Global overview
The USD lost a little ground in generally moderate trade but most notably against the CAD, a reasonably neutral BoC statement helping though oil probably more important. Financials and energy led equity gains, which weighed on USTs late despite another solid auction.
News highlights
• Apr advance goods trade deficit $57.5bn vs $57.1bn in Mar and $60.0bn exp.
• Mar FHFA house price index +0.7% vs 0.5% exp.
• May Markit services PMI fell to 51.2 from 52.8 vs 53.0 exp.
• Fed's Kaplan said Fed should act in near future, may not advocate in Jun or Jul.
• Fed's Kashkari said outlook is for moderate growth.
• Fed's Harker said 2-3 hikes possible this year.
Currencies:
• Speculation that Japanese PM Abe will use June 1 press conference to postpone sales tax increase allowed Nikkei up 258 to join in the global stock market fun, weakening JPY in the process. EUR/JPY briefly above 123 but progress slow as exporters taking advantage of USD/JPY above 110.
• GBP carried on where it left off Tuesday and hefty stops are purported to be about if we go much lower on EUR/GBP, currently near 0.7575 and trading above GBP/USD 1.47.
• Bullard June not a done deal and we don't need a press conference to raise rates proved a perfect counterpoint to Harker's view of 3 rate hikes this year and muddied the waters further. Yellen on Friday now even more eagerly awaited.
• Strong IFO report and good revisions couldn't shift EUR/USD as it came under crossfire from both EUR/GBP and EUR/JPY, though eventually a modest bounce was seen.
• Oil pressing on toward $50 has given AUD and more so CAD some respite. BoC kept rates unchanged as expect ed and statement not too bearish, was good for 50 points to downside in USD/CAD but probably more to do with oil and some Canada production coming back, as CAD gained momentum late on.
• EUR/SEK low 9.2329 but with daily warnings about pace of appreciation progress understandably slow.
Bonds: Treasuries saw cautious pre-auction trade. Early gains in yields were corrected ahead of the data. While trade and FHFA house prices were stronger than expected yields could not regain earlier highs, and subsequently moved marginally lower. The 5 year auction was well received but when response was modest yields edged up again, notably the long end. 2s +0.5bps @ 0.91%, 5s -0.2bps @ 1.40%, 10s +0.5bps @ 1.87%, 30s +2.5bps @ 2.67%.
Equities: The equity rally persisted, energy, materials and financials in the lead responding respectively to prices and expectations for higher rates.
LATAM RECAP
BRAZIL: BRL dropped 0.6% to 3.5931 in a day when the global backdrop for emerging currencies was mostly positive but with the local market concerned about the govt. ability to close the fiscal gap and with some taking defensive positions ahead of a holiday. Di curve followed BRL move and closed wider with some reduction of inversion. Jan 17 was up 1bp to close at 13.70%, while Jan 21 jumped by 13bps to close at 12.73%, reducing the inversion to 97bps. 5Y CDS was down 4bps to 351. Ibovespa gained 0.51% to 49,597 with support from global market. Fipe IPC to 22 May was in the upper side of expectations at 0.50%m/m. FGV May construction costs was below forecasts at 0.18%m/m. Personal default rate was unchanged at 6.2%. May job creation was on expectations at -62.8K. Treasury placed BRL10.5n in LTN notes with lower rates in the back end. FX flows for the third week of May was at -US$1.8bn on large financial outflows.
MEXICO: MXN managed to hold to some of the early gains and after testing 18.31, the currency moved back to 18.4648, gaining only 0.12% in the day as oil prices lost initial impulse and Banxico suggested that it is not close to intervene at the current level. The Mbono/UST 10yr spread corrected down by 4bps to 427. 1y IRS was down 7bps to 4.78%. 5y CDS was down 3bps to 175. MEXBOLSA gained 0.47% to close at 45,711. April trade balance was much weaker than expected at -US%2080mn. Q1 current account was stronger than expected at -US$6.99bn. Banxico released its inflation report suggesting that there is no change in inflation outlook but that it is ready to intervene if there is global financial disturbance influencing MXN.
ARGENTINA: Market was closed for holiday
CHILE: CLP managed to gain 0.55% in the day, supported by gains in copper prices (1.8%), closing at 691.44. Global backdrop was mostly supportive although with a lingering concern on US Fed hikes. 1y IRS went up 1bp to 3.72%. 5y CDS fell by 3bps to 109. IPSA was up marginally to 3,958. Survey of traders' expectations did not change forecast on monetary policy and only increased forecast for CLP quote.
COLOMBIA: Another low volatility day. COP traded in a narrow range between 3053 and 3067 and closed the day up by 0.13% to 3061.0 following regional trend.. The low volatility was created by the remains USD294.4mn in call options yet to be exercised. 1y interest rate swap fell by 2bps to 7.18% keeping rates high as the market prepares for Banrep hike at the end of the week. 5y CDS was unchanged at 240. IGBC lost 0.74% to 9,708.
PERU: PEN got support from copper prices and general gains in the region and closed the day 0.18% stronger at 3.3391. BCRP rolled over PEN165mn in FX swaps but did have bidders for the rollover of PEN81mn in CDR. 1y swap closed down 3bps to 5.44%. 5y CDS dropped by 3bpa to 165.
GLOBAL BACKDROP
US - On Thursday we expect weekly initial claims to see a marginal 3k fall to 275k, while Apr durable goods orders should rise by 1.0%, 0.7% ex transport. Apr pending home sales should see a modest 0.5% increase. May's Kansas City Fed manufacturing survey is also due. Fed speakers are Bullard again and moderate voter Powell.
EUROPE - In the UK, the second estimate of Q1 GDP on Thursday where we expect a downward adjustment 0.2% from 0.3% q/q, tapping the y/y lower to 2.0% from 2.1%. April BBA mortgage approvals are also due.
JAPAN - JPY Corporate Service Price (YoY) (APR), consensus 0.20% y/y. A 40 year auction to be conducted.
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Source ↔ MP3 Lagu Baru
