An FOMC Announcement and Lots of Data Releases

May 2, 2018

In this second day of the third FOMC policy review of 2018, a statement will be released at 14:00 EDT (18:00 GMT). No rate changed is expected, and no subsequent press conference is scheduled. The fed funds target was last raised at the prior March 21-22 meeting. In light of further evidence of rising inflation, the statement will likely encourage expectations of a rate hike in June.

The dollar has lost 0.3% against the Swiss franc overnight and is also down 0.2% versus the kiwi and sterling and by 0.1% relative to the loonie. The values of the euro, loonie and yen are unchanged on net against the dollar. Many emerging market currencies lost ground; for instance, the yuan and peso are down 0.4% and 0.3%.

Equities in Asia closed down by 0.5% in Hong Kong, 0.2% in Japan and 0.4% in India and South Korea but unchanged in China and Singapore. Stocks in New Zealand and Australia rose by 0.8% and 0.6%. European share prices so far show advances of 1.2% in Germany, 0.9% in Spain and Italy, but just 0.4% in the U.K. and 0.2% in France.

Ahead of the FOMC announcement, the ten-year Treasury futures yield is back knocking on the 3% threshold, and 10-year sovereign British, German and Japanese yields rose 5, 2, and 1 basis points overnight.

The prices of WTI oil and Comex gold each firmed 0.3%.

Euroland’s manufacturing purchasing managers index slid 0.4 points to a 13-month low in April of 56.2. Bad weather and mounting supply constraints were factors in the shrinking rate of improvement in operating conditions.

Among Ezone members, PMI readings dropped to a 15-month low in Italy, a 9-month low in Germany, a 7-month low in Spain, a 6-month low in The Netherlands, a 5-month low in Greece, and matched March’s 10-month low in Austria. The French and Irish PMI scores recovered to 2-month highs. All of these indices were above the 50 threshold that separates expansion from contraction, and they ranged from the Dutch 60.7 reading to Greece’s 52.9.

The Swiss manufacturing PMI rose 3.3 points to a robust 63.6, which was a 2-month high. Norway’s PMI reading of 56.2 was also at a 2-month high, but Sweden’s index fell 1.4 points to 54.5, a 20-month low. Poland’s PMI edged up 0.2 points to a 3-month high, but the Czech PMI dipped 0.1 to a 7-month low.

Among Asian economies where manufacturing PMI surveys were published, India’s index recovered to a 3-month high but still tepid 51.6. China’s 51.1 score was a 2-month high as were the readings in Vietnam of 52.7 and Thailand of 49.5. Indonesia’s 51.6 reading constitutes a 22-month peak, but the South Korean manufacturing PMI fell 0.7 points to a 13-month low of 48.4. Malaysia’s PMI also was in sub-50 territory at a 6-month low of 48.6, while the Filipino PMI (52.7) was the best score in four months.

Japan’s service-sector and combined services and manufacturing PMI scores were reported. Each tipped in at six month highs of 52.5 and 53.1, respectively, but business confidence weakened further to a 7-month low.

South Africa’s manufacturing purchasing managers index rebounded through the 50 threshold to an 11-month high of 50.9.

Turkey’s manufacturing PMI fell below 50 to a 15-month low of 48.9.

Britain’s construction PMI, which had plunged during the March snows to a 20-month low of 47.0, recovered to a 5-month high in April of 52.5.

The earliest estimate of GDP growth last quarter in the euro area matched analyst expectations, showing a slower 0.4% quarterly increase and a 2.5% on-year increase, down from 2.8% in the final quarter of 2017 but above the 2.1% on-year pace in the first quarter of last year.

The Euroland unemployment rate remained steady at 8.5% in March despite a 0.2 percentage point decline in the jobless rate for young workers, which remains still very elevated at 17.3%.

Japanese consumer confidence suffered a setback in April, dropping 0.7 points to a 5-month low of 43.6. On-year growth in Japan’s monetary base continued to decelerate last month, reaching 7.8% versus 9.4% in the first quarter, 17.0% in 2017, and 25.0% in 2016.

Swiss retail sales disappointingly dipped 0.1% on month in March and recorded the biggest year-on-year decline (1.8%) since last October. There was a 3-point decline in Swiss consumer confidence this quarter, which at a value of 2 was the weakest since the final quarter of 2017.

British shop prices posted a 1.0% on-year decline in both March and April after drops of 0.8% in February and 0.6% in both December and January.

Italian GDP grew 0.3% last quarter, resulting in a 1.4% rise compared to the first quarter of 2017. Unemployment remained at 11.0% in March.

Consumer prices in the year to April climbed in Indonesia by 3.41% (core 2.69%) and in South Korea by 1.6%.

Quarterly labor statistics were reported in New Zealand. The first-quarter jobless rate was 4.4%. Employment climbed 0.6% on quarter and 3.1% on year. Labor participation slipped at tad to 70.8%, and private labor costs were an unchanged 1.9% greater than a year earlier.

ADP estimates that private-sector U.S. employment expanded 204K in April, marginally more than analysts were anticipating but the smallest monthly increase since November. U.S. mortgage applications last week fell 2.5% as the 30-year fixed mortgage rate climbed 7 basis points to 4.80%. Now investors await the FOMC announcement.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


Tags: , ,


Comments are closed.