Equity markets are stalling into the end of the month. MSCI Asia-Pacific Index is snapping a six-day advance, and the week’s gain was sufficient to extend the advancing streak for the fourth consecutive month. The Dow Jones Stoxx 600 is trading off for the second consecutive session, after rallying for six consecutive sessions. Its 2.4% rally this week ensures a higher close for the month. This European benchmark has risen for three consecutive months and five of the past six. The S&P 500 has gained 1.1% so far this month, coming into today’s session. Last month the S&P 500 slipped 0.4%, which broke a three-month advance.
Bonds also rallied this month. The US 10-year yield is off 12 bp, with Gilts off 10 bp, and the Bund yield down six bp. On the month, French premium narrowed about four basis points. The 10-year JGB yield slipped almost five basis points to almost zero. Italy is the only major bond market to see rising yields. Fitch downgraded Italy last week (to BBB). Note that the PD has an open primary this weekend. Renzi is expected to win, after the left-wing and some old guard broke away from the PD.
The US dollar is mixed on the day. On the month, the dollar has risen against most currencies except, sterling and the euro (and the Danish krone). The dollar-bloc currencies fell out of favor this month, and are off around 2%. Sterling is the best performer, with the surprise election announcement a major prop.
The month-end and what for many in Europe and Asia will be a long holiday weekend with May Day celebrations and the bank holiday in the UK at the start of next week. Perhaps that could help explain the subdued market reaction to a series of economic reports.
The main exception to this generalization is the eurozone preliminary April CPI. It was much stronger than expected. The headline rose to 1.9% from 1.5%, and the core rate jumped to 1.2% from 0.7%. The data appears to have been flattered by calendar effect of Easter, and trip packages, for example, are included in the core. It is the highest level since mid-2013. The CPI report followed news of a stronger gain in M3 than expected, and an improvement in lending to both households and non-financial businesses.
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