Speculations of resumption of ECB's SMP lifted market sentiment. Financial markets rose with the DJIA and the S&P 500 gaining +0.70% and +0.74% respectively. In the commodity sector, crude oil rebounded with the front-month contract for WTI crude oil gaining +1.66%. The equivalent Brent crude contract initially plunged to a 2-month low of 119.05 before rebounding to 120.18 at close. Gold changed little after the rally last week.
The ECB Executive Board member Benoit Coeure signaled the use SMP can be considered with target in Spanish bonds. Coeure stated that the situation in Spain is not justified for the surge in the bond yields as the situation on markets does not reflect the fundamentals of the Spanish economy. Regarding the possibility of ECB's intervention, he hinted that the SMP, which hasn't been used recently but it still exists. His comments sparked speculations that the central bank would soon purchase bonds to ease pressure of Spanish bonds. In Italy, 11B euro of 1-year bills were sold a yield of 2.84%, almost doubled the yield achieved at the last auction in mid-March. Hopefully, Coeure's comments would help Italy's 10-year bond auction today. Indeed, Italian 10-year yields dropped -15 bps after his comments.
The Fed's latest Beige Book revealed that the US economy continued to expand at a modest to moderate pace with the most expansion in the manufacturing sector. Demand for professional business services shown modest to strong growth while retail spending was positive. Banking conditions were largely stable and there were improvement in loan demand and increase in credit quality. Concerning the job market, employment was steady or showed a modest increase across many Districts. Yet, upward pressure on wages was constrained and overall price inflation was modest.
On the dataflow, the US initial jobless claims probably dipped -2K to 355K in the week ended April 7. The country's trade deficit might have narrowed modestly to US$ 52.0B in February from US$ 52.6B a month ago. In Asian session, Australia's job market improved in March with 44K payrolls added during the month, following a -15.4K decline in February. Unemployment rates stayed unchanged at 5.2% in March, compared with market expectations of a rise to 5.3%.