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Global Central Banks Still Got the Markets' Back   May 18 - May 22
Fri, 22 May 04:08 PM EST/09:08 PM GMT
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Assured by an apparent stabilization in global interest rates, market participants sent global equities higher this week on central bank largess and any scrap of perceived good news to hit the tape. In Europe, indices saw a marked upturn despite the emerging sense that Greece was headed for default, while the Shanghai Composite notched seven-year highs on a 8% gain for the week. After emerging from recession in Q4, Japan's Q1 GDP report was even better, growing by its highest rate in a year on an annualized basis at +2.4%. China data remained soft, but the implicit promise of more PBoC support no matter what kept stocks boisterous. US May data was tepid, and the FOMC minutes gave a strong feeling that the Fed would not be raising rates before September. Fed Chair Yellen's Friday afternoon speech did little to alter that notion. There was mixed economic data in Europe, but comments by ECB's Coeure that the ECB would front-load its QE purchases because of the seasonal lack of liquidity in the summer helped gird markets. The US 10-year yield is held near its 200 day moving average just above 2.2% and the Greenback found some buyers. The DJIA and S&P500 saw fresh all-time highs before some very modest selling late in the week, while the Nasdaq approached recent all-time highs. For the week, the DJIA ended down 0.2%, the S&P500 gained 0.2% and the Nasdaq rose 0.8%.

Weak May US economic data points further contributed to the feeling that the Fed would have a very hard time raising rates any time soon. The headline Markit May manufacturing PMI reading was softer for a second consecutive month, dropping to its lowest level since January 2014. Overseas markets continue to be a source of trouble: exports have fallen for two months and manufacturers warned the strong dollar was a big drag on their competitiveness in external markets. Meanwhile the May Philly Fed outlook dropped to 6.7 from 7.5 in April (which had been a four-month high). The NAHB survey of homebuilder confidence slipped lower in May, dropping to 54 from 56 in April, and missed expectations. ...
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