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    Market sentiment slightly deteriorates

    Today we note deterioration of sentiment on equity markets and generally higher risk aversion. Safe heaven assets such as Japan’s yen or gold reported considerable gains. Moreover, the New Zealand dollar skyrocketed as the RBNZ kept the interest rates unchanged. 

    European stocks headed lower on Thursday as traders eyed the morning’s release of data as well as comments from Mario Draghi, President of the European Central Bank which showed that the bank can not do much more to stimulate European economy. Across the pond we also saw declines on the Wall Street but their scale was limited.

    In terms of economic releases today there wasn’t too much by the way of major news with the US initial jobless claims the standout. The weekly unemployment indicator dropped down to 264k from 269k expected, but didn’t have a tangible effect on the marketsThe Canadian national house price index rose by 0.3% for the most recent month, inline with expectations and slightly above the previous print. 

    One of the highlights of the Asian session on the data front was CPI and PPI from China for May. CPI started accelerating in October, from 1,3% YoY to 2,3% in April, but this new reading brought it back to 2%, while consensus expected it to scale back by only a notch. However the surprised came from food prices, so is not that important. PPI rebounded from -6% YoY in late 2015 to -3,4 in April and when it comes to May we saw step up the pace of moving out of deflation. It went straight to -2.8% (consensus was -3.2%) and already has three highly positive MoM readings in a row.

    RBNZ did what the consensus expected, that is nothing. The main rate is still 2,25%. There could be further easing on one of the next meetings, but hot real estate market threatening the financial stability, is an important obstacle. The bank indicated that NZD went above it fair value (strongest in a year), but the reference to FX being just a statement of facts sounds different than before, when depreciation was ’required’ to see a better CPI outlook. 

     

    Any person acting on this information does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.


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