Following yesterday's Yen surge in the aftermath of the disappointing BOJ announcement, the pain for USDJPY long continued, with the key carry pair tumbling as low as 106, the lowest level since October 2014 before stabilizing around 107, and is now headed for its biggest weekly gain since 2008, which in turn has pushed the US dollar to to its lowest close in almost a year as signs of slowing growth in the U.S. dimmed prospects for a Federal Reserve interest-rate increase. As a result, global stocks fell and commodities extended gains in their best month since 2010.

The yen strengthened against all 16 major peers for the second day in a row, climbing as much as 1.1 percent to 106.91 a dollar, the strongest level since October 2014. It surged 4.3 percent this week as the Bank of Japan defied economists’ expectations that stimulus would be stepped up.

The sliding dollar is proving beneficial for raw materials, helping lift gold and silver to 15-month highs. Crude oil has jumped 21 percent this month to more than $46 a barrel in New York. European equities trimmed their biggest monthly advance since November.

As Bloomberg writes, the dollar’s third straight monthly drop and the prospects for the Fed moving gradually on interest rates are spurring the outlook for inflation, with the 10-year U.S. break-even rate at the highest since July. Reports today on consumer confidence and personal spending will provide clues on the trajectory of the world’s largest economy after data on Thursday showed the slowest pace of expansion in two years.

Looking at regional markets, Asia traded mixed amid holiday thinned trade and a cautious tone following Wall St. losses, where an Apple sell-off and weak US GDP dampened sentiment. However, ASX 200 (+0.4%) edged higher underpinned by commodity strength in which WTI broke above USD 46/bbl. Elsewhere, the Shanghai Comp (-0.3%) was subdued after further discouraging earnings in which PetroChina posted its first ever quarterly loss and ICBC reported lacklustre growth as well as an increase in NPL's, while the PBoC also conducted a net CNY 290b1n drain. Finally, Japanese markets were shut for Showa Day public holiday.

In Europe, despite the upside in the energy complex today, sentiment is firmly dampened after the soft close in the US yesterday and the risk off trading seen overnight. Although Asia saw thin trade due to the Japanese holiday, the upside seen in both JPY and precious metals illustrated the uncertainty felt across asset classes, with this filtering through to Europe. Equities have traded in the red throughout the morning, with Euro Stoxx lower by 1.2%, although with the downside in equities failing to filter through to any significant price action in fixed income. Bunds are flat on the day and continue to trade in the tight range between 162.50 and 162.25.

In Fx, it has been a mixed session in FX, but one which again is to the detriment of the USD as the index is pressed down to fresh 6 month+ lows on the back of another down-leg in USD/JPY. Losses in London saw 107.00 taken out, but ahead of 106.50, exotic protective bids are helping contain the sell-off, albeit temporarily so as yet. EUR/USD has been propelled higher accordingly, having adopted a strong bid tone in recent sessions. Earlier gains extended through the pre 1.1400 top seen over the ECB press conference last week, and despite running into strong offers above here, the pullback is contained ahead of 1.1350, with better than expected Q1 GDP in the Euro zone now aiding the bid. This has also helped EUR/GBP recover a little, with Cable now only managing to match the early Feb high at 1.4667 before retracing back through 1.4600. Bids in the mid 1.4550's supporting for now. Commodities still recovering amid the backdrop of recent jitters in equity markets. Oil continues to power north to help maintain USD/CAD pressure on 1.2500. Strong bids coming in ahead of this but sellers keen ahead of 1.2550.

Heading into the North American crossover, energy prices have seen upside for much of the morning with Brent crude futures above USD 48/bbl, while WTI is trading at levels last seen since October. Newsflow for the energy has been somewhat light, with only reports out of Saudi Arabia that they may potentially boost oil production in the summer to around 10.5mln bpd. Elsewhere, Gold rose nearly 1% as a cautious tone spurred a flight-to-safety reaching USD 1280.00/oz eyeing the highs of USD 1284.8/oz seen on the 11th Mar'16, Elsewhere Silver broke the recent highs of USD 17.66/oz reaching USD 17.84/oz with the next level up at USD 18.44/oz. Copper and iron ore prices also benefited from the USD's demise to 8-month lows, with Dalian iron ore futures hitting limit up in early trade.

Bulletin headline summary from Bloomberg and RanSquawk

An uninspiring lead from US and Asian bourses filters into Europe despite the upside in the energy complex

USD-index continues its persistent softness with USD/JPY briefly breaking below 107.00.

Looking ahead, highlights include US Core PCE and Personal Spending, as well as comments from Fed's Kaplan, and BoE's Cunliffe

Treasuries slip during overnight trading, lower with global equities as Japan closed today and May 3-5 for Golden Week; volumes light with 10Y Treasury futures trading around 147k contracts.

Federal Reserve Bank of Dallas President Robert Kaplan says estimates of first-quarter growth have been disappointing, but that output should improve over the remainder of the year

Mario Draghi’s policy challenge was highlighted once again on Friday, with the fastest economic growth in a year overshadowed by a renewed drop in consumer prices as euro- area inflation rate fell to minus 0.2 percent in April

Commerzbank AG downgraded bonds from Poland, Hungary and Croatia this week, saying the countries are most vulnerable to Brexit risks

Spanish banks are gobbling up a growing slice of Portugal’s financial industry, taking advantage of the country’s halting recovery from Europe’s debt crisis

China’s central bank responded to an overnight tumble in the dollar by strengthening its currency fixing the most since a peg was dismantled in July 2005.

Chinese authorities are considering convening a top-level finance work conference this summer, a year ahead of schedule, to map out a sweeping consolidation of the country’s financial regulatory system in a move to reduce risks

Vice President Michel Temer is playing down expectations that he can achieve a quick fix for Brazil’s economic troubles should his boss, Dilma Rousseff, be impeached

Sovereign 10Y bond yields mixed; European, Asian markets lower; U.S. equity-index futures rise. WTI crude oil, metals higher

US Event Calendar

8:30am: Personal Income, March, est. 0.3% (prior 0.2%)

8:30am: Personal Spending, March, est. 0.2% (prior 0.1%)

9:00am: ISM Milwaukee, April (prior 57.78)

10:00am: Retail Sales benchmark revisions

10:00am: U. of Mich. Sentiment, April F, est. 90 (prior 89.7)

1pm: Baker Hughes rig count

DB's Jim reid concludes the overnight wrap



So a busy period of Central Bank policy meetings comes to an end giving investors a chance to take stock and assess where we go from here. In the last week and a bit we’ve heard from the ECB, Fed and now the BoJ. Much of the focus on the former was on the details around the corporate bond purchasing program with the general feeling that it largely exceeded expectations. The Fed made some subtle changes to its language, but ultimately markets remain unconvinced that we’re any closer to the next tightening move. Finally it was the turn of the BoJ yesterday and while investors had been fairly 50/50 going into the meeting for some sort of action, the immediate reaction from markets was one of obvious disappointment. Kuroda’s press conference yesterday seems to have left the market in a bit of a haze of confusion and the BoJ will have be careful not to mismanage expectations and so damage their credibility in the future. All of a sudden it might be worth checking your summer holiday dates versus the next two BoJ dates on June 16th and July 29th.

It’s interesting to take a look at how markets have performed through this busy period of monetary policy meetings, and corporate earnings results for that matter. Ultimately the conclusion is that there’s actually not been that much change for asset prices in the period since the close of play prior to the ECB. Looking at equity markets the S&P 500 is -1.2% with much of that decline a result of yesterdays late selloff, while the Nikkei is -1.4% (again plagued by yesterdays performance), the Stoxx 600 -0.3% and the DAX -1.0%, while European Banks (+2.5%) have actually bounced. Sovereign bond markets are more mixed. 10y Treasury yields are 2bps lower, while similar maturity Bunds and JGB’s are 10bps and 6bps higher respectively. The iTraxx Main index is actually unchanged which may come as a surprise while in FX land the Yen is 1.6% stronger and the Euro is up about half a percent.

Post the BoJ yesterday the main focus was on the US data and specifically the Q1 GDP print. Growth disappointed at +0.5% qoq (vs. +0.7% expected) as net exports contributed negatively while business fixed investment was also down sharply. Inventories also dragged as expected and the data confirmed that Q1 was the weakest quarterly performance for growth since Q1 2014. Interestingly though the US Dollar bounced off its lows and Treasury yields moved higher as the inflation data released alongside actually surprised to the upside. The Q1 Core PCE print came in at +2.1% qoq (vs. +1.9% expected) which is the highest level in four years. We’ll get some idea of the intra-quarter pattern with this afternoon’s March PCE data.

Before we get there though, flicking over to Asia where markets are closing out the week on a bit of a mixed note. After the steep leg lower yesterday, equity markets in Japan are closed for a public holiday, however the Yen has continued to strengthen and is another 1% firmer this morning around 107.20 which is an 18-month high. That means it has rallied over 4% since pre-BoJ yesterday. Meanwhile the Hang Seng has dropped -1.35% this morning, bourses in China are little changed, the Kospi is -0.55% however the ASX is +0.41%. The Chinese Yuan is generating headlines this morning too after the PBoC raised the fix by the most since 2005. The reference rate was set +0.56% stronger however that appears to be more of a reflection of the big weakness in the USD yesterday rather than any policy intention.

Elsewhere US equity index futures are little moved despite Amazon reporting a big beat for Q1 earnings after the closing bell yesterday which sent shares up over 10% in extended trading. The company reported an EPS of $1.07 a share for the quarter after expectations were for 57c. Even if we use the peak in consensus for Q1 EPS this year back in January of 87c, the beat is still impressive.

Back to yesterday. After European equity markets had wiped out the early BoJ-led selloff from the Nikkei into the close (Stoxx 600 closing +0.17%), US equities did look like they were on course for a broadly flattish day before a sharp leg lower for Apple took the rest of the tech sector with it meaning the S&P 500 (-0.92%) and Dow (-1.17%) both ended the session heavily in the red. Apple ended just over 3% lower and it appears that the cause of that was the CNBC interview with Carl Icahn confirming that the investor has sold his stake in the company with concerns about issues in China. US credit indices ended up being hard hit too with CDX IG nearly 3bps wider by the end of play.

Meanwhile the Yen rally yesterday saw the US Dollar index end -0.66% lower and so continuing the theme of dropping every day this week. 10y Treasury yields ended nearly 3bps lower at 1.825% after at one stage touching 1.87% post the inflation data. Oil markets took more of a backseat but the weakness in the Dollar did help to extend the YTD high for WTI after rallying +1.54% to close a smidgen above $46/bbl. Precious metals were the bigger winner on the day however in true risk off fashion. Gold ended up +1.64% at $1266/oz while Silver rallied to the tune of nearly 2% meaning it is an impressive 18% up from the lows of earlier this month.

In terms of the rest of the data yesterday, there were few surprises from the flash CPI numbers out of Germany where the April headline number printed at -0.2% mom as expected. German unemployment was also noted as falling 16k last month. The rest of the data in Europe was reserved for Euro area confidence indicators. Consumer confidence was confirmed this month at -9.3, while economic confidence rose 0.9pts to 103.9 (vs. 103.4 expected). Both services and business climate indicator readings were reported as rising this month too. Meanwhile in the US the only other data of note was a slight increase in initial jobless claims last month by 9k to 257k although albeit still at historically low levels, while the Kansas City Fed’s manufacturing survey was reported as rising 2pts this month to -4.

Looking at today’s calendar, we’ve got a busy end to a busy week for data today. This morning in Europe and shortly after this hits your emails the French Q1 GDP print will be released. Following that will be German retail sales for March before we’re back to France again with the first snapshot of the April inflation numbers. We then turn to the UK for money and credit aggregates data before its all eyes on the Euro area CPI report for April (headline expected at -0.1% mom) and Q1 GDP report (expected to be +0.4% qoq). Across the pond this afternoon we’ll get the Q1 employment cost index, March personal income and spending data and that PCE deflator and core data for last month. There’s more regional manufacturing data in the form of the ISM Milwaukee and the Chicago PMI before we get the final revision to the April reading for the University of Michigan consumer sentiment survey. Meanwhile 22 S&P 500 corporates will be out with their latest quarterly earnings today including Exxon Mobil and Chevron so it’s well worth keeping an eye on those results.