Stocks are lower this morning as investors worry that global markets are getting too far ahead of the economy

Stocks are lower this morning as investors worry that global markets are getting too far ahead of the economy 981 980 Realm

Stocks are lower this morning as markets take a pause. Investors are looking for a new catalyst amid fears that global markets are getting too far ahead of the economy.

 

Global Macro

  • Measures taken by the ECB in March were critical in removing the tail risk of the COVID-19 pandemic and will continue to be crucial in supporting the return of inflation towards the 2% target, President Christine Lagarde said before the Committee on Economic and Monetary Affairs of the European Parliament on Monday. Lagarde reinforced the ECB is determined and ready to adjust all of its instruments, as appropriate, to support the economy but warned that it is important to adopt quickly the European Commission’s proposal for a revised EU long-term budget to give more certainty and confidence to citizens, businesses and financial markets and that any delay risks generating negative spillovers and driving up the costs, and hence the financing needs, of this crisis.
  • Germany’s industrial production slumped by 17.9% month-over-month in April 2020, the steepest decline since the series began in January 1991 and worse than market expectations of a 16.8% fall, due to the negative impact of the coronavirus pandemic. Production contracted for intermediate goods (-13.8%), consumer goods (-8.7%), capital goods (- 35.3%), and energy (-7.2%). A sharp drop was recorded by the automotive industry (-74.6%). Also, construction activity dropped by 4.1%.
  • Overall bank lending in Japan surged a record 4.8% year-on-year in May of 2020, following a revised 2.9% increase in the prior month and above market expectations of a 3.2% gain. This historic surge was due to a rise in fund demand from firms affected by the coronavirus pandemic.
  • The Japanese economy shrank 0.6% on quarter in Q1 2020, compared with the preliminary estimate of a 0.9% contraction and market consensus of a 0.5% decline. This was the first recession since 2015, as the COVID-19 crisis took a huge toll on activity and demand. Private consumption fell slightly more than anticipated (-0.8% vs -0.7% in the preliminary estimate), while there was a significant upward revision of capital expenditure (1.9% vs -0.5%). Meantime, government spending was flat (vs 0.1% in the preliminary estimate), with public investment dropping for the first time in five quarters (-0.6%). At the same time, net external demand subtracted 0.2%age points from growth as exports (-6%) fell more than imports (-4.9%). On an annualized basis, the economy contracted 2.2 % in Q1, less than the initial reading of a 3.4% contraction and compared with consensus of a 2.1% fall.
  • On Monday: European stocks fell slightly as investors locked in some profits after strong gains last week on hopes of a swift economic recovery from the coronavirus pandemic. US stocks moved sharply higher over the course of the trading day, extending the upward trend seen over the past several sessions. With the upward move, the tech-heavy Nasdaq ended the session at a new record closing high. Asian stocks rose broadly as investors weighed surprisingly positive jobs report from the U.S. and Canada against Chinese trade data painting a mixed picture of its economic recovery from the Covid-19 virus.
  • Monday’s data below:

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