The dollar has remained underpinned by a rise in longer-dated Treasury yields, with the 10-year T-note yield lifting to the 1.61-62% area, up about 6-7 bp from the midweek lows. News that U.S. President Biden will present his $6 tln lifted Treasury yields. The DXY USD index remained buoyant, just below yesterday’s eight-day high 90.18.
Key Market Drivers:
- U.S. data calendar includes personal income, goods trade, Chicago PMI
- Canada data calendar is thin the reminder of the week
- Dollar buoyed by higher Treasury yields; key U.S. inflation metric up today
- Core EGBs, Treasuries remain under pressure, stock markets broadly higher
- Eurozone May ESI economic confidence jumped to 114.5 from 110.5
- ECB’s Schnabel suggests rising rates reflect an improved growth outlook
- Japan unemployment rate higher than expected, core CPI -0.2% y/y
European stock markets are broadly higher, after a largely stronger close across the Asia Pacific region. Data releases confirm the strengthening and broadening of the recovery and stimulus hopes are adding support. DAX and FTSE 100 are currently up 0.6% and 0.3% respectively, U.S. futures are posting gains of 0.3-0.5%, with the Dow Jones mini outperforming.
Overnight, Japanese markets outperformed amid reports that the BoJ will extend its pandemic relief program. Topix and Nikkei closed with gains of 1.9% and 2.1% respectively. The ASX was up 1.2% at the close. China bourses underperformed and Hang Seng and CSI 300 closed up 0.04% and down -0.3% respectively, amid signs of fresh U.S.-China tensions.
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The markets today are likely to remain mixed amid the confluence of indicators, though caution may dominate ahead of the long Memorial Day weekend. Thursday’s highlight was the news President Biden would propose a $6 tln budget, perhaps as soon as today. That helped unpin an already bullish stock market, while Treasuries sagged.
Yesterday’s late-day report that the Democrats plan on paying for the spending via a retroactive tax hike knocked Wall Street from its perch. The Dow and S&P 500 did close in the green with gains of 0.41% and 0.12%, respectively, amid reflation trade. The NASDAQ ended fractionally lower with a -0.01% loss. Treasuries were weaker Thursday, but only modestly so. The 10-year was either side of 1.60% on the day. The 2-year was little changed at 0.145%.
The bond market will close early ahead of the holiday weekend. Today’s calendar has April personal income and consumption, with the former projected falling -14.7% versus the prior 21.1% surge, and the latter is expected to rise 0.9% after jumping 4.2% in March. The April PCE deflator likely rose 0.6% from 0.5% previously. This indicator is closely followed by the Fed, and will be on the market’s radar screen given recent inflation concerns.
Advance April goods trade should see the deficit widen to -$93.5 bln from -$90.6 bln. Advance wholesale and retail inventory figures are also due. The May Chicago PMI is penciled in slipping to 66.0 from 72.1, while the final May University of Michigan consumer sentiment index is expected to remain steady at 82.8.
There are no larger-cap earnings reports due today.