German Ifo Index Rises for May as Economy Entered Recession in Q1


Futures for US stocks were about 2% up on Tuesday indicating a strong resumption to trading having been closed on Monday for Memorial Day. Indices had closed in the green on Friday save the DOW which was just lower at 0.03%.


German business sentiment topped expectations in May with the Ifo index recording 79.5 from a revised 74.2 in April. The report came as Q1 GDP fell 2.2% QoQ and the economy entered a recession. The euro closed slightly weaker at $1.0898 while yield on 10Y DBRs closed lower at -0.494%.


Asian stocks were also higher on Tuesday amid indications of further stimulus as well as resumption of just about normal economic activity in Japan. The NIKKEI was up 2.55% while the ASX and the HANG SENG rose 2.92% and 2.01% respectively. The CSI rose a comparatively muted 0.42% even as the PBoC signalled a further decrease in borrowing costs.


Brazil is now firmly in second place in confirmed COVID-19 cases with about 375,000 cases as at Monday. The surge has come as President Jair Bolsonaro has been at odds with governors and ministers over reopening the economy with two health ministers having resigned in the space of a month. The real closed firmer at 5.4452 to the dollar while BRAZIL 29s were about flat, trading in the high 101s.


Bank of Russia Governor Elvira Nabiullina said a 100bps cut remains on the agenda at the June monetary policy meeting on Friday. The governor also stated that 2Q GDP could contract more than 8% even as the decline in industrial production for April was less than expected. The ruble closed slightly weaker at 71.6880 to the dollar while RUSSIA 30s were lower, trading in the high 115s.


Nigeria’s GDP grew 1.87% YoY in Q1 amid a ramping up of oil production to the highest level since 2016. Oil output rose to 2.07 million barrels per day with the oil sector growing 5.06%. The IMF however expects the economy to contract 3.4% in 2020 amid the plunge in crude prices.