·
US housing starts jumped 20.2% m/m in April to an annualised
pace of 1135k – a fresh cyclical high. Likewise, building permits recorded a
strong 10.1% m/m increase. While these data were much stronger than expected it
does follow a period of weakness due to earlier adverse weather
conditions.
·
Core and peripheral European government bonds rallied on news
the ECB might “frontload” its asset purchases. ECB Executive Board member
Coeuré noted that the recent sell-off in European sovereign bond markets was
“worrying” and that the ECB may “moderately” increase purchases under its asset
purchase program in May and June, ahead of the decline in market liquidity over
the European summer.
·
The final estimate of European headline and core inflation in
April remained unchanged at 0.0% y/y and 0.6% y/y. The euro area trade surplus
narrowed to EUR19.7bn in March.
·
UK headline CPI inflation declined 0.1% y/y in April – its
lowest rate since 1960. Core inflation also moderated to 0.8% y/y from 1.0%
y/y. The BoE is forecasting inflation to remain subdued in the near term.
·
In the currency market, ECB smoothing the impact of QE drove the
EUR lower, and GBP followed after the first negative CPI print in official
records. Surging housing data strengthened
USD.
·
US bond yields did not follow the strong rallied in European
bonds, with the 10-year bond yield finishing up 5 bps to 2.29%.
·
US stocks finished the session little
changed.
·
Crude oil prices fell sharply, with WTI down over 3%. Another
firm night for the USD weighed on crude oil, pushing prices to four week lows.
Sentiment appears to have turned, with concerns over a pick-up in US shale
production.
Gold prices declined, reaching lows of USD1,205.92/oz intra-trade.
Support appears to be between USD1,200-1,205/oz and expectations are for recent
new longs who were stopped out to get back in if gold prices dip further.
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