The Market Today

Recovery in Europe Appears to Be Gaining Steam

by Craig Dismuke, Dudley Carter


Markit PMIs, Existing Home Sales, More Fed Communication: The initial May PMIs from Markit are scheduled for release at 8:45 a.m. CT, both expected to inch down from very high levels.  Globally, the May PMIs have been encouraging thus far (more below).  Also today, the April existing home sales data are expected to show a 1% rebound after falling 9.8% in February and March.  Realtors cite a lack of supply as slowing the pace of sales.  Speaking today are four regional Fed Bank presidents: Dallas’s Kaplan, Atlanta’s Bostic, and Richmond’s Barkin at 11:15 a.m. CT; followed by San Francisco’s Daly at 12:30 p.m.  



U.S. Stocks Rose Thursday for the First Time This Week; Global Shares Tack On More Gains Friday Following Solid Economic Data: Stocks rose for the first time this week as tech shares rallied on lower yields to lead ten of the S&P 500’s eleven sectors higher. Energy companies lagged behind as crude prices dropped more than 2% on reports of some progress towards loosening sanctions on Iranian crude. Treasury yields had jumped Wednesday after the Fed’s April Minutes showed some officials saw a possible path to discussing plans related to tapering asset purchases at upcoming meetings. The sentiment sent a brief chill across the markets that pushed the 10-year Treasury yield up 3.4 bps and the S&P 500 down 0.3%. Those concerns, however, seemed to fade Thursday. The S&P 500 rose 1.1% as the 10-year Treasury yield more than unwound its Wednesday rise with a 4.6-bp drop, closing at its daily low just below 1.63%. Economic data released earlier in the day showed continued improvement in filings for unemployment insurance but a slowdown in business activity in the Philadelphia Fed District.

Most global shares have risen Friday following several encouraging economic updates out of Europe. Europe’s Stoxx 600 had added 0.5% by 7 a.m. CT after the Eurozone’s Services PMI rose more than expected in May, from 50.5 to 55.1, driving the composite PMI up 3.1 points to 56.9, its highest level in more than three years. The recovery in Europe has lagged the U.S. but appears to be gaining steam as its vaccination rollout closes what was a wide gap just over a month ago. Nonetheless, yields across the region were falling and trading near their daily lows after ECB President Lagarde said central bank officials were closely monitoring the recent rise in yields. She also said officials need to look through the temporary factors that will lift inflation this year to see that the fundamentals for sustained pressures aren’t there. U.K. yields were more or less unchanged on the day, held up by a retail sales surge in April that more than doubled expectations and a stronger-than-expected gain for its composite PMI to 62.0, the highest in records starting in 1998. U.S. futures were 0.4% stronger around 7 a.m. CT ahead of updates to U.S. PMIs and Treasury yields were less than 0.5 bp changed.


Dallas Fed President Kaplan repeated Thursday that he would like to start talking about a plan for tapering asset purchases sooner rather than later. On the outlook, he expects the economy to grow 6.5% this year and inflation to remain elevated into 2022. He blamed labor supply issues, including a higher level of retirements, for the weakness in the April jobs report.

Digital Currencies: Cryptocurrencies have made headlines in recent days because of sizeable swings in some of the more popular coins. They received additional coverage Thursday after the Treasury announced that “As with cash transactions, businesses that receive cryptoassets with a fair-market value of more than $10,000 would also be reported on” to the IRS under a proposal of the Biden Administration as part of efforts “to minimize the incentives and opportunity to shift income out of the new information reporting regime.” Separately, the Federal Reserve said it “plans to publish this summer a discussion paper that will explore the implications of fast-evolving technology for digital payments, with a particular focus on the possibility of issuing a U.S. central bank digital currency.”

CORONAVIRUS UPDATE  (VS Coronavirus Chartbook – PDF)

Italian Premier Draghi, former head of the ECB, said it’s too early to withdraw monetary support for the European economy. He believes that stronger inflation pressures will be temporary and that it’s premature to confidently say the pick-up in growth will be “sustained.” Japan approved the Moderna and AstraZeneca vaccines but was also reportedly considering extending virus states of emergency for Tokyo and Osaka. The U.K. said the most recent data show its on track to go ahead with reopening on June 21. Ontario took the first steps in loosening restrictions with the possible removal of limits on outdoor dining and retail on June 14.

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2022
This is a publication of Vining-Sparks IBG, LLC
775 Ridge Lake Blvd., Memphis, TN 38120