Morning Update – 16/05/2017 – by Arjun Lakhanpal
May 16, 2017Morning all.. Wall St closed higher yesterday as oil surged higher on OPEC production cut extensions and the S&P finished up 0.48%. Asia was a little more subdued but the Nikkei closed just shy of 20,000 up 0.23%. FX markets were quiet with USDJY having a 60 pip range and finishing the Asian session on the lows. EUR stays above 1.1000 and US 10yr yields remain around 2.33% keeping pressure on the dollar. Oil was the main story yesterday and Asia saw further gains with WTI up 0.35%. WaPo sources: Pres Trump shared highly classified information about IS with Russia’s Foreign Minister & Ambassador last week; the information came from a partner who had not given permission for it to be shared with Russia. This story may develop and impact risk sentiment. Elsewhere, BoJ’s Kuroda: Japan inflation rate still quite low, current YCC policy is appropriate; not concerned about Fed normalization; USD has not risen so much despite Fed hikes; Japanese wages/prices slow to respond to a substantial improvement in economy; will take more stimulus steps if needed; will be able to keep rates extremely low through smaller JGB purchases as debt market tightens; may have lessons to learn from how Fed normalizes policy. RBA Minutes: March inflation data boosted confidence in f/c that core inflation would pick up to around 2% by early 2018; could see 2nd round effects on CPI through upward pressure on biz costs; GDP still expected to pick up to a little above 3% by H1 2018; repeats rise in AUD would complicate economic adjustment; low wage growth and strong retail competition are dampening aggregate wage inflation; developments in labour and housing markets warrant careful attention; significant uncertainty about how to measure spare capacity. AUD tried a rally but failed rather quickly. It remains stuck in a tight range overnight but USD weakness may support AUD. This morning we get a final look at French CPI and Q1 GDP. We get UK CPI data which could move GBP today, EU GDP data and German ZEW.. Busy morning; Good luck.
