Scoreboard: Fed smooth-talk

Wall Street took the Fed minutes in its stride, with energy and consumer sectors pushing higher.

Equities had decent session overnight on the back of a combination of factors. A stronger crude price gave a boost to energy stocks and consumer stocks also saw a decent bid following a 9.2 per cent gain in retailer Tiffany’s, after it reported better than expected profit results.

The Fed didn’t do much to boost sentiment, but then again nothing they said detracted from it. The minutes themselves didn’t contain anything new. The economic outlook remains positive, growth had picked up and so on -- it was all either unchanged from March or nothing we didn’t see in the post meeting statement.

Quantitative easing remains on track to end this year -- likely the US autumn, but the Fed reiterated that exceptionally stimulatory policy would remain in place for a long-time yet. On that score the Fed said the continued stimulus to push the unemployment rate lower wouldn’t risk sparking an undesirable lift in inflation.

Equities saw a decent bid on both sides of the pond, with Wall Street outperforming. At the bell, the S&P500 was up 0.8 per cent (1888) which is the second strongest gain in about 5 weeks. The Dow outperformed that with a 158pts move to 16533, while the Nasdaq was up 0.9 per cent (4131). By sector energy and consumer stocks look to have outperformed, although most major sectors had a solid bid. Over in Europe, the Dax was 0.6 per cent higher, the CaC rose 0.4 per cent, although the FTSE100 fell 0.3 per cent.

Forex moves were greatest on the British pound overnight -- up 60 pips to 1.6901 following the Bank of England’s minutes and strong retail sales results. Otherwise, moves were non-descript -- the euro fell about 20 pips to 1.3688, while the Australian dollar managed to find a bid having hit a low of 0.9209. Currently the unit sits at 0.9251, up 16pips from 4.30pm (AEST), as I write.

Rates rose for a change as US Treasuries sold off, although moves were small. At the close, the US 10-year yield was at 2.53 per cent which is barely 2bp higher than the open. The 5-year followed suit, also up about 5bp to 1.525 per cent, while the 2-year was at 0.339 per cent. Aussie futures followed the US lead, as they do, and fell 2-3.5 ticks each on the 3s (97.230) and 10s (96.315).

Commodities saw decent price moves in the crude space, especially on WTI, which was up 1.5 per cent ($103.86). That move came after a report from the EIA that showed domestic crude stocks falling 7.2 million barrels in the week to May 16 -- the largest such decline in four months. Brent was up as well, but only about 0.5 per cent to $110.4. Elsewhere, metals fell with gold down a few bucks to $1291, silver was flat effectively and copper was off 0.6 per cent.

Elsewhere, In the UK, retail sales surged in April, rising 1.8 per cent after a 0.1 per cent gain. Annually, sales are 7.7 per cent higher.

Markets today. Aussie stocks look set to receive a modest bid today with the SPI up by 0.4 per cent overnight. In terms of dataflow, we see HSBC’s estimate of China’s manufacturing PMI at 11.45am (AEST) followed by some European PMIs this afternoon -- nothing major expected.

Tonight, the key data includes the breakdown of first quarter UK GDP figures, plus their index of services. For the US, we see jobless claims, existing home sales, the Kansas City Fed manufacturing index, the Chicago Fed national activity index and a speech from the President of the San Francisco Federal Reserve.

Have a great day.

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