Stocks Finish Volatile Week Higher; Oil Rallies

US stocks rose and Treasury yields declined for a second consecutive day as moretempered commodity prices helped allay concerns about inflation risks. The S&P 500 rose by 1.49% to 4,173.85 while Dow Jones was up 360.68 points (1.06%) to 34,382.13.

Fed’s Mester Says Policy in Good Place as Recovery Evolves

The Federal Reserve’s policy is in a good place right now, said Cleveland Fed President Loretta Mester, while playing down signals from data that she warns will be volatile as the economy reopens. “The volatility month-to-month I think is something we should expect,” Mester said. “We’re really at the beginning of this vaccinationswidely-distributed part of the recovery and I think we just have to wait and be a little bit patient and let the recovery continue, “ she said.

Mounting Inflation Fears Push US Consumer Sentiment Lower

US consumer sentiment deteriorated unexpectedly in early May as Americans grew increasingly concerned about rising prices. The University of Michigan’s preliminary sentiment index fell to a three-month low of 82.8 in May from 88.3 the prior month, data released showed. More consumers expected inflation to outpace income growth, representing a risk to the spending that makes up two-thirds of the economy

ECB Pressed by Banks to Extend Capital Relief Beyond June

Banks are lobbying the European Central Bank to extend temporary capital relief granted during the pandemic to keep credit flowing to fragile economies, according to people familiar with the matter. Lenders on the continent have been pressing officials to be allowed to keep excluding deposits held at central banks when calculating their leverage ratio.

UK’s Sunak Isn’t Sold on Biden’s Global Business Tax Plan

British officials aren’t convinced by President Joe Biden’s plan for a global minimum business tax rate of 21%, according to a person familiar with the matter. Chancellor of the Exchequer Rishi Sunak and his team are concerned that the rate may be too high over the long term, even though the UK intends to raise corporation tax to 25% in 2023 to repair public finances after the pandemic.

China to Tax Dirty Oil Flows From Next Month Citing Pollution

China will start taxing imports of dirty fuels used to make lucrative but lower quality products from next month, citing pollution concerns and the need to promote fairness in the refining sector. Imports of products such as light-cycle oil -- a low-quality fuel that’s blended into diesel or fuel oil -- will be subject to the consumption tax from June 12, according to a statement from the Ministry of Finance.

Philippines Holds Rates as Price Pressures Ease, GDP Disappoints

The Philippine central bank held its key interest rate at a record low after a disappointing economic performance last quarter and as price pressures cool. Bangko Sentral ng Pilipinas left the benchmark rate at 2% for a fourth straight meeting. The bank also lowered its inflation forecast for 2021 to 3.9% -- down from a previous estimate of 4.2% -- while raising next year’s outlook to 3%, compared to 2.8% previously. That would put inflation back inside the bank’s 2%-4% target range.

Oil Edges Higher as Demand Optimism Offsets Asia Virus Flare-up

Oil edged higher at the open after a third weekly increase as a demand recovery in key regions raised optimism about rising fuel consumption, despite a Covid-19 flare-up in parts of Asia. Brent crude for July settlement rose US$1.66 to US$ 68.71 per barrel.

Source: Affin Hwang Research - 17 May 2021