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Daily Market Color

Trade Data, ECB Stimulus Tapering News Boost Equities, Yields

 

Oil Exports Reduce Trade Deficit

According to today’s report from the Commerce Department, the international trade deficit in goods and services declined to a seven-month low during April.  The trade gap narrowed to $46.2 billion, a $1 billion decline from the previous month’s downwardly revised level, albeit 11.5% wider compared to a year earlier.  Further details of the report show that much of the change was driven by a record number of petroleum exports ($19.9 billion), as overall exports increased 0.3% MoM while imports were down 0.3%.  The heavily scrutinized goods trade gap with China increased 8.1% during the period to $28 billion, while the trade deficit with Mexico and Canada totaled $5.7 billion and $0.8 billion, respectively.

 

 

Europe to End QE?

Today the Chief Economist of the European Central Bank (ECB), Peter Praet, announced that the formal discussions to bring an end to the European Central Bank’s bond buying strategy of quantitative easing (QE) are imminent.   Expectations from market pundits are that the 30 billion EUR/month pace of purchases could be tapered to 0 by year’s end.  While the European bond market was rocked by the political uncertainty in Italy over the past few weeks, the ECB needs to act in the interest of the Eurozone as a whole.  The case has been made to end the QE in the short term as inflation has begun to creep higher and economic forecasts are expected show continued growth.  

 

 

Equities Post Gains, Again

Major US stock indices posted gains today as the comments from White House (Larry Kudlow) were hopeful regarding the ongoing trade discussions.  The Dow led the way today with a 1.4% gain, followed 0.9% rise for the S&P 500.  The Nasdaq managed a 0.7% increase for its third straight record close.  US Treasurys saw a reversal of yesterday’s rally, as yields/swap rates were up 2-5bp across the curve.  The 10-year note yield was up 4bps, closing at 2.97%.  The US Dollar (USD) was down vs. both the euro (-0.5%) and the pound (-0.2%) on the ECB monetary tightening news.  Crude oil futures fell again as the potential of OPEC increasing supply weighed on the market, closing at $65.05/barrel, down 0.7%.

 

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