Daily Market Color

Stock, Bond Markets Fluctuate with Fed Statement and Payroll Data Looming

Financial markets in the US traded within a relatively tight range throughout the day as investors await direction from some upcoming critical events including the Fed’s policy decision tomorrow, payroll/jobs data on Friday, and the final round of the French election on Sunday.  While it is widely expected that the FOMC concludes its meeting tomorrow without implementing a bump to the benchmark borrowing rate, the statement issued afterwards is sure to be dissected carefully in search of a change in outlook for future rate hikes in 2017 and beyond.  As for the jobs report to be released on Friday, 185,000 payroll addition in April is expected, after a meager 98,000 increase in March. US Treasurys gained modestly on the day, reversing an early selloff which had been sparked by yesterday’s comments by Treasury Secretary Steven Mnuchin discussing possible issuance of ultra-long bonds to take advantage of the historically low interest rates.  Yields/swap rates are currently 1-4 bps lower on the day, pushing the yield on the 10-year note close to 2.3%.  US equities saw marginal increases, as all three major indices edged 0.1%-0.2% higher ahead of Apple’s earnings set to be released this afternoon.  Weighing down on stocks were shares of major car companies whose prices slid after missing sales estimates in April.  The rout on oil continued as crude prices declined an additional 1.5%-2% on the day, with WTI slipping below $48/barrel and Brent falling close to $50/barrel.       

Abroad, a measure of manufacturing activity in the euro-area displayed the highest levels of output in the past six years.  Today, IHS Markit reported a 56.7 reading for its Eurozone Manufacturing PMI during the month of April, as an increase in new orders and acceleration of job creation prompted growth in all eight countries except for Greece.  The figure provides further evidence of continually improving economies in the euro-area as the ECB maintains its robust fiscal stimulus.  Additionally, global markets seem to be more at ease this week as the French election nears, with Emmanuel Macron displaying a substantial lead in the preliminary polls.  However, if the wave of populism that led to last year’s Brexit and Donald Trump presidency generates another surprise in this Sunday’s vote, uncertainty will prevail across all regions, as a Marine Le Pen victory would be sure to disrupt the existing euro balance.  European and Asian stocks both traded higher on the day, with major indices up 0.6% and 0.7%, respectively.

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