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G10 Macro Rates Market Analysis – Weekly Review – 22nd May 2020

Tuesday, May 26, 2020

With the Pacific G10 Macro Rates Team 

Global Macro Overview
Volatility continued to decline last week. The key themes remained unchanged: risk assets rebounded as economies started to re-open with the S&P 500 up 3.5% on the week, WTI up 12.5% to above $33, Credit spreads were tighter across the board and 10y Government Bond yields remained mostly unchanged.

North America
US: No major data releases last week. Jobless claims continue to run in millions with a 2.4 million increase in initial claims and 25 million continuing claims. Preliminary PMIs for May were released by Markit. Manufacturing improved to 39.8 (40 exp., 36.1 prev.) and Services improved to 36.9 (32.5 exp., 26.7 prev.).

Canada: The CPI report for April came out last week. All three core measures eased a bit to under the 2% target, but this will not affect policy in the foreseeable future.

Eurozone: Preliminary PMIs came in better than expected, but with the recent volatility of the outcome and unreliability of surveys in the current situation, the data is particularly questionable. In Germany, Manufacturing came in at 36.8 (39.4 exp., 34.5 prev.) while Services came in at 31.4 (26 exp., 16.2 prev.). In France, Manufacturing came in at 40.3 (36 exp., 31.5 prev.) and Services at 29.4 (28 exp., 10.2 prev.).

The unscheduled BoJ meeting did not deliver any surprises. The only change (launch of another lending facility) had already been pre-announced. The Q1 GDP report was as grim as other reports from around the globe. The economy contracted -0.9% in Q1 and -3.4% annualised.

As in the Eurozone, PMIs for May were better in the UK. Manufacturing PMI increased to 40.6 (37.2 exp., 32.6 prev.) and Services PMI rose to 27.8 (24 exp., 13.4 prev.). Retail Sales for April came in broadly in line at -22.6% YoY (-21.2% exp., -5.8% prev.). Whereas the public sector net borrowings were higher at 61.4bn (49.6bn exp., 14bn prev.).

Australia: No major data releases

New Zealand: No major data releases

For further information on the Pacific G10 Macro Rates team, their experience and strategy please see below                                 

Read the Strategy Information Sheet

IMPORTANT INFORMATION: Issued and approved by Pacific Capital Partners Limited, a limited company registered in England and Wales, authorised and regulated by the Financial Conduct Authority . The information contained herein is not approved for use by the public and is only intended for recipients who would be generally classified as investment professionals. Information or opinions contained in this article do not constitute an offer to sell or a solicitation, or offer to buy, any securities or financial instruments or investment advice or any advice or recommendation.

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