Malaysia: Stocks end more than 20 points higher

Malaysian shares closed higher on Thursday with the Kuala Lumpur Composite Index gaining 21.33 points to 1,601.7.

Some 2.1 billion lots, valued at RM2.31 billion were traded. Gainers outnumbered losers 726 to 206.

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US: Stocks rise on data, dovish ECB meeting

[NEW YORK] Wall Street stocks rose on Wednesday following a wave of mostly solid US data and a fresh confirmation of ultra-easy money policies by the European Central Bank.

The Dow Jones Industrial Average advanced 64.33 points (0.36 per cent) to 18,076.27.

The broad-based S&P 500 added 4.47 (0.21 per cent) at 2,114.07, while the tech-rich Nasdaq Composite Index gained 22.71 (0.45 per cent) to 5,099.23. Economic reports showed a big drop in the US trade deficit in April, slower growth in the US services sector in May and a solid 201,000 new private-sector jobs in May.

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Dollar slips as US pipeline inflation turns negative

[NEW YORK] The dollar fell for a third straight day on Thursday as negative US inflation data underlined weakness that could forestall the Federal Reserve's plan to raise ultra-low interest rates.

While the latest US jobless claims report showed the labor market on a tightening course, one of the Fed's key objectives along with price stability, the government reported US producer prices unexpectedly resumed their downward trend in April, getting the second quarter off to a weak start.

The producer price index fell 0.4 per cent in April, more than wiping out March's 0.2 per cent rise which had been the first increase since last October. Economists on average had expected another 0.2 per cent rise.

"We don't believe the PPI will test the Fed's confidence that inflation will return to its target of 2.0 per cent. However, it is a reminder that disinflation hasn't worked its way through the economy yet," said Ryan Sweet of Moody's Analytics.

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Mexico stocks lower at close of trade; IPC down 0.51%

Mexico stocks were lower after the close on Tuesday, as losses in the Telecoms Services, Financial Services and Materials sectors led shares lower. At the close in Mexico, the IPC fell 0.51% to hit a new 3-months high.

 

The best performers of the session on the IPC were Gruma, S.A.B. De C.V. (MX:GRUMAB), which rose 2.28% or 4.270 points to trade at 191.060 at the close. Meanwhile, Alfa, S.A.B. De C.V. (MX:ALFAA) added 2.25% or 0.700 points to end at 31.850 and Grupo Aeroportuario Del Pacifico (MX:GAPB) was up 1.59% or 1.720 points to 110.100 in late trade.

The worst performers of the session were Industrias CH, S.A.B. De C.V. (MX:ICHB), which fell 3.05% or 1.980 points to trade at 62.900 at the close. Grupo Elektra, S.A.B. De C.V. (MX:ELEKTRA) declined 2.92% or 11.590 points to end at 385.010 and Compartamos, S.A.B. De C.V. (MX:GENTERA) was down 2.35% or 0.640 points to 26.610.

Falling stocks outnumbered advancing ones on the Mexico Stock Exchange by 70 to 52 and 12 ended unchanged.

Gold for June delivery was up 0.79% or 9.30 to $1192.30 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in June fell 0.04% or 0.03 to hit $60.78 a barrel, while the July Brent oil contract rose 0.36% or 0.24 to trade at $67.39 a barrel.

USD/MXN was down 0.01% to 15.3562, while EUR/MXN rose 0.37% to 17.2015. The US Dollar Index was down 0.43% at 94.70.

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Perfect Storm For EUR Bonds Will Not Continue, But Watch Out For Fed Hik

European government bond yields have suddenly reversed course, and after a multi-year rally we have seen a historic jump in yields. There is no longer a QE 'scarcity premium' in German bonds and pension funds need to buy less duration when bond yields go up. Put this together with profit-taking, in a situation where the market makers at banks might be less capable of warehousing risk due to tighter regulation, and we have a perfect storm for bonds.
However, there is also a limit to how high yields can go, especially in Europe. We do not believe that the fundamental picture has changed as much as the move higher in yields might indicate. There is also a limit to how long the market can continue to sell-off on positioning. All in all, we do expect the current bond sell-off to stop and EUR yields to stabilise around the current level for the next three to six months.
However, one important factor is the spill-over from the US market, as the first Fed hike moves closer. Hence, given our bearish view on the US market, we see upside for 10-year EUR yields on a 12-month horizon. The ECB is expected to be able to keep yields in the 2y-5y segment in check at the current level and some downside could in fact be seen here.
US yields have also moved higher recently, as the US labour market remains strong, and we continue to expect the Fed to start its hiking cycle September this year followed by a second rate hike in December. Our Fed funds forecast remains well above the forward market, and we project a significant rise in US yields in the 2y-5y segment.
Our forecasts imply that we continue to expect a further widening of the EUR/USD yield spread.
As currency is flowing out of Denmark we now expect Danmarks Nationalbank to hike rates two times this year, leaving the deposit rate at -0.50% year-end.
In Sweden low inflation is expected to trigger a final 10bp rate cut in three months' time.

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