- Slightly positive sentiment this morning as strong Japanese machinery orders partly offset yesterday's soft US data.
- Fed dove Williams says asset purchases could be scaled down as soon as this summer.
- Focus today on US consumer confidence and speeches by ECB board members.
The main market mover overnight was the weaker-than-expected US data released yesterday. The jump in the weekly initial unemployment claims suggests that the US labour market continues to improve, albeit not as fast as hoped after the sharp drop in the previous week. In addition, subdued inflation in the US continues to give Fed considerable flexibility. Overnight sentiment in the market was aided by the release of better-than-expected machinery orders in Japan. Machinery orders in March seasonally adjusted surged 14.2% m/m (Cons:+3.5%). Business investments was one of the few weak points in the strong GDP data released yesterday, so the strong machinery orders suggest that the recovery in Japan is also starting to spill over into business investments.
San Francisco Fed President John Williams in comments overnight said that the Fed could scale back its securities purchases as soon as this summer and possibly end the programme by year-end, see Bloomberg. Williams is currently not a voting member of the FOMC but his views are nonetheless interesting because Williams is generally regarded as one of the doves on the FOMC.
The US stock market ended yesterday’s session moderately lower on the back of the soft US data. S&P 500 yesterday closed down 0.5%. However, sentiment has improved in Asian trade supported by better-than-expected machinery orders in Japan and most Asian stock markets are moderately higher this morning with Nikkei and Hang Seng up 0.4% and 0.2% respectively.
US bond yields declined markedly on the back of the soft data but have edged up slightly during Asian trade. 10-year US bond yield this morning is 1.88%. In Japan it has so far been a relatively calm session with 10-year Japanese bond yields largely unchanged at 0.8%.
In FX markets USD has strengthened overnight and has recouped most of its initial losses after the release of the soft US data yesterday. Speculation about another rate cut from the ECB and the Fed scaling down its asset purchases appears to be the main market driver. EUR/USD is trading 1.2864 and USD/JPY is trading 102.30.
To Read the Entire Report Please Click on the pdf File Below.