Market Update | June 7, 2018

Macro View

Daily Insights

  • ECB economist’s comments push yields higher globally. The European Central Bank’s (ECB) chief economist Peter Praet stated yesterday that the decision on when to end asset purchases could be made, and potentially announced, at the ECB’s meeting on June 14, 2018. This was earlier than the market expected and sent yields higher in Europe, as well as the U.S. ECB bond purchases are slated to run at 30 billion euros ($35 billion) a month until at least September, and markets expected asset purchases to potentially begin to wind down in December 2018. Ultimately, the decision will likely hinge on inflation data, and whether the ECB believes that inflation is on pace to converge to its target. The news hit Italian government bonds particularly hard, exacerbating their recent weakness due to political woes faced by the country with its new anti-establishment leadership. Italian 1-, 2-, 3-, 4- and 5-year bond yields all rose by over 30 (0.3%) basis points during the trading day.
  • Global PMI data reflects broad global strength with U.S. taking the lead. Measures of U.S. manufacturing activity have broken away from the global pack to the upside while the European manufacturing sector has slowed over the past couple of months. Still, recent Markit Purchasing Managers’ Index (PMI) data indicates a solid 80% of countries are in expansion. Despite the soft patch in Europe, a global average of 53.1 in May is solidly expansionary and only 1.4 points behind the recent peak in December 2017.
  • Headlines suggest trade tensions may be rising ahead of this weekend’s G-7 summit. Key points of potential negotiation beyond tariffs and import quotas include environmental issues, Iran, and North Korea. Until we see evidence that trade could be materially disrupted, we remain comfortable with taking benchmark-level risk in portfolios.
  • Trade deficit narrowed in April. The trade deficit narrowed by $1.0 billion in April, its second straight decline, to $46.2 billion, marking the smallest deficit since September 2017. Consensus was for a smaller $0.3 billion reduction, while the previous month’s deficit was revised down by $1.8 billion to $47.2 billion. The reduction in April was driven by a smaller goods trade deficit, while the services surplus was little changed. However, on a 12-month total basis, the trade deficit widened marginally to $573.1 billion, the biggest gap in nine years, with deficits with China and Europe hitting records. April trade data represents progress and will marginally boost gross domestic product, but balancing trade clearly represents a significant challenge for the Trump administration.
  • Jobless claims lower than expected. New applications for unemployment benefits were reported this morning coming in at 222,000 vs. expectations of 225,000. The number represents a four-week low, though the less volatile four-week moving average of claims moved slightly higher to 225,500. The data continue to support our view of a strong and gradually tightening labor market.

Monitoring the Week Ahead

Click Here for our detailed Weekly Economic Calendar


  • Eurozone: GDP (Q1)
  • Japan: Current Account Balance (Apr)
  • Japan: GDP (Q1)
  • China: Trade Balance (Mar)
  • China: Imports & Exports (Mar)


  • Wholesale Inventories (Apr)
  • Germany: Industrial Production (Apr)
  • France: Industrial Production (Apr)



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