Euro Jumps on Surprise EU Inflation Figures

European stock markets are mixed, with the FTSE 100 underperforming following weaker than expected Q1 GDP numbers which will give the BoE some room before having to tighten rates. Eurozone markets managed to stabilized and are posting modest gains. It is the DAX that is underperforming flat on the day, while MIB and IBEX are outperforming. The Macron effect lifted the DAX to new all-time highs this week, but without fresh impetus investors remain reluctant to push things further, especially ahead of the long weekend, with most of Europe on holiday on Monday. Japanese markets also closed narrowly mixed, with the Nikkei down -0.29% ahead of the Golden Holiday as markets consolidate after the 2-week rally and with disappointing earnings reports adding to pressure. Hang Seng and CSI 300 also closed in negative territory, while the ASX was up 0.04% at the close. U.S. stock futures are also moving higher, following better than expected earnings results from Alphabet and Amazon.

WTI crude prices are up 0.8% at $49.36, extending the recovery from Thursdays four-month low at $48.20. A two-session high was logged earlier at $49.63. The relatively big drop yesterday, coupled with a relatively high closing high relative to the day’s range, looks to have encouraged some tactical buying, especially amid news that Russia has cut production by 30k barrels per day. Markets are also expecting that there will be official confirmation that the OPEC-led supply cut will be extended for another six months, though countering this is the prospect for a big jump in crude coming onto the market from U.S. shale production in May.

The Russian central bank cut key rate by 50 basis points to 9.25%. The consensus had been for a 25 basis points cut so today’s move was bolder than anticipated. The statement said that the “Board notes that inflation is moving toward the target, inflation expectations are still declining and the economic activity is recovery”. At the same time inflation risks remain in place, according to the statement.

UK GDP Missed Expectations for Q1

UK Q1 GDP came in worse than expected with growth of 0.3% quarter over quarter, the slowest quarterly rate since the same quarter in the year before and down from 0.7% growth in Q4. The market median had been for 0.4%. The year over year growth rate still rose, to 2.1% from 1.9% in Q4, though this too was 0.1 of a percentage point below the median forecast. A pullback in the dominant service sector drove the deceleration on the quarter, with services growth coming in at 0.3% quarter over quarter in Q1, down from 0.8% in Q4.

Eurozone April inflation jumped back to 1.9% as the timing of Easter help buoy prices. The preliminary reading for Eurozone April HICP inflation came in a tad higher than expected at 1.9% year over year compared to expectations of a 1.8% increase, although this shouldn’t have been a surprise after the stronger than expected numbers out of Spain and Germany.