All eyes/focus would be closely kept on the US inflation data which is due today. As at yesterday we saw the 10-year Treasury yield extend a slide below 1.5%, signaling support for the view that the rebound from the pandemic will stoke only a transient bout of elevated inflation. The S&P 500 SPX slipped c.0.19% to 4,219.55, erasing its meager gain from a day earlier. The benchmark index’s modest moves this week have it on track for its first weekly loss in three weeks. The Dow Jones Industrial Average DJIA lost c.0.4% to close at 34,447.14 while the Nasdaq COMP held up somewhat better, ending down just c.0.09% at 13,911.75.
Early trading in Europe has seen the pan-region Euro Stoxx 50 futures down c.0.11% and German DAX futures also dropping c.0.34% while London’s FTSE futures is slightly up c.0.04%. (10:15 GMT+3). Today’s focus in Europe would be on the ECB and the US CPI print, with the market expectation from ECB to remain dovish and not indicate a slowdown in the pace of purchases. Instead, we might likely see the ECB would link the pace of purchases to financial conditions which would give them the flexibility to keep a high pace if spreads are under pressure but take a step back if spreads are stable during the carry positive summer months.
A continued recovery in oil demand — driven by transport fuels and petrochemicals — remains vital for a further decrease in inventories as OPEC+ plans to gradually bring output back into the market. OPEC+’s tight grip on supply has allowed significant drawdowns, with global inventories already back at their five-year average. Oil prices fell as inventory data from the United States (the world’s top oil consumer) showed a surge in gasoline stocks that indicated weaker-than-expected fuel demand at the start of summer, the country’s peak season for motoring. US crude oil stockpiles that include the Strategic Petroleum Reserve (SPR) fell for the 11th straight week as refiners ramped up output, but fuel inventories grew sharply due to weak consumer demand, the Energy Information Administration (EIA) said on Wednesday. OPEC+ may need to maintain its supply management to reduce inventories further, which reached record levels in 2020 due to the pandemic, while Saudi Arabia’s voluntary 1 million barrels-a-day cut also helped reduce volume further in April. Inventories are now back down below their five-year average following the oil-demand slump, though recovery is proving to be uneven amid continued travel restrictions in some parts of the world. OPEC+ repeatedly said that reducing the “stubbornly high” inventories remains the priority, with the group now planning to gradually bring supply back into the market as demand improves and stockpiles fall.
East Africa’s largest economies plan to borrow at least $16 billion to fund an economic revival, while striving to ease their debt burdens after the coronavirus pandemic battered government revenue. The three governments will contend with a combined budget shortfall of about $16.4 billion in the fiscal year. Finance ministers in Kenya, Uganda and Tanzania will present their 2021-22 spending plans on Thursday, providing details on funding key projects, including building railways and ports, in the wake of heavy indebtedness. Kenya, East Africa’s largest economy, faces a gap of $8.8 billion equivalent to 7.7% of gross domestic product, which it plans to fill with external and domestic borrowing.