US equities tumbled overnight as Fed chair Yellen warned that the "equity-market valuations at this point generally are quite high" and "there are potential dangers there". DJIA closed -86.22 pts, or -0.48% down at 17841.98 but stayed in range of 17585/18228 established since March. S&P 500 also lost -9.31 pts, or -0.45% to close at 2080.15 and is also back below 55 days EMA. Nonetheless, former Minneapolis Fed president Gary Stern criticized that Yellen's warning was just "talk" if it isn't followed by actions like interest rate hike. Also, some people compared Yellen's comment to former Fed chair Alan Greenspan's speech back in 1996 that triggered negative reactions. But then, the bull market in stocks continued through early 2000.
Atlanta Fed president Dennis Lockhart maintained his view that conditions for rate hike "will be appropriate in the middle of the year". Meanwhile, he noted that "probabilities as reflected in forward markets, or futures markets for fed funds, seem to have moved from December toward September" and that's a "reasonable alignment". He also emphasized that, on the back of March's soft hiring growth, the April job data to be released this Friday will be very important to gauge momentum in the second quarter.
Dollar's selloff resumed yesterday with the dollar index now pressing an important cluster support level. 94.05 structural support was breached. Another round of weakness would suggest that recent fall from 100.39 is indeed correcting the whole rise from 78.90 and would send the index back to 55 weeks EMA (now at 89.73). Correspondingly, firm break of 1.1378 in EUR/USD will indicate that rebound from 1.0461 is correcting whole fall from 1.3993 and would bring further rally in the pair. Nonetheless, rebound in the greenback from current level will maintain a near term neutral outlook.
In Eurozone, ECB approved additional EUR 2b in liquidity to Greek banks through the Emergency Liquidity Assistance mechanism of the Bank of Greece. The ceiling was raised from EUR 76.9b last week to EUR 78.9b. Greece made a EUR 200m interest payment to the IMF yesterday, on schedule. Prime minister Alexis Tsipras spoked with European Commission President Jean-Claude Juncker. According to a joint statement, they discussed "the importance of reforms to modernize the pension system" and "the need for wage developments and labor market institutions to be supportive of job creation, competitiveness and social cohesion."
UK general election will be a major focus today. UK's general election this year would be the most uncertain one ever. With only 2 days to go before polling stations open, it remains unclear which party would win the most seats, let alone becoming the majority. The latest YouGov poll shows that the Conservatives and Labour are neck and neck on 33%, with UKIP on 12%, and the Lib Dems on 10%. With no party likely would win the majority of seats, a coalition government should be formed. It is believed that a Conservative-led government would be more fiscally responsible but would trigger a referendum over Britain's exit of the EU, whilst a Labour-Lib Dems government would result in relatively-slower deficit reduction more intervene in markets. Yet, the latter would endorse a friendlier environment with the EU. A Labour-led government supported by the SNP would lead to loosened fiscal policy and more market intervention. More in UK General Election – Most Divided Ever.
On the data front, Australian employment dropped -2.9k in April versus expectation of 3k rise. Unemployment rate rose to 6.2% as expected. Japan monetary base rose 35.2% yoy in April. German factory orders, Eurozone retail PMI, Canada building permits, US Challenger job cuts and building jobless claims will be released later today.