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And now the top stories:
- Producer prices surged 2.1% year-over-year in April, beating expectations. Food prices climbed the most since 2011. Capital Economics’ Paul Dales says the data signal that expansion is basically here. “…While March’s rise was a rebound from the 0.3% m/m fall in February triggered by the bad weather, April’s gain seems to be more genuine. Two-thirds of it was due to an increase in the margins of wholesalers of machinery and equipment, which may be a result of a cyclical pick-up in demand for capital goods. At face value, the increase in core total finished goods PPI inflation to 2.0%, from 1.6% in March, suggests that core CPI inflation will rise from 1.7% in March to around 2.0% within a matter of month. Although we don’t expect this rise to happen so soon, we are expecting the stronger economic recovery and rising wage growth to push core CPI inflation above 2% next year.”
- Bonds rallied, with yields falling to a 7-month low at 2.5231%. Stifel Nicolaus’ Dave Lutz cited four reasons for the sharp drop-off: the German bund market’s own rally, Japanese demand for higher yield (Japan debt trades even lower), monetary policy in China, and an apparent short squeeze.
- S&P raised the credit rating for Greece’s largest banks, the FT said. Alpha Bank, Piraeus Bank, National Bank of Greece and Eurobank Ergasias all had their credit rating raised to CCC+ from CCC, while the outlook for all four banks is stable.
- Citi’s investigation into a possible $US400 million fraud at its Mexican unit continues to widen as the firm announced it had terminated 11 individuals indirectly implicated in the scheme.
- Dean Baquet was named The New York Times’ first-ever African-American executive editor after the paper terminated Jill Abramson. Baquet, a Pulitzer Prize winner, was the paper’s Washington Bureau Chief.
- Macy’s sales missed expectations as weather weighed on foot traffic.
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