Allan von Mehren
Danske Bank A/S
Market Movers
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US ISM non-manufacturing for April is due today. After a big decline from October to February, the index rebounded in March. There should be scope for a further increase in April. Consensus is for a rise to 54.8 from 54.5 in March.
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ADP employment for April will be a good guide for where to look for payrolls on Friday. ADP employment is expected to be broadly unchanged around 200k. US unit labour cost and trade data are also due today.
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In Europe Italy and Spain release service PMI for May but otherwise no data of interest. There are no big movers in Scandi today.
Selected Market News
US senator Ted Cruz withdrew from the race of becoming the Republican candidate running for president making Donald Trump the presumptive candidate. It comes after Trump staged a crushing defeat over Cruz in the Indiana primary.
Equity markets continued the correction lower yesterday and Asian stocks are also lower overnight. The oil price fell back as well, moving below USD45 per barrel (Brent).
Risk markets are in correction mode after two months of decent rally from mid- February to mid-April. It seems fair that markets are treading water for a while awaiting further signals on the sustainability of the recent cyclical improvement in the US and China. We believe the cyclical recovery will continue in coming quarters and that the current set-back will prove temporary.
Bond yields have fallen back in a response to lower risk appetite and this move continued yesterday. EUR/USD moved lower yesterday and is back below 1.15 this morning. A too dovish priced Fed will in our view cap EUR/USD to the upside in the short term.
Data on US car sales disappointed a bit rising only to 17.32m in April (consensus 17.4m) up from 16.46m in May. Car sales have softened in the past months but from high levels.
Yesterday UK PMI manufacturing for April fell below 50 to 49.2. It is the lowest level since February 2013 and another sign that the UK economy is slowing ahead of the EU referendum next month.
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