Trade Deficit Widens in March, Bond Selloff in Focus

Economic Data

- (ZA) South Africa Apr SACCI Business Confidence: 89.9 v 89.1 prior
- (CL) Chile Mar Economic Activity Index (Monthly GDP) M/M: -0.3% v -0.6%e; Y/Y: 1.6% v 1.1%e
- (US) Goldman Economist: Chain Store Sales w/e May 1st w/w: -0.9%; y/y: +3.7%
- (BR) Brazil Mar PPI Manufacturing M/M: 1.9% v 0.3% prior; Y/Y: 4.9% v 2.7% prior
- (US) Mar Trade Balance: -$51.4B v -$41.7Be
- (CA) Canada Mar Int'l Merchandise Trade: -C$3.0B v -C$0.8Be
- (US) Redbook Retail Sales w/e May 1st: +1.2% y/y, Apr MTD: +0.4%; Apr YTD: +1.6%
- (EU) Weekly ECB Forex Reserves: €272.9B v €272.5B prior
- (US) Apr Final Markit Services PMI: 57.4 v 57.8e; Composite PMI: 57.0 v 57.4 prior
- (US) Apr ISM Non-Manufacturing: 57.8 v 56.2e
- (US) May IBD/TIPP Economic Optimism: 49.7 v 50.0e

Sovereign bond yields keep moving higher this morning, with the 10-year UST yield momentarily testing above 2.2% in the wake of the ISM services data (it's back around 2.18% as of writing, while the 100-day MA is around 2.19). The 10-year bund rose back above 0.50%. Stocks are taking it on the chin, with the DJIA down 0.46%, the S&P500 is off 0.86% and the Nasdaq is down 1.16%.
The bond selloff really heated up again this morning. While the US trade data was distorted by the ports strike, the ISM services reading was unambiguously positive, with strong showings in the new orders and employment components. European yields are also shooting higher, with Greece headlines the probable source of selling pressure. Midway through the European session, EU Working Group Chief Wieser warned there would not be a deal at May 11's Eurogroup meeting. Greek, Spanish and Italian yields soared on the comments, while the DAX, CAC and FTSE slumped.


The US trade deficit rose 43% y/y to $51.5 billion in March (a six-month high), reflecting a surge of imports that followed the settlement of the West Coast port dispute. Exports edged up 0.9% to $187.8 billion, but imports leaped a record 7.7% to $239.2 billion. Economists say the numbers were less favorable than those used to calculate advance Q1 US GDP, however it remains unclear how much the imports will boost March inventory numbers and their impact on Q1 US GDP revisions. Inventory data could offset part or all of the GDP impact from the trade data. EUR/USD


WTI crude is up nearly two bucks this morning and testing $61 for the first time since last December, while Brent is above $68. There have been reports of Yemen rebels shelling the Saudi border town of Najran, prompting the Saudis to promise a strong response. Meanwhile, OPEC officials stated today that improved pricing over recent months means the cartel will most like maintain production quotas at the June 5th OPEC meeting.In earnings, Estee Lauder is up 6% after the firm's earnings beat expectations on much improved profit margins. Sprint's headline numbers were a bit disappointing, but its widely watched churn rates improved, helping the stock add a few percent earlier, although S has given up all its gains. Emerson Electric is down 2% after missing expectations and cutting its FY guidance. Disney is up modestly on an all-around solid report. Kellogg is off 2% on shrinking revenue. 

 

Looking Ahead

 

- 12:40 (US) Fed's Lockhart speaks on Monetary Policy in Louisiana
- 13:00 (UR) Ukraine Apr CPI M/M: No est v 0.7% prior; Y/Y: No est v 7.6% prior
- 17:00 (CO) Colombia Mar Exports FOB: $3.2Be v $3.2B prior
- 17:00 (CO) Colombia Feb Economic Activity Index (Monthly GDP) Y/Y: 2.8%e v 3.0% prior
- 19:01 (UK) Apr BRC Shop Price Index Y/Y: No est v -2.1% prior
- 20:00 (US) Fed's Kocherlakota holds Open Forum in Marshall, Minnesota
- 20:00 (CO) Colombia Apr CPI M/M: 0.4%e v 0.6% prior; Y/Y: 4.4%e v 4.6% prior
- 20:00 (CO) Colombia Apr CPI Core M/M: No est v 0.4% prior; Y/Y: No est v 3.5% prior
- 21:30 (AU) Australia Mar Retail Sales M/M: 0.4%e v 0.7% prior
- 21:45 (CN) China Apr HSBC Services PMI: No est v 52.3 prior; Composite PMI: No est v 51.8 prior
- 22:30 (HK) Hong Kong Apr HSBC Services PMI: No est v 49.6 prior