Macro Roundup (May 9)
This is a roundup of global macroeconomic news last night and what is expected today.
The US dollar index broke the 93 level and registered a fresh, four-month high of 93.29 overnight following hawkish comments from the Federal Reserve Board chairman Jerome Powell. US President Donald Trump’s announcement to withdraw the US from the Iran nuclear deal gave further support to the greenback.
"Some investors and institutions may not be well positioned for a rise in interest rates, even one that markets broadly anticipate,” Powell said at a conference sponsored by the International Monetary Fund and Swiss National Bank in Zurich.
“Markets should not be surprised by our actions if the economy evolves in line with expectations,” he added.
Suppressed by the strong US dollar, base metals fell across the board at one point overnight. LME lead lost close to 1% while copper, tin and nickel dipped. LME aluminium and zinc lost their previous gains though they closed slightly higher. SHFE aluminium dropped 0.81%, nickel slid 0.77%, copper edged down 0.7% with zinc, lead and tin slightly down.
China's dollar-denominated imports in April jumped 21.5% year on year, compared to the expected 16% and March’s 14.4%. Its dollar-denominated exports last month grew 12.9% year on year, compared to the expected 8% and March’s -2.7%.
Overall, China returned to trade surplus of $28.78 billion in April from a deficit of $4.98 billion in March, higher than the forecast of $27.75 billion.
The country's trade surplus with the US expanded to $22.19 billion in April, the first increase since November 2017, compared with a surplus of $15.43 billion in March.
Lu Zhengwei, chief economist at Shanghai-based Industrial Bank, attributed the rebound in exports to the cooling of the Chinese New Year holiday factor, a warming weather and the resumption of regular operations at enterprises. Some companies also increased their shipments to the US on fears of sanctions, he added.
US crude oil inventories during the week ended May 4 fell by 1.85 million barrels and gasoline inventories shrank by 2.055 million barrels, according to data from the American Petroleum Institute (API).
Key factors to watch today include the US producer price index (PPI) in April, wholesale inventories in March and the Energy Information Administration's (EIA) data on crude oil inventories over the week ended May 4.
The US dollar is likely to stay at highs in the short term while base metals are expected to continue their rangebound and weak patterns.