US Jobless claims sees an upward risk

Market movers today

• A fairly quiet day on the data front with no major releases in Europe. 

• Housing starts and jobless claims are due in the US. Housing starts should see a big rebound following a steep weather-related decline in February. Consensus is for a rise of 15.9% m/m. Building permits may be more interesting, though, as they tend to be more stable. They have been trending gradually higher for a year but generally been weaker than expected given the very low mortgage yields.

• Jobless claims in the US is one of the few indicators that continue to indicate underlying strength in the US economy. The 4-week moving average is running at a 40-year low. Consensus is for a broadly unchanged level at 280k but given the latest weakness in data there may be some upward risks to this.

• There are also a lot of Fed speakers on tap today. Lockhart (voter, neutral), Mester (non-voter, hawk), Rosengren (none-voter, dove) and Fischer (voter, neutral) will all speak tonight. They may indicate rising uncertainty over the US outlook following the weak US retail sales report Tuesday.

• In Sweden, house price data is released and Ohlsson speaks.

Selected market news

Yesterday’s ECB meeting showed a dovish ECB president Draghi where the most important message was ‘the QE programme must be fully implemented to work’, which pushed market speculations of an early halt to QE back. Added to this, Draghi ended the debate about cutting the deposit rate further, as he twice during the Q&A session clearly said that the ECB will not cut the deposit rate (see ECB's Draghi: Full QE implementation and no deposit rate cut, 15 April). This caused a rally in Euro government yields with German 10-30 year yields reaching new lows and support to the periphery.

In the US, short dated yields are 1-2bp lower as the market continues to adjust the likelihood of a first Fed funds rate hike in September. The move was helped along by disappointing US industrial production data showing only a modest 0.1% m/m rebound in manufacturing production in March and a decline in the new orders/inventory rate in the Empire manufacturing index for April, which suggests that manufacturing weakness extended into April. Separately, the Fed’s Beige Book released last night generally mirrors the message from recent data releases.

US equity markets ended the day higher, supported by reduced Fed fears and positive earnings results. The price on Brent crude jumped more than USD3/bbl as the weekly EIA US stock data and the IEA OMR indicated that stronger demand is leading to a gradual rebalancing of the oil market.