Volatility on financial markets is as low these days as in early 2007 with expectations of slow growth and low policy rates being a major driver. Complacency? The future will tell us. Yesterday, the S&P 500 index inched higher to close at 1951 (+0.1%) while German DAX finished above 10,000 for the first time ever. Asian markets were mixed with the Hang Seng and Shanghai Composite firmer, but Nikkei slightly down.
Chinese consumer prices increased 0.1% mm and 2.5% y/y, a tad higher than expected, reversing the steep fall in headline inflation we had seen in April. As a further step to boost growth, the Chinese central bank announced that it will cut the reserve requirement ratio for a number of regional and agricultural banksby 50bp.
German bond yields traded in rather tight ranges yesterday, while trading volumes were depressed by the Whit Monday holiday in many European countries. Intra-Euro-zone spreads continued to narrow. Yields of 10-year French and Spanish bond were still trading at or close to all-time-lows. Today’s market action should give a better picture of the underlying dynamics, as trading volumes pick up.
Industrial production numbers and ECB refinancing operation results
The highlights in today’s calendar are the ECB’s main refinancing operation results at 11:15 CET, which will show the first reaction to last week’s decisions, as well as more central bank speeches. The ECB’s Liikanen will speak at 9:00 CET, Makuch at 13:00 CET and Mersch at 16:00 CET.
On the economic data front, French April industrial production numbers will be out at 8:45 CET, Italian ones at 10:00 CET, UK data at 10:30 CET and the US NFIB small business optimism index at 13:30 CET.
Auction action starting
This week’s benchmark auctions will be set in motion by the Dutch, German and US auctions. The Netherlands will re-open its April 2017 bond for EUR 2.5 to 3.5bn, while Germany will tap its April 2023 inflation-linker for EUR 1bn. The US, in turn, will sell 3-year notes for USD 28bn.
Nordea