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Major US stock indexes finished trading in the red, but retreated from the session low amid hopes for a trade deal between the US and China.

The selling pressure eased after a message from Trump that he had a “great alternative” to the Chinese trade deal. “They will see what they can do,” Trump said of the Chinese delegation after the White House event on stopping the so-called unexpected medical billing. “But our alternative is excellent,” he told reporters. “This is the alternative I have been talking about for years. We will receive more than $ 100 billion a year. “We never took a dime from China,” Trump said. - And I think it will be a very strong day. But we'll see. ” He added: “It was their idea to return.”

Sarah Sanders, spokeswoman for the White House, said earlier that Chinese Vice Premier Liu He will have dinner with US Trade Representative Robert Lightheiser and other US officials this evening, as the two largest countries in the world are trying to save a trade deal. However, Mr. Liu’s meeting with President Donald Trump on Thursday is not expected, she added.

In general, amid the uncertainty surrounding the negotiations, market participants actually ignored a block of important macro statistics. Thus, the Ministry of Labor reported that producer price index for final demand rose by 0.2% last month, as expected, after rising 0.6% in March. In the 12 months to April, the producer price index rose by 2.2%, which corresponds to growth in March. Economists had forecast a growth rate of 2.3%.

The Ministry of Labor reported that initial claims for unemployment benefits fell by 2,000 to 228,000, taking into account seasonal fluctuations in the week to 4 May. The data for the previous week was unchanged. Economists predicted that in the last week the number of applications will fall to 220,000.

Meanwhile, a report by the Department of Commerce indicated that the US trade deficit in March increased to $ 50.0 billion from $ 49.3 billion in February. Economists had forecast a growth in the deficit to $ 50.2 billion.

Almost all the components of DOW finished trading in the red (23 out of 30). Intel Corp shares were an outsider. (INTC; -5.20%). Chevron Corp. shares rose the most. (CVX, + 2.97%).

All sectors of the S & P recorded a fall. The largest decline was shown by the conglomerate sector (-0.7%) and the consumer goods sector (-0.7%).

At the time of closing:

Dow 25,828.36 -138.97 -0.54%

S & P 500 2,870.72 -8.70 -0.30%

Nasdaq 100 7,910.59 -32.73 -0.41%

• Liu He is not expected to meet with U.S. President Donald Trump on Thursday

The Commerce Department said on Thursday the U.S. wholesale inventories decreased 0.1 percent m-o-m in March, following a revised 0.4 percent m-o-m advance in February (originally, a gain of 0.2 percent m-o-m). That marked the first decline in wholesale inventories since October 2017.

Economists had forecast wholesale inventories being flat m-o-m in March.

On a y-o-y basis, wholesale inventories surged 6.7 percent.

According to the report, wholesale auto stocks decreased 0.9 percent m-o-m in March, while apparel inventories climbed 1.7 percent m-o-m.

Meanwhile, wholesale sales jumped 2.3 percent m-o-m, following an unrevised 0.3 percent m-o-m gain in February. There were increases in sales of motor vehicles, furniture, professional equipment and electrical goods.

Statistics Canada reported on Thursday the New Housing Price Index (NHPI) was unchanged m-o-m for a second straight month in March.

Economists had forecast the NHPI to be flat m-o-m in March.

According to the report, builders in 18 of the 27 census metropolitan areas (CMAs) surveyed reported flat or declining prices in March. Victoria (-0.4 percent m-o-m) registered the largest drop, primarily due to deteriorating market conditions, as well as lower negotiated selling prices.

At the same time, new housing prices rose the fastest in Gatineau (+0.4 percent m-o-m), supported by higher construction costs.

In y-o-y terms, NHPI edged up 0.1 percent in March, the same pace as in the previous month.

Statistics Canada announced on Thursday that Canada’s merchandise trade deficit stood at CAD3.21 billion in March, narrowing from a revised CAD3.42 billion gap in February (originally a CAD2.90-billion deficit).

Economists had expected a deficit of CAD2.45 billion.

According to the report, the country’s exports increased 3.2 percent m-o-m in March, led in part by higher exports of energy products (+7.7 percent m-o-m).

Meanwhile, imports rose 2.5 percent m-o-m in March, in part due to higher imports of consumer goods (+6.7 percent m-o-m) and motor vehicles and parts (+4.9 percent m-o-m).

For the first quarter of 2019, Canada’s trade gap widened to CAD10.4 billion from CAD7.8 billion in the same period of 2018. That was the largest deficit since the second quarter of 2016.

U.S. stock-index futures fell on Thursday, as President Donald Trump’s statement that China "broke the deal" fueled worries the U.S. and China would be unable to hatch a trade agreement before new tariffs go into effect at midnight.

Global Stocks:

The Labor Department reported on Thursday the U.S. producer-price index (PPI) rose 0.2 percent m-o-m in April after an unrevised 0.6 m-o-m increase in March.

For the 12 months through April, the PPI rose 2.2 percent, the same pace as in the prior month. 

Economists had forecast the headline PPI would increase 0.2 percent m-o-m last month and 2.3 percent over the past 12 months.

According to the report, the April rise in the index for final demand was led by prices for final demand goods, which climbed 0.3 percent m-o-m. Meanwhile, the index for final demand services edged up 0.1 percent m-o-m, and prices for final demand construction rose 1.6 percent m-o-m.

Excluding volatile prices for food and energy, the PPI increased 0.1 percent m-o-m and rose 2.4 percent over 12 months. Economists had forecast gains of 0.2 percent m-o-m and 2.5 percent y-o-y, respectively.

(company / ticker / price / change ($/%) / volume)

Intel (INTC) downgraded to Market Perform from Outperform at BMO Capital Markets

The U.S. Commerce Department reported on Thursday the U.S. the goods and services trade deficit widened to $50.0 billion in March from a revised $49.3 billion in the previous month (originally a gap of $49.4 billion).

Economists had expected a deficit of $50.2 billion.

According to the report, the March advance in the goods and services deficit reflected an increase in the goods deficit of $0.5 billion to $72.4 billion and a decline in the services surplus of $0.2 billion to $22.4 billion.

Exports of goods and services from the U.S. rose 1.0 percent m-o-m to $212.0 billion in March, while imports grew 1.1 percent m-o-m to $262.0 billion.

Year-to-date, the goods and services deficit decreased $5.8 billion, or 3.7 percent, from the same period in 2018. Exports increased $14.0 billion or 2.3 percent. Imports increased $8.2 billion or 1.1 percent.

The data from the Labor Department revealed on Thursday the number of applications for unemployment benefits decreased less than expected last week.

According to the report, the initial claims for unemployment benefits fell 2,000 to 228,000 for the week ended May 4.

Economists had expected 220,000 new claims last week.

Claims for the prior week were remained unchanged at 230,000.

Meanwhile, the four-week moving average of claims rose 7,750 to 220,250 last week.

Bill Diviney, the senior economist at ABN AMRO, suggests that some Fed policymakers are already setting out their views on ways to improve the regulator’s strategies and tools.

• The most important recent contributions have come from NY Fed President John Williams, who has co-authored an academic paper that makes the case for an average inflation target, while today, board member Lael Brainard gave a speech signaling skepticism over whether the Fed should make such a shift, instead arguing for the Fed to beef up its toolkit by considering, for instance, a yield curve target.
• However, some Fed officials have expressed skepticism, with Cleveland Fed President Mester, for instance, asking ‘do the assumptions of the model really play out in real life?’, while St Louis Fed President Bullard warned that making radical changes to the framework could ‘unleash chaos’ in financial markets.
• Brainard, meanwhile, referred to skepticism that central banks would be able to support above-target inflation sustainably, without ‘becoming concerned that inflation might accelerate and inflation expectations might rise too high’. With that said, Fed officials overall are expressing an open mind going into the June conference, and could yet be persuaded that the benefits of changing the framework would outweigh any costs.
• We are likely to see further proposals from Fed officials over the coming weeks and months, and following the conference in June, the FOMC will conduct a full assessment, sharing its conclusions in the first half of 2020. Should the Fed adopt an average inflation target – currently the most likely of the proposed framework changes – we believe it would raise the risk of easier policy next year, although our base case remains that the Fed keeps rates on hold.

Analysts at TD Securities suggest that Canada’s higher energy prices will provide a tailwind to nominal exports and help the international merchandise trade deficit to narrow to $2.3 billionn in March alongside a rebound in non-energy exports following a broad pullback in February.

• Real exports should post a more modest advance while higher imports will provide an offset. New home prices for March will be released alongside trade where TD is on consensus for a flat print.

Iris Pang, the economist for Greater China at ING, says China's April credit data matched the smooth progress of trade talks last month but notes the faster loan growth is expected to return as the trade tension increases.

• We thought loan growth would decline in April but the drop from CNY1.69 trillion to CNY1.02 trillion was more than expected.  
• The seemingly smooth progression of trade talks last month signaled that exporters would not be facing any additional tariff hikes and therefore gave China's central bank, the PBoC, a reason to limit banks' loan growth. There's no need to place an extra burden on banks when the environment is stable. We do not agree with the market that the slower loan growth means lower loan demand. Loan demand in China has been strong from infrastructure projects and small- and medium-sized companies.
• But we believe credit growth in May will be higher than April and could be similar to the scale seen in March, which was CNY1.69 trillion. 
• Higher tariffs from the US on Chinese exporters means small Chinese exporters will need extra money to survive the tough times ahead, otherwise, the job market will be affected. Job stability is a top priority for the Chinese government as outlined in its "six stability" policy for 2019.
• If China implements more fiscal stimulus to defy a trade-induced economic slowdown, credit for infrastructure projects will increase, which implies total credit growth will be even faster.

Walt Disney (DIS) reported Q2 FY 2019 earnings of $1.61 per share (versus $1.84 in Q2 FY 2018), beating analysts’ consensus of $1.57.

The company’s quarterly revenues amounted to $14.922 bln (+2.6% y/y), beating analysts’ consensus estimate of $14.526 bln.

DIS fell to $134.80 (-0.14%) in pre-market trading.

The Chancellor told the Evening Standard the UK Prime Minister Theresa May will be “as good as her word” and step down once a Brexit deal passes in the Commons.

“Once we start the leadership contest, getting it done as quickly as possible would be positive because this isn’t just about the leader of the party, it’s about the Prime Minister”. 

His remarks come amid rising pressure from Tory MPs for an early leadership contest. 

Hammond did not rule out a swift summer contest that would enable a new leader to take over by the party conference in October. 

“I’m clear that the leadership contest should happen once the deal is done,” he said. 

Asked if Theresa  May could stay on beyond the conference, the Chancellor answered that the party would decide the handover timing.

He also stressed: “For those who think she should go sooner, the answer is simple: vote for the deal and it’s done and we can move on.”

• Government has made no big offer in Brexit talks
• Labour can't ignore referendum vote to leave the EU

Analysts at Rabobank note that the U.S. international trade data for March will be published later today and this release is considered to be a key event of the day.

• The first two months of the year showed some narrowing in the trade deficit, and a further decline may have President Trump believing that his tariffs are helping out. However, the recent narrowing of the trade deficit may have been driven by temporary factors such as a production stop in China during the lunar New Year, as well as the build-up of inventories in the US during the second half of last year.
• Once this inventory depletes, imports inevitably have to pick up pace again, putting renewed pressure on the trade balance.

TD Securities analysts point out that the Norges Bank followed up its March rate hike with a pause today.

“The Governor fine-tuned his guidance of future hikes, bucking the dovish trend of his G10 counterparts in saying that a June hike was now likely, meaning two hikes for the Norges Bank in the space of three months. We therefore adjust our forecast from a September hike to June, with no implication for the timing of future hikes. The clear signal for a June hike helps draw a line under recent NOK weakness. Larger concerns are likely to dominate, however, as investor attention remains focused on global trade and geopolitical tensions. Despite this, we think EURNOK may have peaked for this cycle and look for the cross to resume its grinding move lower.”

More foreign visitors came to Britain in January but they each spent less on average than a year ago, while British residents' trips abroad showed the opposite trend, official figures showed.

Some 2.6 million foreigners visited Britain in the first month of 2019, up by 6 percent from a year earlier, but their total spending was unchanged at 1.5 billion pounds, the Office for National Statistics said.

British residents made 4.5 million trips abroad in January, 2 percent fewer than a year earlier, but spent 2.9 billion pounds, 6 percent more than in 2018.

• UK has missed out on 2-3 year of business investment on Brexit

• smooth Brexit transition would probably boost investment

• Brexit deal would help economic outlook

• series of repeated Brexit cliff edges could cause investment to be subdued for a while

• UK real incomes have picked up in past year

• UK neutral rate is a lot lower than in the past

• estimates neutral rate is about 2%

• I would expect interest rates will go a bit higher over time, but it won’t be far of fast

Removing U.S. tariffs on Chinese goods in stages might be a good strategy to hold Beijing to its promises made during trade negotiations, but it will make it harder for businesses to operate, a former U.S. trade negotiator said.

There's a distinction between what might be attractive as a trade negotiating strategy and what might be attractive from a business perspective, Stephen Olson, a research fellow at the pro-trade group Hinrich Foundation, told.

While removing the tariffs in stages may be effective for the U.S. to keep its leverage in the trade talks, such a move "makes it very, very difficult to do planning and it only extends the period of uncertainty" for businesses, he said.

"Certainly, President Trump would welcome a trade agreement that he could position as a victory, as a win," he said. But if the best deal that is available leaves the president vulnerable to charges from his political opponents that he has gone soft on China, then Trump could back track from reaching an agreement, Olson explained.

ANZ analysts note that China’s both consumer and producer price indexes improved substantially in April, indicating that deflationary risks have largely dissipated, which is good news for the debt-fuelled China economy.

“The pace of credit growth slowed in April on the back of renewed concerns about the risks of increases in China’s macro leverage ratio in Q1. The slower pace of credit expansion also weighed on the growth rate of total social financing (TSF) in the month. Meanwhile, the higher inflation rate in April is unlikely to change the overall monetary policy direction. The biggest near-term uncertainty is the ongoing trade tensions between China and the US.”

Britain's economy will be around 3% poorer over the long term if it leaves the European Union and retains a customs union with the bloc, the option favoured by the opposition Labour Party, academic forecasters predicted.

The National Institute of Economic and Social Research (NIESR) said the long-run loss after 10 years, compared to staying in the EU, would be equivalent to around 800 pounds per person per year.

"Leaving the EU for a customs union will make it more costly for the UK to trade with a large market on our doorstep, particularly in services which make up 80% of our economy," NIESR economist Garry Young said.

NIESR said overall gross domestic product 10 years after Brexit would be 3.1% lower in a customs union scenario than if Britain stayed in the EU, and tax revenues would fall by 2.9%. Lower immigration would limit the per capita reduction in GDP to 2.3%, equivalent to 800 pounds per head.

British companies' demand for staff rose at the slowest rate since 2012 last month, according to a survey that suggested the labour market, a bright spot in the economy ahead of Brexit, might be losing its shine.

The monthly index of staff demand from the Recruitment and Employment Confederation (REC) and accountants KPMG fell to 53.6 from 55.5 in March, its lowest level since August 2012.

The survey also showed slower pay growth, something the Bank of England said last week it had seen signs of recently.

Starting salaries for new permanent staff rose by the smallest amount in two years, though pay growth for temporary workers improved slightly.

While the Bank of England last week predicted the unemployment rate would fall a little further, REC survey suggests the labour market is slowing.

• there is no winner in a trade war

• hopes US meets China halfway

• hopes US can resolve problem through dialogue instead of unilateral steps

• China is fully prepared to defend its interests, has determination and capacity to do so

• trade delegation has already left Beijing for US

• vice premier Liu visit to the US shows China’s sincerity

• asked about countermeasures to US tariffs, says if US implements tariffs China will take necessary countermeasures

• asked about countermeasures to US tariffs, declines to comment on specifics, says please pay attention to future announcements

• asked about trade dispute with US, says China sincerity in talks is evident

The Goldman Sachs Analysts, in their latest client, offer a medium-term view on the US dollar, with the risks skewed towards the downside.

“Sticking with their bearish US dollar call for the medium term. Reasons for the bearish outlook:

• Robust case for improving European growth in coming quarters and stimulus from China.

• US rates are high compared with a trade-weighted average of G10 rates.

• USD could drop when rate differentials fall 80-100 bps (US 2 year notes) that EUR and GBP will benefit.”

• we think near-term pressure on gold is understandable

• this consolidation as an opportunity to gradually build a strategic position in gold

• but for now, the extent of the dovish shift in Fed expectations has made gold vulnerable to improvement in the data during a time when physical markets tend to be quieter.

• physical demand out of China has been weak this year

• interest out of India has been resilient

• Central bank activity has been another source of support for gold - strong net buying from 2018 has extended into this year

According to analysts at ANZ, in contrast to the RBA’s wait-and-see stance, yesterday the RBNZ delivered an OCR cut, but stopped short of promising further aggressive action.

“Our NZ colleagues have long argued that the RBNZ would cut the OCR, but as it turns out they took the plunge a little earlier than we anticipated. The bank’s OCR projection implies a 50% chance of an additional cut sometime next year, indicating the Bank is prepared to respond should economic outturns disappoint their expectations. And disappoint we think they will. Lower interest rates will support growth, but we don’t think a single 25bp cut will completely alleviate the headwinds the economy is facing at present. We expect that by November it will be evident that further cuts are required and that the Bank will deliver.”

Bank of Japan Governor Haruhiko Kuroda said the central bank was watching exchange-rate moves carefully as they affect the economy and prices. But he added that currency policy, including whether and when to intervene in the market, falls under the jurisdiction of the Ministry of Finance (MOF).

"The BOJ would not do something for exchange-rate stability" as doing so is the responsibility of the MOF, Kuroda said, when asked by an opposition lawmaker in parliament about recent yen rises.

Kuroda also said the central bank would "swiftly" consider easing monetary policy if the economy lost momentum towards achieving its 2 percent price target.

He also told parliament that a further escalation in the U.S.-China trade friction could inflict significant damage on the global economy by hurting trade activity and business sentiment.

According to Karen Jones, analyst at Commerzbank, EUR/USD pair is struggling to overcome resistance and remains capped by 55 day ma at 1.1265.

“For now, we are unable to rule out a retest of the 1.1110 support, but, if seen, we look for this to hold. Be advised that the pattern being traced out is a potential large reversal pattern. We have divergence of the weekly RSI and a 13 count on the weekly chart as well and hence there is a risk of bullish reversal. Initial resistance is the 100 day ma at 1.1322 and the resistance line at 1.1344 ahead of the 200 day ma at 1.1404. Only above the 200 day ma would this imply a bullish reversal. Support at 1.1110 is regarded as the break down point to 2018-2019 support line (connects the lows) at 1.1052, the 1.0963 TD support and the 1.0814/78.6% retracement.”

According to the report from Cabinet Office, the Consumer Confidence Index (seasonally adjusted series) in April 2019 was 40.4, down 0.1 points from the previous month.

The categories of the Consumer Perception Indices (seasonally adjusted series), which are comprised of the Consumer Confidence Index in April are as follows;

• Overall livelihood: 38.0 (up 0.3 from the previous month)

• Income growth: 40.5 (down 0.1 from the previous month)

• Employment:44.4 (up 0.7 from the previous month)

• Willingness to buy durable goods:38.8 (down 1.1 from the previous month)

Price expectations a year ahead:

• The percentage of a group who expect "Go up" in April was 87.7%, an increase of 1.3% points from the previous month.

• The percentage of a group who expect "stay the same about 0%" in April was 7.2%, a decrease of 0.8% points from the previous month.

• The percentage of a group who expect "Go down" in April was 3.4%, a decrease of 0.3% points from the previous month.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1338 (4286)

$1.1308 (2956)

$1.1295 (84)

Price at time of writing this review: $1.1194

Support levels (open interest**, contracts):

$1.1171 (3028)

$1.1145 (8046)

$1.1112 (5308)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date June, 7 is 115159 contracts (according to data from May, 8) with the maximum number of contracts with strike price $1,1500 (8087);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3246 (1936)

$1.3178 (2012)

$1.3125 (935)

Price at time of writing this review: $1.3015

Support levels (open interest**, contracts):

$1.2953 (1842)

$1.2931 (2034)

$1.2876 (1810)

Comments:

- Overall open interest on the CALL options with the expiration date June, 7 is 37593 contracts, with the maximum number of contracts with strike price $1,3450 (3289);

- Overall open interest on the PUT options with the expiration date June, 7 is 37313 contracts, with the maximum number of contracts with strike price $1,2700 (4177);

- The ratio of PUT/CALL was 0.99 versus 0.98 from the previous trading day according to data from May, 8

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.