Stocks Consolidate Gains as Euro Continues to Climb

The global stock market rally, sparked by Macron’s advance towards becoming the next French President, started to run out of steam during the European session. The DAX surged to new record highs Monday and remains above 12,400, as the focus turns to the ECB meeting on Thursday. The FTSE 100, which underperformed Monday, is outperforming today. The CAC 40 continues to climb, after surging more than 4% yesterday and Italian and Spanish indices are narrowly mixed. Asian markets still moved higher overnight, with the Nikkei closing with a 1.08% gain and Chinese stocks stabilizing after yesterday’s sell off.

WTI crude prices are up 0.3% on the day, at $49.39. The modest gain follows six consecutive sessions of decline, which left a four-week low at $49.03 yesterday. Prices are down by 5.8% week-on-week. Sentiment remains decidedly bearish, with the OPEC-led supply reduction, in place since the start of the year, and looking likely to be extended into the second half of the year, having failed to clear oversupply, with stockpiles at record levels. A surge of U.S. production is also set to hit the market in May.

German Services Sentiment Declined in April

German services sector confidence eased in April, according to the Ifo institute, which put the overall reading for April at 107.8, down from 108.3 in the previous month. The current conditions indicator fell to 116.1 from 116.9 and the expectations reading to 100.0 from 100.3. This main Ifo yesterday still improved, but the expectations index also dipped and it seems the dynamic of the German economy is slowly easing, while France and other Eurozone countries are catching up.

UK government borrowing fell GBP 20 billion in the year to March to a total of GPB 52 billion in the net figure excluding public sector banks figure. On the month, net borrowing rose by GBP 5.1 billion, more than the GBP 3.1 billion figure forecast by economists. Total government debt, excluding banks, rose to 86.6% of GDP, up from 83.6% in March last year.

The BoJ’s Kuroda said he expects CPI to near 2% during parliamentary testimony, which has been his long standing view, repeated as he defended the central bank’s ultra-loose monetary policy strategy. He declined to comment when asked about Trump’s accusations of currency manipulation, and said that the BoJ was understood by the G20 and IMF to be pursuing its target to generate 2% inflation.

French manufacturing confidence jumped higher in April, with the reading rising to 108 from 105 in the previous month. The overall business confidence number remained steady though, and while past production numbers increased sharply, the future production outlook fell back to 1 from 3. Interestingly though, the own company production outlook improved, and the renewed dichotomy between the assessment of the overall climate and the situation at company level is also likely to reflect political and economic uncertainty in a wider context. Overall though numbers remain positive and with the strong PMI readings suggest the French recovery is finally gathering steam.