Market Roundup
• Italy's Cottarelli opens door to possible eurosceptic government.
• US Q1 GDP 2nd Estimate, 2.2%, 2.3% forecast, 2.3% previous.
• US Q1 GDP Cons Spending Prelim, 1.0%, 1.1% previous.
• US Q1 GDP Sales Prelim, 2.0%, 2.0% forecast, 1.9% previous.
• US Q1 GDP Deflator Prelim, 1.9%, 2.0% forecast, 2.0% previous.
• US Q1 Core PCE Prices Prelim, 2.3%, 2.5% forecast, 2.5% previous.
• US Q1 PCE Prices Prelim, 2.6%, 2.7% forecast, 2.7% previous.
• US Q1 Corporate Profits Prelim, 5.9%, 1.7% previous.
• US Apr Adv Goods Trade Balance, -68.19 bln, -68.29 bln previous.
• US Apr Wholesale Inventories Adv, 0.0%, 0.3% previous.
• US Apr Retail Inventories Advance, 0.5%, -0.1% previous.
• US May ADP National Employment, 178k, 190k forecast, 204k previous.
• US w/e Mortgage Market Index, 356.1, 366.7 previous.
• US w/e MBA 30-Yr Mortgage Rate, 4.84%, 4.86% previous.
• CA May BoC Rate Decision, 1.25%, 1.25% forecast, 1.25% previous.
• CA Q1 Current Account C$, -19.50 bln, -18.00 bln forecast, -16.35 bln previous.
• CA Apr Producer Prices MM, 0.5%, 0.8% previous.
• CA Apr Producer Prices YY, 2.4%, 2.3% previous.
• Fed, U.S. regulators unveil first 'Volcker Rule' rewrite.
• U.S., Europe expose trade divisions as tariff clock ticks.
• China vows to protect its interests from "reckless" U.S. trade threats.
Looking Ahead - Economic Data (GMT)
• 30 May 23:50 Japan w/e Foreign Bond Investment, 948.9 bln previous
• 30 May 23:50 Japan w/e Foreign Investment JP Stock, 99.1 bln previous
• 30 May 23:50 Japan Apr Industrial Output Prelim MM, 1.2% forecast, 1.4% previous
• 30 May 23:50 Japan May IP Forecast 1 Mth Ahead, 3.1% previous
• 30 May 23:50 Japan Jun IP Forecast 2 Mth Ahead, -1.6% previous
• 31 May 01:00 China May NBS Non-Mfg PMI, 54.80 previous
• 31 May 01:00 China May NBS Manufacturing PMI, 51.3 forecast, 51.4 previous
• 31 May 01:00 China May Composite PMI, 54.1 previous
• 31 May 01:00 New Zealand May NBNZ Business Outlook, -23.4% previous
• 31 May 01:00 New Zealand May NBNZ Own Activity, 17.8% previous
• 31 May 01:30 Australia Q1 Capital Expenditure, 0.7% forecast, -0.2% previous
• 31 May 01:30 Australia Q1 Building Capex, -2.1% previous
• 31 May 01:30 Australia Q1 Plant/Machinery Capex, 2.2% previous
• 31 May 01:30 Australia Apr Private Sector Credit, 0.5% previous
• 31 May 01:30 Australia Apr Housing Credit, 0.5% previous
• 31 May 05:00 Japan Apr Construction Orders YY, -4.0% previous
• 31 May 05:00 Japan Apr Housing Starts YY, -8.9% forecast, -8.3% previous
Looking Ahead - Events, Other Releases (GMT)
• N/A The Bank of England and CEPR are holding a conference on Competition and Regulation in Financial Markets in London
• 16:35 Speech by Sylvain Leduc, Bank of Canada Deputy Governor about Economic Progress Report in Quebec City, Canada
Currency Summaries
EUR/USD is likely to find support at 1.1507 levels and currently trading at 1.1652 levels. The pair has made session high at 1.1676 and hit lows at 1.1591 levels. The euro recovered against US dollar on Wednesday from 10-month lows after reports that Italy's biggest party would make a renewed attempt to form a coalition government and end months of political turmoil. An attempt by two anti-establishment parties to form a new government in Italy collapsed at the weekend, raising the prospect of an early election. Markets feared that election would become a de facto referendum on Italy's use of the euro.A source close to 5-Star, the single largest party in the new parliament, said the party would try again to form a coalition with the right-wing League. Without a deal, sources said President Sergio Mattarella could dissolve parliament in the coming days and send Italians back to the polls as early as July 29. The euro, which plunged to a 10-month low of $1.1510 on Tuesday, rose 1.2 percent to a session high of $1.1676 on Wednesday. It remains down 4 percent this month against the dollar. The dollar index, measured against a basket of currencies, slipped 0.7 percent to 94.10 and below Tuesday's 6 1/2- month high.
GBP/USD is supported in the range of 1.3200 levels and currently trading at 1.3275 levels. It reached session high at 1.3304 and dropped to session low at 1.3252 levels. Sterling strengthened against the dollar on Wednesday as currencies stabilised after Italy's political crisis sent shock waves through global financial markets. Purchasing managers' index data for the manufacturing sector on Friday will offer the first test for sterling bulls as recent economic data have indicated that another rate hike from the Bank of England this year is not a done deal yet. The British currency edged 0.1 percent higher at $1.3273 after falling to its lowest levels since Nov. 20 on Tuesday. But it weakened against the euro by half a percent, to 87.51 pence, thanks to a broad-based euro bounce. Hopes that Italy could avoid a new election after all helped European markets recover from one of their worst sell-offs in years on Wednesday, though markets remained wary. May's purchasing-manager index will offer some clues on how the economy is faring. A poll forecast the index would show growth moderated in April. On a trade-weighted basis, sterling was trading at 78.73, not far from a two-month low of 78.53 hit earlier this month.
USD/CAD is supported at 1.2820 levels and is trading at 1.2877 levels. It has made session high at 1.3012 and lows at 1.2834 levels. The Canadian dollar strengthened against its U.S. counterpart on Wednesday after the Bank of Canada left interest rates on hold but boosted expectations for a hike at its next policy meeting in July.The central bank left its benchmark interest rate at 1.25 percent, as expected, but dropped cautious language about future rate moves in a signal that higher borrowing costs are on the way. The Bank of Canada has hiked three times since last summer. Chances of further tightening in July jumped to around 70 percent from less than 50 percent before the announcement, the overnight index swaps market indicated. On the data front, Canada's current account deficit widened to C$19.50 billion in the first quarter, the third largest ever, thanks to a growing international trade gap in goods, Statistics Canada said. In separate data, Canadian producer prices rose by 0.5 percent in April from March, the fourth consecutive increase, on higher prices for energy and petroleum products. The Canadian dollar was last trading 1.1 percent higher at C$1.2877 to the greenback, or 77.66 U.S. cents, its biggest gain since March 21.
AUD/USD is supported around 0.7500 levels and currently trading at 0.7571 levels. It hit session high at 0.7583 and made session lows at 0.7528 levels. The Australian dollar strengthened against greenback on Wednesday after U.S. data showed the U.S. economy slowed slightly more than initially expected in the first quarter while political uncertainty lingered in Italy. U.S. gross domestic product increased at a 2.2 percent annual rate, the Commerce Department said in its second estimate of first-quarter GDP, instead of the previously reported 2.3 percent pace. Italy's 5-Star Movement party made a renewed attempt to form a coalition government and called for eurosceptic economist Paolo Savona to withdraw his candidacy as economy minister. Souring Sino-U.S. relations added to investor woes as it rekindled trade-war fears after China expressed surprise and said it was ready to fight back at the White House's decision to go ahead with the $50 billion worth of tariffs on Chinese imports, unless Beijing addresses the issue of theft of American intellectual property. This development came after the two sides agreed earlier this month to look at steps to narrow the U.S. trade deficit with China, and days ahead of a visit to the Chinese capital by U.S. Commerce Secretary Wilbur Ross for further talks. Australian dollar was last up 0.9 percent at $0.7577, above two-week lows low of $0.7474.
Equities Recap
A robust bounce back in Italian stocks helped lift European equities on Wednesday as investors recovered from the previous day's sharp selloff and digested the possibility of a new Italian election as early as July.
UK's benchmark FTSE 100 closed up 0.5 percent, the pan-European FTSEurofirst 300 ended the day up by 0.03 percent, Germany's Dax ended up by 0.6 percent, France’s CAC finished the day down by 0.5 percent.
U.S. stocks ended higher on Wednesday, with the S&P 500 and Dow registering their biggest daily percentage gains since May 4, as signs emerged of an easing of political turmoil in Italy and a surge in oil prices boosted energy stocks.
Dow Jones closed up by 1.26 percent, S&P 500 ended up by 1.27 percent, Nasdaq finished the day up by 0.89 percent.
Treasuries Recap
U.S. Treasury yields rose on Wednesday, reversing sharp losses the previous session fueled by the Italian political crisis, as financial markets stabilized after Italy sought to end its turmoil with a plan for a new government.
U.S. 10-year yields rose to 2.842 percent , from Tuesday's 2.768 percent. U.S. 30-year yields were last at 3.014 percent, up from 2.967 percent late on Tuesday.
On the short-end of the curve, U.S. 2-year yields were up at 2.415 percent, from Tuesday's 2.319 percent.
Commodities Recap
Gold prices edged higher on Wednesday as the dollar wilted after U.S. data showed the U.S. economy slowed slightly more than initially expected in the first quarter while political uncertainty lingered in Italy.
Spot gold was up 0.32 percent at $1,302.17 per ounce by 1:32 p.m. EDT (1732 GMT), while U.S. gold futures for June delivery settled up $2.50, or 0.2 percent, at $1,301.50 per ounce.
Oil prices climbed surged on Wednesday, rebounding from a four-day slump as Russia's central bank expressed caution on plans to boost oil supply and analysts forecast a drawdown in U.S. crude inventories.
Brent settled up $2.11, or 2.8 percent, at $77.50 a barrel. U.S. crude gained $1.48, or 2.2 percent, to $68.21.
