Italian and Spanish political concerns have sparked a global flight-to-quality trade that is bringing back memories of the 2011/2012 eurozone crisis. Treasuries were well bid overnight, with the 10-year note yield touching as low as 2.79% (currently 2.87%), and S&P 500 futures are down 19 points. Italian 2-year note yields were up as much as 150 bps overnight to 2.83% (highest since 2012), and Italy’s primary equity index is down 3% currently. As to be expected, broad credit metrics (swap and credit spreads) are also leaking wider. Efforts to form a new government in Italy failed over the weekend, and the ECB can’t step in to support Italian bonds unless the country enters a fresh program with the central bank (unlikely in the current Italian political environment).
Today’s risk-off trade is generally tied to questions of the viability of the euro currency and monetary union, which was the central theme of the 2011/2012 crisis. There remains a large amount of excess liquidity in European markets from the ECB, and if we learned anything from recent crises, it’s the power of central bank liquidity in responding to short-term pockets of market volatility. However, while larger credit concerns in Europe may be overblown, this does bring into question any plans for the ECB to begin policy tightening (rate hikes & QE tapering) in the next 6-12 months.
Jason Haley
Managing Director, Investment Management Group
| Date Time | Event | Survey | Actual | Prior | Revised |
| 05/29/2018 | S&P CoreLogic CS 20-City MoM SA | 0.75% | 0.53% | 0.83% | 0.84% |
| 05/29/2018 | S&P CoreLogic CS 20-City YoY NSA | 6.45% | 6.79% | 6.80% | 6.76% |
| 05/29/2018 | S&P CoreLogic CS 20-City NSA Index | — | 208.62 | 206.67 | 206.57 |
| 05/29/2018 | S&P CoreLogic CS US HPI NSA Index | — | 198.94 | 197.01 | 197.29 |
| 05/29/2018 | S&P CoreLogic CS US HPI YoY NSA | — | 6.53% | 6.34% | 6.51% |
| 05/29/2018 | Conf. Board Consumer Confidence | 128 | — | 128.7 | — |
| 05/29/2018 | Conf. Board Present Situation | — | — | 159.6 | — |
| 05/29/2018 | Conf. Board Expectations | — | — | 108.1 | — |
| 05/29/2018 | Dallas Fed Manf. Activity | 23.8 | — | 21.8 | — |
| 05/30/2018 | MBA Mortgage Applications | — | — | -2.60% | — |
| 05/30/2018 | ADP Employment Change | 190k | — | 204k | — |
| 05/30/2018 | Wholesale Inventories MoM | 0.50% | — | 0.30% | — |
| 05/30/2018 | GDP Annualized QoQ | 2.30% | — | 2.30% | — |
| 05/30/2018 | Personal Consumption | 1.20% | — | 1.10% | — |
| 05/30/2018 | GDP Price Index | 2.00% | — | 2.00% | — |
| 05/30/2018 | Core PCE QoQ | 2.50% | — | 2.50% | — |
| 05/30/2018 | Advance Goods Trade Balance | -$71.0b | — | -$68.0b | -$68.3b |
| 05/30/2018 | Retail Inventories MoM | — | — | -0.40% | -0.50% |
| 05/30/2018 | U.S. Federal Reserve Releases Beige Book | ||||
| 05/31/2018 | Challenger Job Cuts YoY | — | — | -1.40% | — |
| 05/31/2018 | PCE Core YoY | 1.80% | — | 1.90% | — |
| 05/31/2018 | Personal Income | 0.30% | — | 0.30% | — |
| 05/31/2018 | Personal Spending | 0.40% | — | 0.40% | — |
| 05/31/2018 | Real Personal Spending | 0.20% | — | 0.40% | — |
| 05/31/2018 | PCE Deflator MoM | 0.20% | — | 0.00% | — |
| 05/31/2018 | PCE Deflator YoY | 2.00% | — | 2.00% | — |
| 05/31/2018 | PCE Core MoM | 0.10% | — | 0.20% | — |
| 05/31/2018 | Initial Jobless Claims | 228k | — | 234k | — |
| 05/31/2018 | Continuing Claims | 1733k | — | 1741k | — |
| 05/31/2018 | Chicago Purchasing Manager | 58.2 | — | 57.6 | — |
| 05/31/2018 | Bloomberg Consumer Comfort | — | — | 55.2 | — |
| 05/31/2018 | Pending Home Sales MoM | 0.40% | — | 0.40% | — |
| 05/31/2018 | Pending Home Sales NSA YoY | — | — | -4.40% | — |
| 06/01/2018 | Change in Nonfarm Payrolls | 190k | — | 164k | — |
| 06/01/2018 | Two-Month Payroll Net Revision | — | — | 30k | — |
| 06/01/2018 | Change in Private Payrolls | 190k | — | 168k | — |
| 06/01/2018 | Change in Manufact. Payrolls | 20k | — | 24k | — |
| 06/01/2018 | Unemployment Rate | 3.90% | — | 3.90% | — |
| 06/01/2018 | Underemployment Rate | — | — | 7.80% | — |
| 06/01/2018 | Average Hourly Earnings MoM | 0.20% | — | 0.10% | — |
| 06/01/2018 | Average Hourly Earnings YoY | 2.60% | — | 2.60% | — |
| 06/01/2018 | Average Weekly Hours All Employees | 34.5 | — | 34.5 | — |
| 06/01/2018 | Labor Force Participation Rate | — | — | 62.80% | — |
| 06/01/2018 | Markit US Manufacturing PMI | 56.6 | — | 56.6 | — |
| 06/01/2018 | Construction Spending MoM | 0.80% | — | -1.70% | — |
| 06/01/2018 | ISM Manufacturing | 58.2 | — | 57.3 | — |
| 06/01/2018 | ISM Employment | — | — | 54.2 | — |
| 06/01/2018 | ISM Prices Paid | 78 | — | 79.3 | — |
| 06/01/2018 | ISM New Orders | — | — | 61.2 | — |
| 06/01/2018 | Wards Releases May Auto Data — Excluding GM |