Recap :

Commentary:

Notable:

  • Fed Minutes
  1. meeting participants generally indicated that their assessment of the economic outlook had not changed materially since the March meeting
  2. a number of participants pointed to possible sources of downside risk to growth, including a persistent slowdown in the housing sector
  3. Most participants commented on the continuing weakness in housing activity. They saw a range of factors affecting the housing market, including higher home prices, construction bottlenecks stemming from a scarcity of labor and harsh winter weather, input cost pressures, or a shortage in the supply of available lots. Views varied regarding the outlook for the multifamily sector, with the large increase in multifamily units coming to market potentially putting downward pressure on prices and rents, but the demand for this type of housing expected to rise as the population ages.
  4. A number of them argued that several indicators of labor underutilization–including the low labor force participation rate and the still-elevated rates of longer- duration unemployment and of workers employed part time for economic reasons–suggested that there is more slack in the labor market than is captured by the unemployment rate alone.
  5. Low nominal wage inflation was also viewed as consistent with slack in labor markets. However, some participants reported that labor markets were tight in their Districts or that contacts indicated some sectors or occupations were experiencing shortages of workers.

The BoE minutes showed a unanimous vote, but they highlighted the widening disparity in MPC views.

  1. The central view of most Committee members was that the margin of spare capacity remained in the region of 1% – 1½% of GDP, although it had probably narrowed a little since February. There was considerable uncertainty around that central estimate, however, and a range of views on the Committee. Among the elements on which members held different views were: the extent of slack remaining within companies; what proportion of self-employment represented a form of labour market slack; and the extent to which increases in employment might at the margin add less to the productive capacity of the workforce than factored into the Committee’s projections.
  2. The case for moving gradually and cautiously was reinforced by uncertainty over the likely impact on the economy of a rise in Bank Rate. It could be argued that the more gradual the intended rise in Bank Rate, the earlier it might be necessary to start tightening policy. Against that, if productive potential were in part related to the level of demand, then the earlier policy was tightened the greater the risk of incurring a substantial cost in foregone output.
  3. for some members the monetary policy decision was becoming more balanced.

UK Retail Sales increased 1.3% MoM vs 0.4% exp, and the March figures were revised up 0.4%.

The BOJ upgraded its assessment on the capex. “the QQE has been exerting its intended effects”, and also by removing the sentence, which was used in the statement until last month, that “such conduct of the monetary policy will support the positive movements in economic activity and financial markets, contribute to a rise in inflation expectations, and lead to Japan’s economy to overcome the deflation that has lasted for nearly 15 years”. In addition, Shirai, who dissented from the description in the statement in April, with a view that labor and income situation should be included as one of the risk factors in the BoJ’s economic outlook, did not dissent today… the modification of the statement suggests that the BoJ is now fully convinced that the deflation has ended. – JPM

Japan Trade Balance improved to -809Bn vs -646Bn exp and -1445Bn prev

EU Consumer Confidence improved to -7.1 vs -8.3 exp and -8.6 prev

Russia’s Gazprom and China’s China National Petroleum Corporation (CNPC) have signed a historic 30-year contract to supply natural gas to China, according to Russia Today and confirmed by Bloomberg. The total value of the contract is $400 billion, Gazprom CEO Aleksey Miller told RT, although the price in the document remains a "commercial secret."

The EIA has cut its original estimate of recoverable shale oil reserves in California’s much-hyped Monterey shale play by 96%, the L.A. Times’ Louis Sahagun reported late Tuesday. The agency now says there are just 600 million barrels of recoverable crude — as much as Bolivia. Previously the agency had said there were up to 13.7 billion recoverable barrels. –BI

Junk-bond investors are earning practically nothing extra to own older, smaller bond issues that don’t typically trade as often as bigger, newer debt offerings, according to Barclays Plc data. The gap has collapsed to almost zero from a 1.05 percentage point premium for the less-liquid notes in the fourth quarter of 2011. – BBG

Economics of Poker: The Effect of Systemic Chance” (2012) by Robert Hannum, a professor of risk analysis and gaming at the University of Denver. His study of more than a billion hands of online Texas Hold’em found that 85.2 percent of the hands were decided without a show of cards. In other words, players’ betting decisions were of overwhelming importance in determining the outcome. Of the remaining 14.8 percent, almost half were won by a player who didn’t hold the best hand but instead had induced the player with the best hand to fold before the showdown… To help us appreciate the skill-to-luck ratio, the economists compared the win rate of high-skilled poker players, 54.9 percent, with that of baseball teams that made the playoffs the previous season — which won 55.7 percent of their games against teams that failed to reach the postseason. – BBG

Upcoming Data:

  • Wed: Japan PMI, China HSBC PMI
  • Thu: EU PMI, UK GDP, Turkey CBRT, Canada Retail Sales, US Jobless Claims, Existing Home Sales, South Africa SARB
  • Fri: German IFO, CanadaCPI, US New Home Sales
  • Mon: US Holiday, BoJ Minutes,
  • Tue: US Durable Goods, Consumer Confidence, Kuroda Speaks, NZ Business Confidence
  • Wed: German GfK Consumer Confidence, EU Money Supply, Australia Private CapEx
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