The Market Today

Euro PMIs Set Positive Tone Ahead of U.S. Data

by Craig Dismuke, Dudley Carter


Optimism about Upcoming Manufacturing Data: Today’s calendar brings the May Markit manufacturing PMI revision (8:45 a.m. CT) along with the May ISM manufacturing index (9:00 a.m.).  The Dallas Fed Manufacturing Activity index for May is set for 9:30 a.m. There is optimism in the air coming into this morning after the strong results in the overnight PMIs (more below).  Also scheduled today (9:00 a.m.) is the April construction spending data which is expected to show a 0.5% MoM gain.

Fed Communications: Fed Vice Chair Quarles will speak  at 9:00 a.m. CT.  In comments last week, Quarles placed himself in the camp of Fed officials who thought it could be possible to discuss tapering asset purchases in coming meetings, presuming the economic data remain strong.  Also speaking today at 1:00 p.m. is Governor Brainard, long a bellwether of the consensus Committee view.


U.S. equity futures have jumped overnight in their return from the Memorial Day break, with the S&P 500 set to rise for a fourth consecutive session to start June. Most Asian markets closed higher and Europe’s Stoxx 600 was up strongly, adding more than 1.2% to trade at a new all-time high. A major theme last month for U.S. markets was building economic momentum, amid rapid improvement in the domestic pandemic, that appeared to be putting upward pressure on prices. Revisions overnight to the preliminary Eurozone manufacturing PMI for May reflected those same dynamics, lifting the index from 62.8 to 63.1, its highest level in records since the mid-1990s. Additionally, headline inflation in the Eurozone quickened from 1.6% to 2.0% YoY last month, the fastest rate since October 2018 but reflecting many of the same factors at play in the U.S. data. Annual core inflation rose from 0.7% to 0.9%. Commodity prices have strengthened with equities and the Treasury curve has steepened. U.S. WTI crude was leading price gains across most commodity types, rallying more than 3% to its highest level in two and a half years. At 7:20 a.m. CT, S&P 500 futures had risen 0.5% and the 10-year Treasury yield had added 3.1 bps to 1.63%.

ICYMI – May 28, 2021 Weekly Market Recap: Yields drifted lower last week and stocks recovered closer to record levels as Fed officials continued the nearly synchronous conjecturing that a growing list of inflationary indicators reflect rising pressure that will abate over the medium term. Housing activity continues to be slowed down by a lack of supply that, when conjoined with strong demand, is driving up prices at the fastest rate in over a decade. However, other data showed the broader recovery continuing. The sharp drop in personal income in April was expected after stimulus checks were mailed out in March, leading to a surge that month. However, wage gains remained solid, spending strong, and savings elevated. Durable goods orders were also strong when another chip-shortage related drop in auto activity is removed, and business equipment investment remained brisk. Consumer confidence did cool but jobless claims continued to decline, providing a boost to optimism ahead of this Friday’s payroll report that the labor market recovery has continued. The millions of jobs that are still missing since disappearing during the pandemic is a key reason Fed officials seem comfortable dismissing firmer inflation. The Fed’s preferred measure, core PCE inflation, rose from 1.9% to 3.1% in April, its fastest rate since 1992. Click here to view the full recap.

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