From Doonesbury:
And from Marc to Market:
Overview: Disappointing Chinese April data spurred speculation that more stimulus will be forthcoming and bolsters hopes that a trade deal with the US by the end of next month helped Asian Pacific equities advance for the first time this week. Indonesia, which reported a record trade deficit on the back of collapsing exports (-13.1% year-over-year in April, nearly twice the decline expected after a 10% fall in March) kept the pressure on its equity market. At the same time, though, an unexpected rise in South Korean unemployment (4.1% vs. 3.8%) heightened speculation of a near-term rate cut, while the equity market rose for the second consecutive session. European and US equities have not followed suit. The Dow Jones Stoxx 600 has been unable to hold on to the initial gains after yesterday's 1% rise, the most since early April, while US shares are trading with a softer profile. Bond yields are mostly softer. The US benchmark 10-year yield is slipping through 2.40%, while the German benchmark yield is its lowest since 2016 (negative 11 bp). Italy, where League leader and Deputy PM Salvini, probably campaigning for the European Parliament elections said he would be willing to break the EU fiscal rules to cut the unemployment rate in half, has seen its bond and stock underperform. Italy's bank index has fallen over 12% this month. The dollar is mixed, but it seems that its role is more like a fulcrum than a key mover. The dollar-bloc currencies and the Scandis on the weaker side of the teeter-totter and the yen, Swiss franc are on the other side, with the euro and sterling firm but little changed. Unchanged unemployment at 14.7%, despite calls for deterioration, failed to lend the Turkish lira much support as the government re-imposed a 0.1% foreign exchange fee on some transactions to discourage speculation (rather than raise funds).
Asia Pacific
Many observers are suspect of Chinese economic data. Yet there seems to be an asymmetry. There is greater disbelief expressed toward strong data than weak data. That means that most are willing to accept at face value today's disappointing data. Industrial output fell to 5.4% from 8.5% in March and well below expectations. Retail sales slowed to 7.2% from 8.7%. Fixed asset investment slowed to 6.1% form 6.3%. On the other hand, unemployment fell to 5.0% from 5.2%, and investment in property edged to 11.9% from 11.8%. The slowdown does not appear to be the result of the trade shock, and the latest escalation is not yet in effect. We think China has the will and the resources to make good on what we have called its "Draghi moment"--willing to do whatever it takes to bolster the economy in the face of US pressure and the 70th anniversary of the Communist Revolution.
Japan reported mixed data. Construction orders jumped 66% in March. This follows a small decline in February after a nearly 20% rise in January. Orders rose by the most in Q1 since Q2 14. On the other hand, preliminary machine tool orders for April slumped by a third (-33.4%). It is the sixth consecutive year-over-year decline. Separately, we note that although the Japanese yield curve through 10-year is negative, the equity market is paying a rich yield. The yield of the Topix is near 2.5%, according to Bloomberg. This is not only greater than the S&P 500 dividend yield (just below 2%), but it is also above the US 10-year yield. The dividend yield of the Nikkei is near 2.2%....
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