US durable goods orders might stage a rebound

Market movers today

• The Eurogroup meeting starts today and focus will be on Greece. The parties are still some way from reaching an agreement and we do not expect a solution to the Greek issue at the current meeting. Negotiations will continue at the Eurogroup meeting on 11 May – the day before the next large payment to the IMF is due.

• German Ifo expectations are expected to decline a bit as it has reached a rather high level. The index already points to strong GDP growth and even if the Ifo expectations decline a little, this would still suggest a solid expansion in the German economy in the first half of 2015.

• We look for a rebound in US durable goods orders for March. In particular data on the key non-defence durable goods orders ex. aircraft have been extraordinarily weak lately with the average growth rate over the past three months at -8% annualised. We expect part of the weakness to have been caused by temporary factors and in line with consensus expect a rebound.

• There are no key movers in Scandi today.

Selected market news

Greek prime minister Alexis Tsipras yesterday expressed optimism on reaching a deal with EU by the end of this month saying that ‘a big part of the distance has been covered’. It followed talks on the sidelines of an EU Summit with Angela Merkel and Francois Hollande.

The Nasdaq index hit a 15-year high topping the dot-com bubble high as US stocks saw renewed gains after treading water for a couple of days. Stocks were lifted by earnings surpassing expectations and easing fears over Greece. Energy shares found support in a renewed rise in the oil price.

The price on Brent crude jumped above USD65/bbl yesterday as the unrest in Yemen escalated with Saudi Arabia initiating an aerial attack on Shiite rebels. The market is clearly concerned with the unstable political situation in the Middle East, which could disrupt supplies from the region.

Data were generally weaker than expected yesterday. Euro Flash PMI for April undershot expectations in another sign that the high euro-area surprise index is bound to go lower in the months ahead. It mostly reflects that expectations have moved higher and the very strong growth tailwind in Q1 from the oil price decline is easing a bit. US data were also on the soft side yesterday. Markit PMI, jobless claims and new home sales were weaker than expected. We look for US data to gradually become more balanced as growth is expected to recover in coming quarters.

The German 30-year yield continued higher yesterday and is now up 15bp this week. It comes after a period of steep decline, though, and so far mostly looks like a correction to the downtrend.