UK Market Snapshot
UK markets finished higher on Friday, following better than expected corporate earnings reports. BT surged 12.3%, as the company hiked its dividend payout 14% after a well-received fourth quarter earnings report. Shire rallied 4.4%, after the company won a court ruling against Watson Laboratories over generic versions of its Lialda treatment. The FTSE 100 advanced 0.5%, to close at 6,625.0, while the FTSE 250 rose 0.2%, to settle at 14,315.7.
US Market Snapshot
US markets closed higher on Friday, after US treasury reported the widest budget surplus in five years last month and ahead of the G-7 finance ministers and central bank governors' two-day meeting. Gap rallied 5.6%, following upbeat first quarter earnings projections. Nvidia climbed 4.5%, after the company’s first quarter revenue and earnings data came ahead of market expectations. Priceline.com advanced 3.8%, after a well-received first quarter results. Dell edged up 1% amid news that the company would get a proxy bid from billionaire, Carl Icahn and Southeastern Asset Management. The DJIA rose 0.2%, to settle at 15,118.5, while the NASDAQ advanced 0.8%, to close at 3,436.6. The S&P 500 gained 0.4%, to settle at 1,633.7.
Europe Market Snapshot
Other European markets finished higher on Friday, following strong corporate earnings reports and encouraging German trade data. ArcelorMittal rallied 4.2%, after the company posted better than expected first quarter results and reiterated its annual earnings projections. The FTSEurofirst 300 index gained 0.4%, to close at 1,233.5. Among other European markets, the German DAX Xetra 30 rose 0.2%, to close at 8,278.6, while the French CAC-40 advanced 0.6%, to settle at 3953.8.
Asia Market Snapshot
Markets in Asia are trading mixed this morning. Japanese markets are trading higher, after the G7 meeting refrained from criticizing the Japanese move to devalue the yen. Sharp Corp is trading 11.8% higher amid news that the company would scale down its operations in Europe. Panasonic and Nissan Motor are trading 8.5% and 5.6% higher, respectively, after each of them projected a robust profit outlook. The Nikkei 225 index is trading 1.6% higher, at 14,833.3. Hang Seng index is trading 0.8% down, at 23,141.5, while the Kospi index is trading 0.4 points higher, at 1,945.1.
Commodity, Currency and Fixed Income Snapshots
At 0330GMT today, one month futures contract is trading 0.72% or US$0.75 lower at US$103.16 per barrel. On Friday, the contract declined 0.54% or US$0.56, to settle at US$103.91 per barrel, as the Organization of the Petroleum Exporting Countries indicated that the demand for the crude oil rose less than expectations and raised its crude output for April.
At 0330GMT today, gold futures contract is trading 0.25% or US$3.6 lower at US$1,433 per ounce. On Friday, the contract fell 2.18% or US$32, to settle at US$1,436.6 per ounce amid a strong greenback.
At 0330GMT today, the EUR is trading at US$1.2973 against the USD, marginally losing 0.08%. On Friday, the EUR weakened 0.38% versus the USD, to close at US$1.2983, following downbeat industrial production data from Italy.
At 0330GMT today, the GBP weakened against the USD, slightly losing 0.01%, to trade at US$1.5352, ahead of UK’s housing price balance data to be released later today. On Friday, the GBP weakened against the USD by 0.58%, to close at US$1.5354, after UK’s trade deficit narrowed less than market expectations.
In the US, long term treasury prices fell, pushing the yields higher. On Friday, yield on 10-year notes rose 9 basis points to 1.90%, while yield on 2-year notes gained 4 basis points to 0.26%. Meanwhile, 30-year bond yield increased 9 basis points to 3.10%.
Key Economic News
UK trade deficit narrowed in March
Total trade deficit in the UK narrowed to £3.13 billion in March, compared to an upwardly revised deficit of £3.39 billion reported in the previous month. Visible trade deficit narrowed to £9.06 billion in March, compared to a deficit of £9.17 billion recorded in February. Additionally, non EU total trade deficit narrowed to £3.47 billion in March, compared to a revised deficit of £4.21 billion recorded in February.
UK construction output rose lower than expected in March
On a monthly basis, construction output in the UK rose 12.1% in March, less than market expectations of a 15.0% rise, and compared to an 8.7% rise recorded in the previous month. On a quarter on quarter basis, construction output fell 2.4%, the lowest in fourteen years. On an annual basis, construction output fell 7.4% in March, compared to a revised 5.5% drop recorded in the previous month.
German trade surplus declined in March
On a seasonally adjusted basis, trade surplus in Germany narrowed slightly to €17.6 billion in March, compared to an upwardly revised surplus of €17.7 billion recorded in February. Market had expected trade surplus to narrow to €17.5 billion.
Fed's George urges to begin exiting bond-buying programme
The president of the Federal Reserve Bank of Kansas City, Esther George maintained her view that Fed should begin tightening monetary policy as it moves further from the financial crisis and the US economy continues to grow. Further, she expressed concerns that by continuing the policy, the US economy could be exposed to some long-term risks. She warned the Fed could be setting the economy up for challenges, including higher inflation, when it ends a period of heavy intervention and near-zero interest rates.
Shadow banking risks remain warns Fed's Bernanke
Federal Reserve chairman Ben Bernanke said that “the shadow banking system still posed a threat to financial stability, and funding markets might still not be able to cope with a major default”. "While the shadow banking sector is smaller today than before the crisis, regulators and the private sector need to address remaining vulnerabilities," Bernanke added further at a banking conference sponsored by the Chicago Federal Reserve Bank.
US monthly budget balance rose in April
The US Treasury Department reported that, on a seasonally adjusted basis, the federal budget balance recorded a budget surplus of US$112.9 billion in April, the biggest monthly budget surplus in five years, compared to a surplus of US$59.1 billion recorded in the previous month. Market had expected the federal budget balance to come in at US$112.0 billion in April.
Japan’s Eco Watchers current index declined in April
Japan’s Eco Watchers survey for the current economic conditions dropped to a reading of 56.5 in April, compared to a reading 57.3 in March. Meanwhile, Eco Watchers survey for future economic situation rose to a reading of 57.8 in April, compared to a reading of 57.5 recorded in the previous month.
Japan bankruptcies continued to decline in April
On a year-on-year basis, bankruptcies in Japan dropped 10.5% in April, compared to a 20.0% drop recorded in the previous month.
G7 gives green light to Japan's stimulus measures
Group of seven finance officials’ industrialized nations have indicated their tolerance to Japan's monetary easing measures, which are mainly oriented for an economic recovery from near two-decade period of stagnation. The policy makers were of the view that Japan’s monetary policies to end the prolonged deflation are not proposed to manipulate the country’s currency.