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Sentiment Lifted as US' Mnuchin Suggested Could Reach +3% with Tax Reform Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Fri May 19 17 00:24 ET

US financial markets stabilized after the selloff in the previous day, thanks to better-than-expected macroeconomic data. Wall Street gained +0.27% and the S&P 500 index ended the day +0.37% higher. US dollar recovered with the DXY index paring the losses made on Wednesday. Note in particular that GBPUSD reversed gains after briefly breaching 1.3. The pair ended the day1.2936, down -0.25%. US Treasuries fell, sending yields higher. The 2-year yields rose +2 points to 1.27% and 10-year yields added 1 point to 2.23%. in the commodity sector, energy prices remained firm with the front-month WTI crude oil contract adding +0.57% while the Brent contract was up +0.58%. The market consensus is that the OPEC/non-OPEC meeting next week would lead to announcement of an extension of the output cut deal until March 2018, at an unchanged rate of 1.8M bpd.

At his first Congressional testimony before the Senate Banking Committee, US Treasury Secretary Mnuchin indicated that GDP growth of 3%-or over is achievable, if the regulatory and tax reforms are enacted. While affirming that the administration has been working on the reform plan, Mnuchin did not offer any of the details or the time scale for the agenda.

While the US markets appeared to have been relieved from political issue temporarily, Brazilian real was hit hard as President Michel Temer has been accused of condoning the payment of a bribe to silence a potential witness, Eduardo Cunha, in a corruption scandal. The Bovespa stock market index slumped -8.8%, while the BRL has sank more than -7% against the USD.

On the dataflow, US initial jobless claims fell to 232K in the week ended May 13, from 236K a week ago. This has beat consensus of a rise to 240K and marks the lowest level in 28 years. Separately, the Philly fed manufacturing index soared +16.8 points to 38.8 in March. The market had anticipated a drop to 18.5. Leading indicators grew +0.3% in April, compared consensus of, and March's, +0.4% gain. In the UK, retail sales expanded +2.3% m/m in April, after contracting -1.4% (revised from -1.8%) in April. The market had anticipated a milder growth of +1.1%.

Today, the Eurozone would report its trade balance for March while Germany would print its PPI reading for April. A series of hard data would be released in Canada. Headline CPI probably improved to +1.7% y/y in April, from +1.6% a month ago. The core reading might have added +0.1 percentage point to +1.4% y/y for the month. Retail sales probably grew +0.3% m/m in March, after a -0.6% contraction a month ago. Excluding auto, retail sales might have gained +0.2%, following a -0.1% drop in February.

 

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