Closing Wrap - Thursday 21.05
Headlines
  • China To Impose Sweeping Nat’l Security Law In HK, Bypassing City’s Legislature
  • China: US To Face Countermeasures If It Imposes Sanctions
  • US Senators To Propose Bill Sanctioning Chinese Officials Over HK Security Law
  • Trump To Withdraw From ‘Open Skies’ Arms Control Treaty
  • Mnuchin Sees US Economic Bottom In Q2, 'Gigantic Increase' In Q4
  • US House Will Review Bill To Delist Chinese Companies
  • UK Buys 10 Mln Antibody Tests From Roche And Abbott
  • British Banks Warn BoE Against Negative Rates
  • Yield On UK 5-Year Government Bonds Falls To New Record Low
  • Tesla Gigafactory Shanghai Expansion Is Back In Full Swing
  • GrubHub And Uber 'Very Close', Still Talking About A Deal
Commentary
China’s Peoples’ Congress Convenes As US Pressure Mounts

With the world’s two largest commercial powers at loggerheads in the throes of the worst economic downturn since World War Two, this year’s Chinese National People’s Congress could boost hopes about global growth after lockdown or dash them.

 

In what is seen by many as political theatre, the meeting, which begins Friday and generally extends for 10 days, allows the Chinese leadership and officials from around the country to gather in Beijing. The congress is considered a formality for enacting Communist Party policy growth targets, economic plans, and a range of other policy measures formulated well before the 3,000 delegates even sign-in.

 

But this year, the foreign-policy hurricane swirling around the meeting during the last few sessions has grown: There is little doubt that China’s Wuhan Province served as the germination point for the Covid-19 outbreak, which resulted in a 6.8pct contraction in Chinese GDP in the first quarter versus the year-earlier period, the worst decline on record.

 

The lockdown to stem the spread of the virus also forced the first postponement of the March congress since 1995, and questions remain about Beijing’s handling of the outbreak. (LiveSquawk – Continue Reading)

US Jobless Claims Surprise To Upside But Four-Week Average Slips

Claims came in above the consensus estimate of 2.4mln but fell in the week to May 16 from the prior 2.687mln. This was revised lower by 294k from the previous 2.981mln after a clerical error in Connecticut. The four-week moving average fell to 3.042mln, a drop of 501k from the previous week. The number of claims over the past eight weeks totals around 38.6mln, which is equivalent to all the claims filed during the Great Recession. That said, this is now the seventh consecutive week of declines, tying the all-time record.

 

The record continuing claims figures, that is those Americans receiving unemployment benefits, has sent the insured unemployment rate to 17.2pct. This series is reported with a one-week lag. (LiveSquawk – Continue Reading)

Market Sees Inflation Well Below Fed Target Until at Least 2050

Bond investors are skeptical that inflation will rebound as the U.S. economy eventually starts to recover.

 

While some lawmakers fretted this week that a combination of central bank and government rescue packages could inflame long-dormant price pressures, the market’s outlook for inflation has languished. Investors aren’t betting on outright deflation over the longer term, but the 10-year breakeven rate -- a gauge of traders’ expectations for the consumer price index over the next decade based on Treasury prices -- is hovering around 1.15%. The 30-year is less than half a percentage point higher.

 

That means investors don’t see the Federal Reserve getting close to its 2% inflation target before 2050. That outlook isn’t a great set up for the Treasury’s $12 billion sale of 10-year inflation-linked bonds Thursday. The historic slump in West Texas crude oil prices, which have clawed back from below zero to trade above $34 a barrel, and last month’s record decline in an index of core consumer prices, contribute to the case against inflation protection.

 

“We have to get through the deflation before we worry about the inflation,” Kathy Jones, a fixed income strategist at Charles Schwab, said at a virtual roundtable Wednesday. “We’re not in the high inflation camp.” (Bloomberg – Continue Reading)

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