Overnight Developments
CRB - Commodity Research Bureau - CRB - Fri May 18, 6:30AM CDT

Jun E-mini S&Ps this morning are up +0.18% on optimism progress was being made in trade talks between the U.S. and China on reports that China had offered to reduce its annual trade surplus with the U.S. by $200 billion through increased imports of American products, according to an anonymous Trump administration official. The U.S. merchandise trade deficit with China hit a record $375 billion last year. European stocks fell back from a 3-1/2 month high and are down -0.19% on Italian political risks. Italy's MIB Stock Index is down -1.17% and the 10-year Italy bond yield jumped 11 bp to a 10-month high of 2.22% after the Five Star Movement and the League reached an accord that aims to ramp up spending on the poor and cut taxes in a direct challenge to the European Union. The accord demands a review of EU budget rules, an end to economic sanctions on Russia and pledges to roll-back pension reforms that raised the retirement age. Asian stocks settled mostly higher: Japan +0.40%, Hong Kong+0.34%, China +1.24%, Taiwan -0.03%, Australia -011%, Singapore -0.21%, South Korea +0.34%, India -0.86%. China's Shanghai Composite climbed to a 5-week high on strength in energy stocks along with optimism that progress will be made on U.S.-China trade talks. Japan's Nikkei Stock Index rallied to a 3-1/2 month high, led by a jump in exporters, as USD/JPY rose to a 3-3/4 month high.

The dollar index is up +0.17% at a 5-month high. EUR/USD is down -0.12%. USD/JPY is up +0.22% at a 3-3/4 month high after Japan Apr national CPI rose +0.6% y/y, weaker than expectations of +0.7% y/y and the slowest pace of increase in 5 months, which is dovish for BOJ monetary policy and undercut the yen.

Jun 10-year T-note prices are little changed, up +0.5 of a tick.

Cleveland Fed President Mester said "the U.S. economy is near both Fed monetary goals of maximum employment and price stability, and the outlook is one of the most favorable we have seen in a long time."

ECB Governing Council member Nowotny said he's among policymakers who think the ECB "shouldn't wait too long with normalizing monetary policy, given the situation of the economy."

German Apr PPI rose +0.5% m/m and +2.0% y/y, stronger than expectations of +0.3% m/m and +1.8% y/y.

Japan Apr national CPI rose +0.6% y/y, weaker than expectations of +0.7% y/y and the slowest pace of increase in 5 months. Apr national CPI ex fresh food rose +0.7% y/y, weaker than expectations of +0.8% y/y and the smallest pace of increase in 7 months. Apr national CPI ex fresh food & energy rose +0.4% y/y, right on expectations.