copper and gold have declined in early Wednesday trading.

The 10-year German bund yield is unchanged at 0.32%, while the 10-year British gilt ticked a basis point lower to 1.08%.

The earliest estimate of GDP growth last quarter in the euro area, a rise of 0.5% from 4Q16 and 1.7% on year, beat U.S. results. GDP in Euroland also rose 0.5% in the final and first quarters of 2016.

Producer prices in the euro area fell by a larger-than-forecast 0.3% in March and were 3.9% higher than a year earlier. The energy component slumped 1.7% on month after dropping 1.0% in February.

German unemployment fell 15K in April. There was a 5.8% jobless rate, and a 10K rise in job vacancies.

British shop prices posted a 12-month drop of 0.5% in April after on-year declines of 1.0% in February followed by 0.8% in March. Initial talks between British and EU officials about Brexit have gone poorly.

Britain’s construction purchasing managers index improved 0.9 points to 53.1 in April, which was the highest reading so far in 2017.

New Zealand’s jobless rate fell to 4.9% in the first quarter after having risen from that level in 3Q16 to 4.2% in the final quarter of 2016. Employment grew 1.2% on quarter and 5.7% on year. On-year wage inflation stayed at 1.6%, and the labor participation rate edged up 0.1 percentage point to 70.6%.

Australia’s Performance of Services index recovered 1.3 points further to print at 53.0 in April following readings of 51.7 in March, 49.0 in February, 54.5 in January and 57.7 in the final month of 2016.

Vietnam’s manufacturing PMI fell a half point to a 3-month low but still solid 54.1 score. Export orders growth was at a record pace.

Egypt’s non-oil PMI improved 1.5 points to 47.4, signaling the slowest rate of contraction in nine months. The Saudi Arabian non-oil PMI nudged up 0.1 point to a 2-month high of 56.5, but the comparable PMI for the United Arab Emirates backed off March’s 19-month high of 56.2 to print 0.1 point lower at 56.1.

Turkish CPI inflation accelerated further to 11.87% in April from 11.3% in March and 10.1% in February. Producer price inflation was even higher into double-digit territory at 16.76% last month in Turkey.

The FOMC releases at statement at 14:00 EDT today. Investors look for clarification regarding the timing of the next interest rate hike and the latest thinking about how and when balance sheet reduction will commence. The ADP estimate of private jobs growth and the ISM non-manufacturing PMI report arrive today as well.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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