EU Daily Market Wrap - 9th May 2019

EU Daily Market Wrap - 9th May 2019

Today's Highlights

  • CNY Inflation rebounds in positive territory in April;

  • China denies backtracking on Trade talks;

  • US-China trade deficit shrunk lowest in 5 years;

  • US Core PPI growth slowest in 11 Months;

Macro Review

US stocks fell for a forth day as US Tariffs looms. However, Reuters reported comments form China denying backtracking from negotiations and interest in "meeting halfway". As things stand, US will levy 25% tariffs on 200bln of Chinese imports on Friday. However, Chinese Commerce Minister said "China is well-prepared for an escalation in trade tensions". The trade war cycle is back on and most likely at the stage were "The US administration is tough on trade with China" which should be enough to force a correction in the market before a new resolutions is hinted. 

The US stock market suffered another day of losses with SP500 on pace for his worst week of 2019 (-4% drop in the ocean) retesting the 2840 level to the downside. Not surprisingly Dow Jones was the biggest loser given its large exposure to the US Industrial Sector. Interesting to see how US-China tensions will resolve. Odds favour a resolutions as both countries need to get a deal for political (US) and economic (China) gains, with Trump probably still holding the reins as trade data confirms US-China trade gap at its lowest level in 5 years. The rest of global equities followed similar patterns, with the FTSE100 also weighted by strength in GBP.

The USD Index paired back some of the recent gains after US Core PPI slowed, rising just 2.4% (below the 2.5% expected) - the slowest since May 2018. However, the Core PPI in April jumped 0.4% - the most since Jan 2018. EUR spiked higher amid US dollar weakness, whereas GBP settled above the 1.30 handle. JPY appreciated against all major currency as money flows into safe heavens. AUD extended losses amid trade tensions. 

Looking over the commodity complex, Wti Crude dropped to 61 remaining fairly correlated with US Equities.

Gold traded positive after a sideways session supported by a softer dollar and overall risk-off tone.

The Day Ahead

  • RBA Statement of Monetary Policy (overnight);

  • UK GDP (9.30 am);

  • US Core Inflation Rate (1.30 pm);

EU Close

If you missed the morning briefing from the desk click HERE

Hope you enjoyed the session.

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