European, US Stocks In Eerie Calm As French Vote Looms

Credit markets in the US also had a decent day in line with the largely positive sentiment. CDX IG closed 1.7bps tighter for its strongest day in over a month. Meanwhile US Treasury yields inched a little bit higher with 10y yields up another 1.8bps to 2.233%. That means yields are now up some 7bps from Tuesday’s intraday lows. Meanwhile in commodities it was a decent day for base metals with the likes of iron ore (+1.18%), copper (+1.21%), aluminium (+2.10%) and zinc (+3.30%) all higher. The tumble lower for WTI Oil abated somewhat after holding just below the $51/bbl mark. Meanwhile in FX the most  notable move was that for the Yen which weakened -0.42% after BoJ Governor Kuroda said that the BoJ will continue with very accommodative monetary policy and continue with the current pace of QE for some time. He noted that this reflects the still benign inflation backdrop despite an improving economy.


This morning in Japan both the Nikkei (+0.86%) and Topix (+0.98%) are leading gains following those Kuroda comments, while a strengthening in Japan’s manufacturing PMI to 52.8 (from 52.4) is also helping sentiment. Elsewhere in Asia the Hang Seng (+0.30%), Shanghai Comp (+0.07%), Kospi (+0.91%) and ASX (+0.91) are also higher. US equity index futures are also showing modest gains.


Moving on. We have published a Credit Bite this morning which provides a brief overview of floater issuance dynamics in the EUR IG space, showing a breakdown by maturity for corporates and financials separately. The recent surge in supply comes largely on the back of investors starved for floaters amidst concerns about the direction of interest rates. It should be in your inbox, email Michal.Jezek@db.com if not.


In terms of other news yesterday, over at the Fed we heard from Governor Powell who said that he favoured some form of reassessment around financial regulation. Meanwhile Dallas Fed President Kaplan reiterated that he thinks the median of three rate hikes this year remains an appropriate baseline. In terms of data, in the US the headline business conditions index in the Philly Fed’s manufacturing survey declined 10.8pts to 22.0 in April. Meanwhile initial jobless claims edged up a small 10k to 244k last week while the conference board’s leading index came in at +0.4% mom for March. In Europe the European Commission’s flash consumer sentiment reading for April was reported as improving 1.4pts to -3.6 and in the process equally the post-financial crisis high set in March 2015.


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