US 10-year rates are again probing the air above 3%, and this is encouraging a push back toward JPY110, with the euro slipping toward $1.19. Asian equities fell, with the MSCI Asia Pacific shedding 0.8%, the most in nearly a month, snapping a three-day advance.

China and India were able to buck the regional move. China's economic data was mostly softer than expected and is consistent with a gradual turn in the cycle as the Lunar New effect fades. Retail sales rose 9.4% year-over-year, matching the slowest past since 2004. Urban fixed investment also slowed more than expected. The 7% year-over-year pace is down from 7.5% in March and is the slowest pace since 2000. Industrial output did surprise to the upside, rising 7% year-over-year, up from 6.0% in March.

For its part, India reported higher than expected April inflation. Wholesale prices rose 3.18% year-over-year, up from 2.47% in March. A rise to 2.90% had been expected. The CPI rose to 4.58% from 4.28%.

Turing to Europe, the Five Star Movement, and the League are getting closer to forming a government. The combination of a flat 15% and 20% tax rate coupled with a new benefit for the poor (unemployment insurance or what is dubbed a universal basic income for unemployed/poor) could challenge the EU fiscal rules, but there is little impact on Italian assets. The 10-year bond yield is off a basis point today and is the strongest bond market among the high-income countries today. The two-year yield is off a basis point as well. The premium over Germany has narrowed. And the signal from the equity market is similar. Italian equities are up about 0.3% near midday in Milan. The Dow Jones Stoxx 600 is off fractionally after slipping yesterday too.  

There are three noteworthy economic reports from Europe today. First, French wages growth accelerated in Q1 to 0.7% form 0.2% in Q4 17. It is the strongest pace since 2013. It follows on the heels of the settlement of the construction sector negotiations in Germany, which also saw an above-inflation settlement like the public sector and metal workers. This will encourage the ECB to look past the near-term softness in the regional CPI.