From Marc to Market:
The US dollar is firm, near the best levels of the week against
the euro, yen, and sterling. However, against the dollar-bloc and several actively
traded emerging market currencies, including the Turkish lira and South African
rand, the greenback has given back some of yesterday's gains.
Oil is snapping a four-day decline. News that US output fell by 113k barrels a day last
week, the biggest drop in eight months, coupled with a Canadian wildfire that
is threatening as much as one million barrels a day
in Canada are helping drive oil prices higher. Several oil companies have
announced cutting output in Canada and/or
closing pipelines.
Rising oil prices did Asian equity markets no favors. The MSCI Asia-Pacific Index
excluding Japan, which concludes its Golden Week holiday day with markets
re-opening tomorrow, posted a fractional
loss that was sufficient to extend the losing streak for a seventh session.
China's markets bucked the trend to post marginal gains. European
shares, on the other hand, are mostly higher, with the Dow Jones Stoxx 600
snapping a four-day decline with a 0.5% gain near midday in London. The gains are led by telecom and energy sectors.
Asia-Pacific bonds were firm, but European bonds are trading
heavier. European
bonds yields are mostly 1-2
bp higher as are US Treasury yields. The US 10-year yield fell 10 bp
over the past two sessions and is up two bp today. There were
conflicting
employment signals yesterday. The ADP estimate disappointed, but the
jobs
component of the service ISM, where the headline rose to four-month
highs,
reached its highest level in a year. Initial jobless claims today,
though no bearing on tomorrow's national report, may be given more
weight than
usual. The four-week moving average, used to smooth out of the noise in
this high frequency series stands its lowest level since the early
1970s.
Nevertheless, the importance of the employment data may be
lessening. The continued recovery of the labor
market may be necessary, but still insufficient to prompt the Fed to move.
The April FOMC statement acknowledged the improvement but cautioned that
it was not lifting consumption, which drives the economy. That said, the
strong April auto sales suggest the US
consumer may be returning in Q2.
In addition to the weekly initial jobless claims, the North
American session features speeches by four regional Fed Presidents (Bullard,
Kaplan, Lockhart, and Williams). Many
investors may be confused by
the cacophony of Fed voices. We continue to advise that the clearest
signals of intent and policies emanate from the Fed's leadership. Three
voices in particular should be monitored, Yellen, Fischer, and Dudley. ...MORE
This follows on yesterday's "
Greenback Firmer, but has it Turned?" which we didn't get to.
