The euro-area May confidence indicators

Market Movers

• The euro-area May confidence indicators are released today and we do not expect any surprises with confidence virtually unchanged since April.

• In the US initial jobless claims have trended lower in recent weeks suggesting continued progress in the labour market. This stands in contrast to other more downbeat economic data released recently and it will be interesting to see if claims stayed subdued last week.

• Further, we expect US pending home sales to have increased 0.8% m/m in April in line with other indicators, showing improved activity in the housing market.

• Minneapolis Fed President Kocherlakota (non-voter, dove) will speak this evening and ECB governing council member Novotny will speak in the morning.

• Norway will release unemployment data and Denmark employment data.

Selected Market News

Risk sentiment in European markets late yesterday afternoon got a boost from reports that a deal between Greece and its official creditors could be imminent. Hopes of an imminent deal supported both EUR and peripheral bond markets yesterday.

According to Greek Prime Minister Alexis Tsipras the negotiations are now in their ‘final stretch’ and according to a senior government official Greece and its official creditors had started to draft a final list of overhauls and budget cuts that Greece needs to implement to secure fresh bailout funds needed to service its debt in June. However, comments from EU officials yesterday evening played down hopes of an imminent deal. The Vice President of the European Commission, Valdis Dombrowskis, said that they were still some way from a deal and ‘there needs to be a comprehensive reform package presented by the Greek government to successfully complete the review’. In addition German Finance Minister Wolfgang Schäuble on the sidelines of the G-7 finance minister meeting said that ‘we haven’t got much further in substance in the negotiations’. Hence, it appears difficult to reach an agreement by the end of this week.

In Japan retail sales in April expanded 0.4% m/m but this was less than expected and overall the recovery in retail sales since the consumption tax hike in April last year has been disappointing. One of the reasons given for the unhappy consumer is the negative impact from a weaker yen. Hence, Japanese politicians does not necessarily applaud the renewed weakness in the Japanese yen. Overnight yen has continued to depreciate and has reached a 12-year low against the dollar. Overnight Chief Cabinet Secretary Yoshihide Suga said that ‘sudden movements in the exchange rate are undesirable’. This is a repeat of what Finance Minister Taro Aso said yesterday and underscores some attempts at some verbal intervention to at least stem the pace of depreciation.