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.
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.
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.
No major data.
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.
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.
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