US consumer sentiment data today to see an above consensus increase

Market Movers

• In the UK we will get more information about economic development in Q1 as March figures for construction output are released. We do not believe that the numbers will lead to a revision of the first estimate of GDP growth in Q1 (0.3% q/q).

• The US manufacturing sector is struggling with a stronger USD and weak global demand, which has weighed on production recently. We expect somewhat better growth in April and look for manufacturing production growth of 0.3% m/m. A stronger pace of private consumption is key to our outlook for US growth this year. We expect consumers to spend some of their savings from Q1 in coming months as the improvement in the labour market continues and consumer sentiment remains high. We expect an increase in the May preliminary University of Michigan consumer sentiment to 97.0, which is only topped by the January release in the current cycle. 

• It is Friday and that means potential rating action with Ireland (Moody’s), Italy (S&P), the Netherlands (Fitch) and Portugal (DBRS) up for potential review. Ireland is the most interesting and the most likely candidate for a rating change. In our view the requirement for an upgrade to 'A-level' has been fulfilled. Growth remains very strong with the Irish Ministry of Finance recently lifting the 2015 forecast to 4.0% and the projection running to 2019 above 3%. Debt is falling sharply, which could be supported further by the re-privatisation of a share of AIB by the end of this year. Irish fundamentals will outshine soft core Belgium already this year and debt will drop below the French level within a couple of years. The current ‘Grexit’ risk could lead Moody’s to postpone an upgrade until the autumn and to only lift the outlook to ‘positive’ tonight. We do not expect other changes in rating or outlook tonight.

Selected Market News

• At a speech in Washington ECB president Mario Draghi reaffirmed the central bank’s commitment to implementing the EUR60bn/month purchases until September 2016. Draghi, however, did also warn policy makers about ‘blind’ risk taking and the danger of QE purchases leading to financial instability.

• Despite the lower-than-expected US jobless claims yesterday the USD has declined further on the back of disappointing wholesale prices and not least Wednesday’s release of the weak retail sales figures. The significant build in bullish dollar bets has increased the vulnerability and sensitivity of the ‘greenback’ and with the disappointing US data in the last month, the USD index is now set for the fifth weekly decline heading into the last business day of the week.

• The weaker USD and signs of the bond market sell-off easing boosted US stocks lifting the S&P 500 by 1.1% to a new record high.

• In Japan wholesale prices were released overnight showing a monthly rise of 0.1% m/m (consensus 0.1%). Bank of Japan Governor Kuroda in a speech also stated that the bank will not hesitate to adjust monetary policy if needed.

• As expected, Bank of Korea kept the 7-day repurchase rate unchanged at 1.75%.