The atmosphere on bond markets is easing a little in the wake of Jerome Powell's speech... and on the eve of the publication of the 'NFP', the monthly employment report.

The head of the FED - who must already have a few things to say about April's figures - asserted that job creation was still plentiful, while GDP was experiencing a 'rapid rise' at the same time.

But he reassured his listeners a little on Wednesday evening by insinuating that the Fed's next move will 'probably not' be a rate hike (13% of traders thought there might be no rate cut this year, but a hike in January 2025 if inflation picks up).
Even if Jerome Powell believes that the FED's objectives are on track, but a little behind schedule on the inflation front, investors need to take on board the fact that the outlook has changed considerably in 4 months, with expectations of 7 rate cuts revised down to a single easing (150 basis points from the initial scenario) which may not take place until the very end of the year (the consensus is no longer even in the majority for September, whereas it was in mid-April).

The inflation problem may not be easy to solve if the economy continues to perform well", admit Commerzbank analysts.
For the German bank, no interest rate cut is therefore to be expected before December.

Uncertainty surrounding the monetary easing agenda 'taped' US bond yields to the previous day's levels until late afternoon... Yields then eased sharply towards the end of the day: the '10 yr' erased -3Pts to 4.595%, the '2 yr' eased from 4.966% to 4.900% and the '30 yr' remained stuck at 4.735% (-1.5Pt basis point).

As for US figures, US industrial orders rose by a further 1.6% in March 2024, according to the Commerce Department (following a 1.2% increase in February).

US industrial shipments rose by 0.3% in March compared with the previous month. With inventories virtually unchanged, the inventory-to-delivery ratio remained unchanged at 1.47 month-on-month.

Non-farm productivity rose by an annualized 0.3% in Q1 2024, according to the Labor Department's first estimate, driven by a 1.3% rise in total output and a 1% increase in hours worked.

Given this weak rise in productivity, but also a 5% increase in hourly wages, non-agricultural unit labor costs in the US climbed by 4.7% for the first three months of this year... enough to upset the markets, but they want to see the glass half full tonight.

The US trade deficit remained virtually unchanged at $69.4 billion in March, compared with $69.5 billion the previous month (which was revised from an initial estimate of $68.9 billion), according to the Commerce Department.

This 0.1% month-on-month decline in the deficit is the result of a 1.6% drop in US imports of goods and services, to $327 billion, and a 2% contraction in exports, to $257.6 billion.
Weekly jobless claims stagnate once again at 208,000 (and that's 2 months 'standing still').

On the European statistics front, the HCOB PMI index for eurozone manufacturing settled below the 50 mark of no change between contraction and growth for the 22nd consecutive month, signalling a further deterioration in economic conditions in April.
Having fallen from 46.1 in March to 45.7, it also highlights a slight acceleration in the contraction of the eurozone manufacturing sector compared with the previous month, with strong divergences in trends at national level.

In France, the PMI manufacturing index fell from 46.2 in March to 45.3 in April, marking the fifteenth consecutive deterioration in the sector's economic situation, with contraction at its fastest pace since January.
Our OATs and Bunds eased by -3.5Pts to 3.04% and 2.54% respectively, while Italian BTPs fell by -6Pts to 3.85%.
Across the Channel, the upturn was also evident, with yields easing by -7Pts from 4.400% to 4.33%.

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