Financial markets review – 27th May 2016

Monday 23 May

• In the US the flash manufacturing PMI for May was down a disappointing 0.3pts to 50.5 (vs. 51.0 expected) which is the lowest reading since September 2009.
• In the Euro area, the composite PMI nudged down from 53.0 in April to 52.9 in the May reading, this went against the consensus estimate for a rise to 53.2. The weakness came from the manufacturing sector where the PMI edged down to 51.5 (vs. 51.9 expected) from 51.7, while the services reading was unchanged at 53.1 (vs. 53.2 expected).

Tuesday 24 May

• In the US, the Richmond Fed manufacturing index for May provided further evidence of softness in the sector after dropping 15pts this month to -1 (vs. +8 expected). New orders were also down a significant 18pts.
• In Europe, Germany reported no change in its final Q1 GDP revision of +0.7% QoQ. Meanwhile the May ZEW survey was released which revealed a 5.4pt increase in the current situation component to 53.1 (vs. 49.0 expected).
• ECB Vice-President Constancio suggested that it is still too early to start a discussion regarding further stimulus from the ECB as a response to more challenging financial conditions.
• Greece’s creditors have come to an agreement on allowing the release of €10.3bn of aid as with the first tranche due to be delivered in June, as well as the commitment for future debt relief in 2018.

Wednesday 25 May

• In the US, the advance goods trade balance for April showed a modest widening in the deficit to $57.5bn from $57.1bn although expectations had been for a widening to $60bn. While imports rose as expected (+1.9% MoM), the surprise was the +2.4% MoM increase in exports which will be seen as positive for Q2 GDP. Meanwhile the services PMI reading (51.2 vs. 53.0 expected) was disappointing after declining 1.6pts from April. Additionally, the FHFA house price index reported an increase higher than expected +0.7% MoM in March.
• Over in Europe the highlight was better than expected German IFO survey for May. The business climate reading was up a full point from April to 107.7 (vs. 106.8 expected) thanks to similar gains in the current assessment (+1pt to 114.2) and expectations (+1.1pts to 101.6) components.

Thursday 26 May

• In the US the latest durable and capital goods orders in April received most of the attention. Headline durable goods orders were up a bumper +3.4% MoM last month, well exceeding the +0.5% consensus. Atlanta Fed to revise up their Q2 GDP forecast to 2.9% from 2.5% previously which is the highest forecast so far for the quarter.
• US housing market data reported that pending home sales in April rose better than expected at +5.1% MoM (vs. +0.7% expected). Elsewhere, initial jobless claims were down 10k last week to 268k and down for the second consecutive week.
• UK Q1 GDP came in broadly in line with expectation with a growth rate of 2%, compared to a forecast of 2.1%.

Friday 27 May

• Japan’s April CPI report revealed a 0.20% drop in headline inflation to -0.3% YoY. That was a little higher than expected (-0.4% expected).
• In the US, the revised GDP for Q1 2016 came in at 0.8%, which was a nudge below the expected 0.9% growth rate.