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G10 Macro Rates Market Analysis – Weekly Review – 8th May 2020

Monday, May 11, 2020

With the Pacific G10 Macro Rates Team 

Global Macro Overview
Last week continued the fashion of decreasing volatility, higher equities and unchanged interest rates. The rally in equities continued to be skewed towards technology companies, with the broad NASDAQ index trading positive YTD. As was expected, the number of job losses in Canada and the US reached all time extremes. With numbers fully priced, there was little reaction by financial markets.

In Europe, the German Constitutional Court requested clarifications on the QE programme undertaken by ECB (Public Sector Purchase Problem or shortly PSPP). Bundesbank will have to exit the programme and sell its holdings of German Government Bonds. The ECJ judged earlier on the legality of PSPP. Thus, the German court’s decision created constitutional crisis in Europe that will be developing in upcoming weeks.

North America
US: Initial jobless claims rose by another 3 million, while continuing claims increased to 22.5 million. Non-Farm Payroll numbers released on Friday showed that the US economy lost 20.5 million jobs in April with unemployment increasing to 14.7% from 4.4% in March, slightly less than 16% expectation. Average hourly earnings jumped 4.7% MoM indicating that the job losses came mostly for lower paid workers.

Canada: Similar to the US, Canadian economy lost 3 million jobs in April with unemployment now standing at 13% vs. 18% expectation. Hourly wages jumped 10.5% YoY, again, indicating that job losses were experienced mostly in the lowest paid sectors.

Europe
Eurozone: No major data.

Sweden: PMIs followed global trends and showed significant decline of activity in Services and Manufacturing sectors.

Norway: The Norges Bank surprised the market and economists by cutting the deposit rate to 0%. At the same time, it was communicated that 0% is a lower bound for the foreseeable future.

Japan
No major data.

UK
The Bank of England left interest rates and the size of QE programme unchanged last week. Surprisingly for the markets two members of MPC voted to increase QE and Governor Baily communicated that other members were considering voting to upscale the QE programme.

Australasia
Australia: The RBA left monetary policy unchanged. No major data was reported

New Zealand: Card spending dropped 47% in April as the country entered lockdown.

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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