The Japanese trade deficit widened in March

Market movers today

• Focus will be on the situation in Ukraine again after the international agreement to avert wider conflict in Ukraine faltered on Monday. Today US Vice President Joe Biden meets with Ukrainian Acting President and Prime Minister.

• In terms of data releases we have a thin calendar. Most interesting will be US existing home sales. We expect it to lie flat on the month, whereas consensus is for a decline.

• In the euro area consumer confidence for April is released and we expect a small increase. Last month it increased to the highest level since end-2007 after it trended upwards during 2013. The change in consumer sentiment indicates higher private consumption in the euro area in 2014.

• Early tomorrow morning the Chinese flash estimate for the Markit/HSBC manufacturing PMI for April is released and we expect it to continue to decline to 47.6 from 48.0 in March. Currently, it looks like April will mark the bottom.

• In the Scandi markets focus will be on Swedish unemployment, see more on page 2.

Selected market news

Russia’s foreign minister has warned about a possible Russian military intervention in Ukraine saying his country faces growing demands to ‘rescue’ its western neighbour, see FT. Last week an agreement was reached in order to avert wider conflict in Ukraine but since then there have been renewed calls for new sanctions against Russia from the US after a deadly shootout in eastern Ukraine. Moreover Washington has said it will hold Moscow responsible as pro-Moscow gunmen have not shown signs of surrendering government buildings they have occupied, see Reuters.

The Japanese trade deficit widened in March, which reflects a surge in import growth ahead of the consumption tax hike in April, while exports continued to disappoint despite the weaker yen. The foreign trade data indicate that net foreign trade is poised to subtract more than 1% q/q ann. from GDP growth in Q1 indicating that market consensus of GDP growth exceeding 4% q/q ann. in Q1 is too optimistic.

In Italy the new government led by Matteo Renzi has requested one more year to meet its agreed structural budget target citing ‘exceptional circumstances’. Officials in Brussels said that the European Commission, which will deliver its assessment on 2 June, was expected to push back the demand and ‘make it clear that we can’t allow any delays’, see FT. Previously, the French socialist government said it will stick to its budget deficit target for 2015 despite earlier indications that it would seek a delay.

US stocks advanced modestly yesterday and S&P500 rose for a fifth day, which is the longest winning streak since October. This morning Asian markets are more mixed with Hong Kong and Chinese stocks lower, while Nikkei is higher.