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Mixed Data has Created Risk Aversion

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Mixed Data has Created Risk Aversion

A plethora of data was released on Thursday, but the upshot is that investors are now concerned, which is reflected in the recent TIC data. While CPI came out in line with expectations, NY Empire Manufacturing was strong. Industrial production was weaker than expected and jobless claims were stronger than expected. It is difficult to get a gauge on risk, as bond yields are pushing to new lows while implied volatility is near the bottom end of the 5-year range.

The U.S. TIC report revealed a $126 billion March outflow thanks to a $118 billion outflow in net bank liabilities. Domestic net investment revealed a $9 billion inflow after a $91 billion surge in February. There were outflows of $14.4 billion in Equities and $9.1 billion in Agencies, partly offset by a $26 billion inflow in Treasuries. There was a large $116 billion net private outflow alongside a small $11 billion outflow from official accounts.

The 0.6% April U.S. industrial production drop capped a slightly-revised two-month surge that left gains of 0.9% in March and 1.1% in February, with an April drop that was led by a 5.3% utility plunge from a March all-time high, alongside smaller give-backs of prior strength for manufacturing and business equipment.

Jobless claims declined 24,000 to a seasonally adjusted 297,000 for the week ended May 10, according to the Labor Department. That was the lowest reading since May 2007 and brought claims back to their pre-recession level. Claims for the week ended May 3 were revised to show 2,000 more applications received than previously reported. Economists polled had forecast first-time applications for jobless aid ticking up to 320,000 last week.

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