Daily Brief

Daily Brief

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Large helpings of caution

No deal is better than a bad deal

Jamie Dimon, the boss of JP Morgan, a bank, expressed 80% confidence that the US administration would be able to do a trade deal. "It may take a little more time" but " I'd rather not do a deal than do a bad deal". Investors did not wholly agree.

British investors will have heard something similar before, and they would have good reason for scepticism. Their colleagues in the States had already been getting on with business before Mr Dimon made his TV appearance and they were not in a mood for jam tomorrow. They were antsy about another trade war blow-up so were following the traditional risk-off path; selling equities and buying the Japanese yen.

The US dollar and the DJ30 stock index followed similar trajectories through the London session and overnight. The Dow is down by 1% in dollar terms and the dollar is 0.6% lower against the top-placed yen. Switzerland's franc saw no benefit from the flight to safety. It is fractionally ahead of the last-placed British pound alongside the Canadian dollar and Northern Scandinavian crowns.

Moderate growth in the EA and EU

The European Commission's Economic Forecast for spring 2019 notes "weakness  in manufacturing". It anticipates growth varying from "robust" in Ireland through "steady" in Bulgaria" and "subdued" in the UK to "lower" in Sweden". Sweden proved the point by reporting falls for manufacturing orders and industrial production.

The euro did move lower after the EC published its report but it is unlikely that the two events were related: investors tend not to focus to closely on projections from Brussels. The currency is all but unchanged against the US dollar and a third of a cent firmer against sterling.  

Canada's Ivey purchasing managers' index was arguably the prettiest ecostat of the day. At 55.9 it was three points ahead of forecast and more than a point and a half higher on the month. The British Retail Consortium's retail sales figure for April also looked impressive, up by a monthly 3.7%, but there were extenuating circumstances: the big Easter spend in March 2018 moved to April in 2019

RBNZ first to move

As generally expected, the Reserve Bank of New Zealand announced this morning that it had lowered its Official Cash Rate from 1.75% to 1.5%. Its policy statement implied a more consistently dovish tone in months to come. 

The Kiwi's knee-jerk reaction was to fall more than a cent and a half. A correction quickly began and the NZ dollar is unchanged on the day. Shortly afterwards, China reported a divergence between exports and imports. Exports in April were 2.7% below the same month last year while imports went up by 4.0%. The news did no immediate damage to the Australian dollar, which is a quarter of a cent higher on the day.

There are no important economic statistics until the Chinese inflation numbers tonight. Britain's RICS house price balance comes out at midnight and the Halifax house price index could also appear.

GBP: Fails to benefit from strong BRC sales

GBP: Fails to benefit from strong BRC sales

USD: The benchmark as trade fears swirl

USD: The benchmark as trade fears swirl

EUR: Unaffected by sober EC economic forecast

EUR: Unaffected by sober EC economic forecast

NZD: Rate cut possible tonight

NZD: Rate cut possible tonight

NZD: Unchanged after widely-expected rate cut

NZD: Unchanged after widely-expected rate cut

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