Market wrap: US data was second tier but impressive - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global Market Sentiment: Global markets marked time Thursday, an early lurch toward risk aversion reversed later in the session. All the main US indices were down around 0.7% at their lows but recovered, the S&P500 trimming losses to -0.2%, the Dow -0.1%. US data (PPI) was stronger than expected, FX and fixed income markets were confined to small ranges.

Weaker than expected earnings from US retailers drove early risk aversion, the political firestorm engulfing the Trump Administration around the firing of FBI chief Comey remains a major talking point too.

Moody’s cut ratings on 6 Canadian banks amid housing woes there, the BoE kept interest rates unchanged and sounded a slightly more hawkish tone as inflation continues to trend above the bank’s range but the vote was 7-1, whereas many had warmed to the possibility of a more hawkish 6-2 vote.

Interest rates: UK 10yr gilt yields fell 0.7bp (1.159%), German 10yr bund yields rose +1bp (0.432%) while US 10yr yields fell 1.26bp to 2.4015%, despite solid US data.

Currencies: EUR/USD made a 30 point run lower in early US trade to 1.0840 after strong US PPI data but quickly bounced back to unchanged at 1.0870. ECB Chief Economist Praet echoed yesterday’s comments from Draghi noting that while the economic picture is firming its too early to contemplate an exit from accommodation. USD/JPY fell 0.3%, weakness on the day mostly due to an early bout of risk aversion in US equity markets.

NZD/USD spent much of the offshore session consolidating earlier losses driven by the RBNZ’s dovish MPC, where they maintained that policy will remain accommodative for a considerable period and made no changes to the rates track, NZD traded between 0.6825 and 0.6865 offshore. AUD/USD was held to a 0.7350-0.7380 range overnight, Dalian bulk commodity futures fell, iron ore -1.4%, coking coal -1.6% though thermal coal rose 0.1%.

Economic Wrap

US data was second tier but impressive, April produce prices rose a stronger than expected 0.5% (0.2% expected), the upside surprise matched by the core rate, ex food, energy and trade rising 0.7% (0.2% expected), while jobless claims continued to hold down near 44 year lows coming in at 236k (consensus 245k)."