U.S. short-term Treasury yields rose following a stronger-than expected retail sales number. Two-year yields climbed 4 basis points (bps) to 0.78 percent on Friday, posting its largest daily jump since April 20, as short-term yields are most sensitive to changes in the Federal Fund rate and tend to rise when rate-hike expectations increase. In contrast, the yield on the 10-year Treasury note fell 3 bps to 1.73 percent, flattening the U.S. yield curve.
Developing-country stocks fell for the fourth consecutive week on global growth concern. MSCIs gauge of emerging-market stocks fell 1.4 percent on Friday, pushing its weekly decline to 1.2 percent, with Chinas Shanghai Composite Index sliding 3 percent. A rally in emerging-market equities that has pushed the benchmark stock index up 16 percent from this years low in January is fading as investors pulled $3 billion from equities in Asia and Brazil this month.
Advanced Markets
U.S. retail sales surged 1.3 percent (m/m) in April, the biggest gain in a year, after falling 0.3 percent the previous month, as American consumers stepped up purchases of automobiles and a range of other goods. Prospects for consumer spending got a boost from a sentiment survey from the University of Michigan that showed consumer confidence jumped to an 11-month high in early May, driven by steadily rising incomes, better employment prospects and low inflation.
The Euro Area economy expanded 0.5 percent (q/q) in Q1 2016, revised down from a 0.6 percent growth reported previously. It is still the fastest growth in a year as Germany, France and Italy posted strong growth, while Portugal slowed with Poland, Greece and Latvia contracting.
U.K. construction output fell 4.5 percent (y/y) in March, the third consecutive monthly decline, following a revised 0.4 percent drop in February. The drop was led by downward pressure on all new work (down 0.6 percent) and repair and maintenance (down 1.9 percent). In contrast, house building went up 3.4 percent.
