From strongest to weakest major currency
The NZD is the strongest and the CHF is the weakest at the start of the North American session. Today at 8:30 a.m., US PCE data for April will be released. Core PCE is the Fed’s preferred measure of inflation.
Adam previewed yesterday’s release (CLICK HERE) that the consensus is +0.3% m/m, but it’s on a razor’s edge as all estimates are almost evenly split between +0.2 % and +0.3% with an average of +0.25%. Consider this a downward bias against the stock.
Other inflation figures to watch:
- Core PCE year-over-year expected at 2.8%, same as last month
- PCE expected at 0.3% m/m and 2.7% y/y
The focus will be on basic services and especially basic non-housing services, but don’t neglect the general numbers. A figure below 2.7% – and something like 2.5% – is starting to look awfully close to the target, although beating some high commodity prices contributes much of the upside.
Adam posted this
The other half of the report focuses on income and expenses. The latest round of comments from Fed officials highlighted strong wage growth as a concern. I think this is a lagging indicator, but it’s worth keeping in mind as revenues are expected to grow 0.3% m/m. Spending should follow this pace, at +0.3%, but I wonder if the American consumer is outperforming once again.
Overnight, ECB CPI data came in stronger than expected, helping to push EURUSD higher ahead of next week’s interest rate decision:
- Flash estimate of core CPI in EUR y/y: Actual: 2.9%, Forecast: 2.7%, Previous: 2.7%
- Flash estimate of CPI in EUR y/y: Actual: 2.6%, Forecast: 2.5%, Previous: 2.4%
The ECB’s Panetta said the CPI data was neither good nor bad and that policy would remain restrictive even after several rate cuts.
A preview of other markets at the start of the North American session.
- Crude oil is trading unchanged at $77.91. Yesterday at this time the price was $79.08
- Gold is trading +$0.64 or 0.03% higher at $2,344.40. At this time yesterday, the price was higher at $2335.46.
- Silver is trading up $0.15 or 0.49% at $31.31. Yesterday at this time the price was $31.31
- Bitcoin is currently trading at $68,395. At this time yesterday, the price was trading at $67,811.
- Ethereum is trading at $3,805.50. At this time yesterday, the price was trading at $3,736.20.
Pre-market preview of major indices is down after yesterday’s declines: Major US indices are on track to close lower.
- Dow Industrial Average futures imply a decline of -9.48 points. Yesterday, the index fell -330.06 points or -0.86% to 38111549
- S&P futures imply a decline of -6.98 points. Yesterday, the index fell -31.49 points or -0.60% to 5235.47
- Nasdaq futures imply a decline of -49.10 points. Yesterday, the index fell -183.50 points or -1.08% to 16737.08
European stock indices are trading higher today in the US morning snapshot:
- German DAX, -0.07%
- CAC France, unchanged
- British FTSE 100, +0.44%
- Spanish ibex, -0.10%
- Italian FTSE MIB, +0.15% (delayed by 10 minutes).
Stocks in Asia-Pacific markets were mostly lower:
- Japanese Nikkei 225, +1.14%
- Chinese Shanghai Composite Index, -0.16%
- Hong Kong Hang Seng Index, -0.83%
- Australian S&P/ASX index, +0.96%
As for the US debt market, yields are trading lower after yesterday’s sharp rises. Coupon auctions this week were far from exceptional, pushing the yield higher:
- 2-year yield 4.941%, +1.2 basis points. At this time yesterday, the yield was 4.958%
- 5-year yield 4.579%, +0.9 basis point. At this time yesterday, the yield was 4.611%
- 10-year yield 4.556%, +0.2 basis points. At this time yesterday, the yield was 4.589%
- Yield at 30 years 4.683%, -0.2 basis points. At this time yesterday, the yield was 4.713%
Regarding the Treasury yield curve, spreads remain in negative territory but are moving closer to parity (steeper curve)
- The 2-10 year gap stands at -38.7 basis points. At the same time yesterday, the gap was -36.8 basis points.
- The 2-30 year gap stands at -25.9 basis points. At the same time yesterday, the difference was -24.2 basis points.
On the European debt market, 10-year benchmark yields are higher:
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