Morning Report: Friday 7 May 2021

Summary

• US S&P recovers after few weak days, led by Food, Banks and Telcos. NFP the major datapoint for today.
• BOE - as expected - didn't make any huge changes, but trajectory for tapering and hikes looks clearer.
• Jersey a flashpoint as the row over fishing between UK and France hits a new peak.

• Market Watch: European markets were flat on the day, with Food & Beverage and Chemicals the only notable positive moves, offset by weakness in Tech, Energy and Travel & Leisure. The latter two sectors are down almost 3% this week. After a couple of weak days, the US showed good recovery: S&P up 82bps, led by Food, Banks and Telcos. Autos and Consumers the laggards. Post BOE meeting, UK 10Yr trades a bit tighter, back below 0.8%.

• US: Initial jobless claims fell more than expected, to 498k, the lowest post-pandemic level seen.

• Eurozone retail sales surprised to the upside, rising +2.7% MoM for March beating consensus of +1.6%. Germany contributed highly, rising +7.7% MoM.

• UK: As expected the BOE did not alter the policy rate or asset purchase programme, but there was a sense of tone that asset purchase rate may slow, and signal rate could be hiked in 2023. Forecasts have been raised for 2021: with GDP moving from 5% to 7.25% and unemployment from 6.5% to 5.0%. We also had the final services PMI, which showed levels of 61.0 well above the flash estimate of 60.1. Composite was 60.7, as all sub-indices rose except for business expectations and prices charged.

• China: Exports continue to rise steeply, with a pace of +32.3% YoY in April, higher than consensus of 24.1%. Imports in-line at 43.1%, with trade surplus rising by $29.1b to $42.85b. Caixin’s services PMI rose by 2p to 56.3 in April, higher than the cons of 54.2.

• News In Brief:

  • Norges Bank kept its signal rate unchanged and gave no new indication. Rate hike is still expected in H2 of this year.

  • US to keep pressure on China and preserve some of Trump’s limits on US investments in some Chinese companies.

  • Jersey has become a flashpoint in the argument over Channel fishing rights, as French fishermen protest licenses given by the UK.

  • Earnings: Credit Agricole performed well of trading, Siemens raised FY guidance, and BMW EBIT beat

• Today’s Data: US Non-Farm Payrolls which are expected to show a rise of close to 1m jobs in April (916k in March). Unemployment is expected to show a further tick down, from 6.0% to 5.8%. German industrial production is expected to have risen 2.2% MoM in March after February’s 1.6% fall.