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Daily Briefing – Thursday, May 25, 2017

Europe

Europe today celebrates Ascension Day, as markets open in the Green. Yesterday the FTSE outperformed its European compatriots, ending at a 1-week high, with mining and retail leading the march (and despite a 64% collapse in profits for Marks & Spencer). The pound is also showing comparative strength ahead of the UK’s Q1 GDP numbers later this morning. In its Financial Stability Report, the European Central Bank is warning against a growing housing market and bank sector weakness amidst low interest rates.

US

Existing home sales faltered in April, down 2.3% to 5.57 million units and the USD continues to show signs of pressure following the meeting minutes of the Fed’s Open Market Committee yesterday. US indexes managed to ignore the FOMC, with the DJIA up 0.41% and the Nasdaq 0.39%. Weak Q1 data was shrugged off and chances of a June rate hike remain high. The report indicates some concern over inflated prices, but a growing consensus for reducing the central bank’s balance sheet. On the other hand, Canada yesterday kept its interest rate unchanged, central bankers indicating 5% quarterly growth YoY and a belief that the country has developed immunity to its former commodities-reliant economy. On Monday US markets will be closed for Memorial Day.

Asia

China’s finance ministry yesterday accused Moody’s of using “inappropriate methodology” to downgrade the nation to A3. In spite of a momentary spike in the Yuan following the FOMC’s minutes yesterday, indexes rose on panic buying as commodities fell – especially metals. The Shanghai composite closed 1.34% up, the Chinese FTSE by 2.43% and the Hang Seng 0.75%. Other Asian markets followed suite. Economists estimate that China’s debt to GDP ratio is in the 300% region after the government’s huge injections into capital markets since the beginning of the year.

Commodities

Following Moody’s China downgrade, Bitcoin has surged above $2400 – that’s 400% in the space of a year! And, OPEC members are meeting in Vienna amidst a growing consensus in favor of extending the current production freeze by 9 months. Concern is being voiced, though, that OPEC is no longer the “price setter” it once was. Still, that plus yesterday’s EIA -4.43 million barrel crude oil inventories change (the 7th week of declining stocks) has pushed the commodity back into a bullish bias, with WTI now at above 51.74.

Week’s Events

9 AM GMT Italy: Industrial Sales & Orders
8:30 PM GMT UK: Mortgage Approvals, GDP, and Business Investments at 9:30
12:30 PM GMT US: Jobless Claims, Goods Trade Balance, and Kansas Fed Manufacturing index at 3.
11:50 PM GMT Japan: CPIs

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