Scoreboard: Mixed messages

Wall Street followed European markets lower despite positive data, while US Treasuries rallied.

Stocks were belted on both sides of the Atlantic overnight but the price action seemed at odds with the news and dataflow, which was mixed. Take the economic data -- there was the bad: US industrial production fell 0.6 per cent in April after a 0.9 per cent gain -- 0 per cent was expected. Similarly, European GDP came in a little lower than expected, rising 0.2 per cent when 0.4 per cent was forecast.

Then there was the good: European GDP rose 0.2 per cent which, for Europe, is a good outcome. More importantly, some of the manufacturing indicators out of the US were positive. The Empire Statement manufacturing survey surged to 19 in May from 1.3. The Philly Fed index remains elevated at 15.4 (from 16.6 in April), which is a great outcome considering the average is about 4. Finally, and probably most importantly, jobless claims fell again in the week to May 10 -- about 24,000 to 297,000 which is the lowest number of claims in seven years.

For mine the good far outweighed the bad.

Equities were smashed though, the price action equally bad in the US and Europe. At the bell, the S&P5000 was off 0.9 per cent (1873), with the Dow losing 167pts to 16446. The Nasdaq was then 0.8 per cent lower at 4069. By sector, energy, basic materials and financials were the key underperformers, with telecommunications posting very modest gains. Over in Europe, the Dax fell 1 per cent, the CaC outdid that with a 1.3 per cent fall, while the FTSE100 was 0.5 per cent lower.

Forex markets drove the US dollar down, although it was a weird and whippy session. The euro initially dropped sharply after weaker than expected GDP figures came out. The unit hit a low of 1.3649, or 66 pips lower. The bid soon came on though and the unit was little changed at the time of writing at 1.3711. Sterling too initially weakened but once again a bid developed as the US market opened. At the time of writing Sterling was up 35 pips (1.679) from 4.30pm (AEST) yesterday. The Australian dollar for its part was little changed, modestly weaker perhaps -- maybe 20 pips to 0.9356.

Rates fell again, as US Treasuries rallied and the bid was decent. In largely one-way traffic the US 10-year yield fell 6bps to 2.495 per cent. The 5-year yield fell 4bps to 1.529 per cent, while the 2-year is at 0.354 per cent. Aussie futures were up 1 tick on the 3s to 97.17, while the 10-year was 4.5 ticks higher at 96.29.

Commodities weakened overnight, despite a softer US dollar, with some decent falls -- especially silver, which fell 1.4 per cent. Gold was then off about $9 to $1296, with copper 0.4 per cent lower. In the crude space, WTI fell 0.8 per cent ($101.5) and Brent fell 0.3 per cent ($109) and that’s despite the IEA raising their forecasts for oil demand for this year.

Elsewhere, there was quite a lot of data out overnight. In Europe, inflation rose by 0.2 per cent in April following a 0.9 per cent lift, to be 1 per cent higher annually. In the US, consumer price inflation rose by 0.3 per cent in April, to be 2 per cent higher annually from 1.5 per cent a year ago. Still in the US, the rate of mortgage foreclosures fell in the March quarter, to 2.65 per cent from 2.86 per cent. Similarly, delinquencies fell to 6.11 per cent from 6.39 per cent.

In markets today, the SPI suggests Aussie stocks will fall 0.6 per cent following weakness in global markets. In terms of the data it’s quite light. The key interest will be a speech from the Fed chair Janet Yellen at 8.10am (AEST) followed by a Chinese business indicator index at 11.45am (AEST).

Tonight all we see is the European trade balance, US housing starts, the Michigan University’s consumer confidence survey, and a speech from the St Louis Fed President James Bullard.

Have a great day.