OVERNIGHT MARKET UPDATE:
· US – Chicago Fed President Evans backed Yellen's case for a gradual approach to FOMC rate rises this year. Evans also confirmed that global growth and risks are an important consideration to policy. April would be too soon for a rate increase, Evans suggested. “My assessment is the economy is going to be strong enough, we’ll be raising rates two times this year, could well be more if we do better,” he said.
· US – US ADP employment rose 200k in March. This was a touch higher than market expectations of 195k and confirmed ongoing robust labour market conditions. Revisions to February were minor at -9k, leaving this measure of jobs growth at 205k.
· Euro area – There was a slight upside surprise in the flash German CPI inflation read for March, but still way below the European Central Bank’s medium-term target of close to but below 2%. The harmonised measure rose 0.8% m/m and 0.1% y/y.
· Euro area – The headline Economic Sentiment Indicator in March fell to 103.0 points in March from 103.9 in February, mainly because of falling confidence among consumers and in the construction and services sectors.
· Currencies – The US dollar weakened against nearly all of its developed and emerging-market rivals after Yellen’s dovish comments were echoed by Fed Evans. This has erased the probability that April hike was “live” after hawkish comments last week.
· Equities – It was generally a positive session for equities. The DAX and FTSE closed up 1.6%. In the US the gains were more modest with the major indices all up around 0.5%.
· Rates – European sovereign bond yields gradually rose through the day, with 10-year yields up 2 bps in both UK and Germany. UST 10-year yield was also 2 bps higher, supported by the solid ADP report.
· Energy – Crude oil prices rallied as the USD weakened and the supply rise coming in below market expectations. EIA reported a 2.3 million barrels rise in crude-oil supplies to 534.8 million barrels, but below market expectations.
· Precious Metals – Gold traded lower despite the lower USD as investors turned their attention to the climb in equity markets.