May 23, 2019

Daily Market Review – Thursay, May 23, 2019

Daily Market Review – Thursay, May 23, 2019

Europe

Theresa May’s colleagues made it clear yesterday that they would not necessarily back her new Brexit bill, increasing pressure on her to resign and the pound to continue its plunge – now to a 5-month low, as a no-deal Brexit looms closer. May’s new Brexit plan includes a fresh set of border arrangements for Ireland by the end of next year, a commitment to continue its alliance with Northern Ireland, aligning workers’ rights and foodstuffs regulations with the EU, continued environmental standards, frictionless trade with the EU and – above all – the ability for Parliament to vote in a 2nd Brexit referendum.

As expected, UK retail jumped to 3% YoY in April and consumer inflation to 2.1% – a tenth less than expected. The non-seasonally adjusted PPI regressed to 2.1% YoY, but public sector borrowing shot up to £4.967 bn. Elsewhere in Europe, as Parliamentary elections are set to start and PMIs are slated to appear this morning, Germany’s Q1 GDP remained level. At present, Reuters expects Eurosceptic parties to grab about a third of the seats in Strasburg – spelling trouble for the European economy.

Asia

Elections are also in the spotlight in India today as PM Narendra Modi is expected to lead a landslide victory. India’s lead over China as the fastest growing economy in the world is expected to solidify by 2020, when its economy is slated to grow by 7.1% – especially as Chinese post 2018 debt over its attempt to resuscitate its economy has approached untenable levels in a trade-war era.

The overnight Nikkei PMI puts Japan’s manufacturing sector back into contractionary territory with a reading of 49.6 in May, after a single month just above the 50 mark. Foreign investments in Japanese equities also regressed by ¥-58.0 bn – all this after yesterday’s relatively positive data. The result is the Nikkei 225 joining its Asian counterparts in a negative close, this morning, though none as bad as the Shenzhen Composite, which lost 1.92%, as no relief seems to be in store for the US-China trade war – pushing up the safe-haven yen. Indeed the BBC yesterday reported that “Japan and the UK have joined the US clampdown” on Chinese tech companies “deemed a security risk” – read: Huawei.

US

Indexes remained subdued yesterday with the dollar index breaking resistance at 98, as the FOMC minutes showed a willingness to continue showing patience with the US economy, siding with Chairman Powell’s belief that the recent drop in inflation is temporary. Optimism was boosted by the fact that Trump’s tariff war toll is proving less disastrous on GDP than expected.
In Canada, retail sales improved remarkably shooting up 1.7% MoM in March, though not sufficiently to offset poor household expenditures. The result – an immediate loss of this week’s gains in the Canadian dollar.

Commodities

Oil lost more than a percent last night after the EIA published its weekly inventories data – an additional 4.7mB on tap, putting inventories at a 2-year high!

Economic Calendar

Today’s Top Economic Events
TIME/PLACE RELEASE/DATA
07:30 AM GMT – Germany Markit Manufacturing, Services & Composite PMIs (May), Current Assessment and Business Climate at 08:00
08:00 AM GMT – EU Markit Services Manufacturing & Composite PMIs (May)
12:30 PM GMT – US Continuing & Initial Jobless Claims (May 10), Markit Services Manufacturing & Composite PMIs at 13:45, New Home Sales (Apr) at 14:00, and speeches from Fed heads Kaplan, Daly, Bostic & Barkin at 17:00
22:45 PM GMT – NZ Imports, Exports & Trade Balance (Apr)
23:30 PM GMT – Japan National CPIs (Apr), and All Industry Activity Index (March) at 04:30 AM (+1)

For more, visit our Economic Calendar