Originally published by Rivkin Securities
The euro rose with European yields and equity markets on Thursday ahead of the second round run-off for the French Presidential election on Sunday. The euro gained +0.94% against the US dollar and +0.62% against the Japanese yen while spot gold, which is in vogue during times of uncertainty, dropped -0.87%. Both the German and French 10-year yields rose by +6 and +2.5 basis points respectively narrowing the spread between the two to +0.382%, the lowest levels since November 2016.
The Euro STOXX 600 gained +0.67% extending the year to date gain to +8.46% outperforming US counterparts with the S&P 500 sitting on a +6.72% return. National equity benchmarks were also higher with both the DAX and CAC 40 up +0.96% and +1.35% respectively.
Current projections suggest Emmanuel Macron, who is seen as further strengthening the Euro-zone, will get 61% of the vote compared with Marine Le Pen’s 39%. This is certainly the desired outcome for markets although attention may quickly shift to focus on the legislative elections due to be held in June. At this stage polling suggests Macron’s En Marche! Party will become the largest legislative party but may fall just shy of the parliamentary majority to enable him to pursue reforms.
Also boosting Europe overnight was better than anticipated retail sales and PMI composite reports. Retail sales (YoY) rose +2.3% from +1.7% prior and estimates for +2.1%. The composite PMI report (MoM Apr) rose to a six year high of 56.8 from 56.4 in March with the report underpinning recent data which continues to signal a broadening recovery in the Euro-zone.
Oil prices tumbled amid concerns over rising US production despite the high probability that OPEC members will agree to extend production cuts when they meet on May 25th although any likelihood of an increase in the level of cuts remains slim with OPEC officials playing down this possibility. Both WTI and Brent crude plummeted -4.81% and -4.92% shown on the first chart below. The second chart below shows the U.S. crude oil production from the US Energy Information Administration which rose 28,000 barrels per day to 9.293 million barrels for the week ending April 28th while the third chart at the same time shows rising US crude inventories at record levels.
Locally the S&P/ASX 200 finished -0.27% lower on Thursday and this morning we look set to open slightly lower with ASX SPI200 futures down -8 points in overnight trading.
Data releases:
· RBA Quarterly Statement On Monetary Policy 11:30am AEDT
· Euro-zone Retail PMI (MoM Apr) 6:10pm AEDT
· US Non-farm Payrolls (MoM Apr) 10:30pm AEDT
· US Average Hourly Earnings (MoM & YoY Apr) 10:30pm AEDT
· US Baker Hughes Rig Count (May 5th)
Chart 1 – WTI (Blue) & Brent (Purple) Crude Oil
Chart 2 – US Crude Oil Production
Chart 3 – US Crude Oil Inventories
Source: Rivkin, US Energy Information Administration