The trade deficit in the US widened to $74.6 billion in April 2024, the largest since October 2022 from a downwardly revised $68.6 billion in March and below forecasts of a $76.1 billion gap. Imports increased 8.7% to $338.2 billion, mostly due to passenger cars, computer accessories, telecommunications equipment and crude oil, while falling for transport. Exports edged up a meager 0.8% to $263.7 billion, mainly pharmaceutical preparations, electric apparatus and semiconductors. On the other hand, exports were down for industrial supplies, travel and financial services. Meanwhile, the largest trade gap was recorded with the European Union (an 11% increase to $-22.5 billion) while the trade deficit with China narrowed 11% to $22 billion. The gap with Mexico also fell by 5% to $12.8 billion.

The three major averages in the US swung around the flatline on Thursday, after both the S&P 500 and the Nasdaq rallied to new record highs the day before, with traders awaiting further catalysts to assess the monetary policy outlook. Initial jobless claims rose more than anticipated last week, and labour costs in Q1 were revised lower, an additional sign the Fed has room to cut interest rates this year. The highly-anticipated jobs report is due tomorrow. Real estate, materials, utilities and health were the worst performing sectors while tech and consumer discretionary outperformed. On the corporate front, shares of Lululemon jumped more than 4% after upbeat earnings. Megacaps were also mixed, with Microsoft trading little changed, while Amazon (0.7%), Meta (0.1%) and Alphabet (0.6%) were in the green. Apple, on the other hand, was down 0.2%. Nvidia extended gains to break another record level of $1239.

Canada reported a trade deficit of CAD 1.05 billion in April 2024, almost half of the CAD 2 billion deficit recorded in March and much lower than market forecasts of a CAD 1.4 billion gap. Exports were up 2.6% to CAD 64.5 billion, as shipments increased for metal & non-metallic mineral products (+4.7%), aircraft, other transportation equipment & parts (+8.6%), farm, fishing & intermediate food products (+5.5%) and consumer goods (+1%). Meanwhile, imports also went up but at a lower rate at 1.1% to CAD 65.5 billion as purchases increased for metal & non-metallic mineral products (+7.7%), motor vehicles & parts (+4.2%) and aircraft, other transportation equipment & parts (+23.7%). In contrast, imports were down for consumer goods (-1.5%), energy products (-6.9%) and industrial machinery, equipment & parts (-3.9%).

Nonfarm business sector labor productivity rose by 0.2% in the first quarter of 2024, which was marginally lower than the preliminary estimate of a 0.3% increase but better than market expectations of a 0.1% advance. Output grew by 0.9%, falling short of the preliminary estimate of 1.3%, while hours worked were up by 0.6%, lower than the preliminary estimate of a 1% increase. From the same quarter a year ago, nonfarm business sector labor productivity grew 2.9%, marking the largest increase since the first quarter of 2021.

The number of people claiming unemployment benefits in the US jumped by 8,000 to 229,000 on the week ending June 1st, well above market expectations of 220,000, to record the highest reading since the eight-month high of 232,000 from early May. In the meantime, outstanding claims unexpectedly rose to 1,792,000 in the earlier week, the highest in seven weeks. The results were further evidence of a softening US labor market, strengthening the case for the Federal Reserve to deliver multiple rate cuts this year should inflation progress in converging to its target. The four-week moving average for initial claims, which reduces week-to-week volatility, eased by 750 to 222,250. In the meantime, the non-seasonally-adjusted claim count eased by 1,734 to 195,430, with increases in Minnesota (2,780) and California (2,408) offsetting seasonal decreases in Michigan (-2,742) and Texas (-1,831).

Germany's 10-year bond yield increased by 5 basis points to 2.56% on Thursday following the ECB's interest rate decision. The ECB lowered its key interest rates by 25bps in June, as expected, bringing the main refinancing operations rate to 4.25% and the deposit facility rate to 3.75%. However, the central bank's caution about persistent inflation risks led traders to reassess their expectations for future rate cuts this year. The most recent Eurosystem staff projections show upward revisions for both headline and core inflation rates for 2024 and 2025 compared to March projections. Staff now predicts headline inflation to average 2.5% in 2024, 2.2% in 2025, and 1.9% in 2026.