- The Eurozone’s final April PMI for the manufacturing sector affirmed industry’s strong performance with a print of 62.9. Firms continue to report high input costs as well as elevated shipping costs, fueling into inflation expectations for the bloc. Investment and employment readings gained, setting the Eurozone up for a stronger performance in Q2 than the contraction at the start of the year.
- India’s manufacturing PMI held steady at 55.5 in April, compared with 55.4 a month earlier. The April print represented the ninth consecutive monthly expansion in the sector although the introduction of lockdowns in major states could bring the positive stream of data to a halt. According to the PMI from IHS Markit, Indian factories continue to shed jobs while input and output prices also gained.
- In the US, the ISM manufacturing index fell to 60.7 for April from 64.7 a month earlier. While the index did fall, at over the 60 the headline level is still suggesting strong growth in manufacturing in the US. Price pressures remain a dominant concern for firms with the input cost index rising to 89.6 from 85.6 in March thanks to long delivery lead times and to a high backlog of orders. The higher ISM price pressure points are likely to feed into higher inflation in coming months with markets watching how quickly supply chains can adapt to ease any shortages.
- Turkish CPI inflation came in at 17.1% y/y in April, lower than the consensus projection of 17.3% but still a marked acceleration from the 16.2% recorded the previous month. This was the seventh consecutive month of faster price growth. While the TCMB adjusted its inflation expectations upwards over the weekend it seems likely that inflation will still exceed the bank’s new projection of 12.2% at year-end, given mounting inflationary pressures. The lira remains weak despite Governor Sahap Kavcioglu’s pledge to keep policy tight and rising commodity prices will also keep inflation from rapidly normalising. PPI inflation exceeded expectations in April, coming in at 35.2% compared to consensus forecast of 33.1% and the previous month’s 31.2%.
- Saudi Arabia has named Faisal Alibrahim as economy and planning minister. He previously had serviced as vice minister in the portfolio and had worked in senior roles at Aramco.
Today’s Economic Data and Events
08:30 RBA policy rate: forecast 0.1%
12:30 UK PMI Mfg (April): forecast 60.7
18:00 US Factory orders (Mar): forecast 1.3%
18:00 US Durable goods (Mar): forecast 0.5%
Fixed Income
- With markets quiet in early sessions thanks to holidays in many markets, most action took place later in the day when the US opened. Treasuries were higher across the back end of the curve with 10yr yields closing almost 3bps lower at 1.597$. At the front end, yields were essentially unchanged. European markets saw no effective changes.
- Fed Chair Jerome Powell said in a speech yesterday that the outlook for the US “has clearly brightened” but the recovery “has been slower for those in lower paid jobs.” While markets are expecting a strong NFP—perhaps as many as 1m jobs for April—that will still leave the labour market in the US around 7m jobs below its pre-Covid levels.
FX
- The dollar was offered broadly overnight, giving back a considerable portion of the gains it made at the end of last week. The DXY index fell by 0.37% to 90.945 led by a similar sized gain in EURUSD, closing at 1.2064. GBPUSD was a notable outperformer, adding more than 0.6% to close at 1.3911, as the market looks ahead to the Bank of England later this week.
- Commodity currencies were generally stronger although USDCAD showed little movement. AUD added 0.6% to 0.7763 while NZD was up 0.5% at 0.7201.
Equities
- Some major equity markets were closed for the start of May holiday on Monday, but those that were open had a positive start to the week for the most part. In the US, both the S&P 500 (0.3%) and the Dow Jones (0.7%) closed higher, but the NASDAQ slipped -0.5%.
- In Europe the FTSE 100 was closed for the May Day bank holiday, but on the continent equities started the week on the front foot, as the composite STOXX 600 gained 0.6%, with gains for the FTSE MIB (1.2%), the DAX (0.7%) and the CAC (0.6%).
- In Turkey, the Borsa 100 recouped some of its recent losses with a 1.7% gain yesterday, and is now up 3.4% w/w but still down -3.8% ytd.
- Within the region, the DFM closed 1.1% higher yesterday, while the Tadawul lost -0.5%.
Commodities
- Both WTI and Brent started the week on a positive footing. WTI futures gained 1.4% to close at USD 64.49/b while Brent added almost 0.5% at USD 67.56/b. There are few direct catalysts in the oil market at the moment but the ongoing JCPOA negotiations in Vienna will provide some direction whichever way they track.
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