OVERNIGHT MARKET UPDATE:
· US – US advanced Q1 GDP rose a
soft 0.5% saar, which was slightly below market expectations 0.7% growth and
the slowest pace in two years as business slashed investment by the steepest
amount since Great Recession.
· US – The initial jobless claims
at last week rose by 9,000 to 257,000, but remained near the four-decade low.
· Euro area – The German
unemployment rate held steady at 6.2% in April, while the number of jobless
dropped by 16,000, suggesting that a gradual labour market improvement is
continuing.
· Euro area – German Harmonised
Index of Consumer Prices (HICP) dropped by 0.1% on the year after a 0.1% rise
in March, as the energy remained the drag.
· Japan – Bank of Japan
unexpectedly held off on expanding monetary stimulus, as policy makers opted to
take more time to assess the impact of negative interest rates. Market players
were clamouring for some action in response to a strengthening in the yen. Separately,
BoJ postponed their time frame for reaching a 2% inflation target.
· Currencies – The Japanese yen
posted its largest gain against the dollar in more than seven years after the
BoJ’s decision to stand pat.
· Equities – US stock markets
started off on a sour note after the BoJ’s decision. Sentiment further weakened
on news that US GDP grew at the slowest pace in 2 years. As a result, Dow Jones
closed 1.2% lower, the worst day in over 2 months.
· Rates – US Treasury yields
dropped to fresh one-week lows after the weak US GDP data. Selling pressure in
equity markets also fuelled demand for haven assets.
· Energy – A weaker USD and
stronger fundamentals continued to push crude oil prices higher. Sentiment
remained positive as the impact of further falls in US crude oil production.
Another fall in the US oil rig count points to further weakness in output.
· Precious Metals – The BoJ’s
decision not to ease saw a surge in the yen and stronger investor demand hit
the gold market.
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