Lots of New Information to be Absorbed Today

July 3, 2014

The ECB’s refinancing rate, marginal lending rate, and deposit rate were left unchanged at 0.15%, 0.40% and -0.10%.  Draghi’s press conference at 12:30 GMT is awaited for clues on forward rate guidance and details on how bank lending might be stimulated.

Because of Friday’s Independence Day holiday, the monthly U.S. labor force survey gets released at 12:30 GMT today.  Trade figures and weekly jobless insurance claims also arrive.

A slew of service sector June purchasing managers surveys were reported.

The Swedish Riksbank eased monetary policy more forcefully than anticipated.

Ezone May retail sales were weaker than assumed, but the PMI figures point to faster growth in the second quarter than in the first of this year.

The Australian dollar sank to an 8-month low of 0.9362 against the U.S. currency.  The greenback is 0.7% higher versus the Aussie dollar on balance but otherwise unchanged against the euro and kiwi, up 0.2% relative to sterling and 0.1% vis-a-vis the yen and Swissie but off 0.2% relative to the loonie.  Canadian trade numbers also arrive today.

Stocks reflect risk-on thinking in the early going today.  Equities advanced 0.4% in New Zealand, China and Taiwan, 0.7% in Australia, and 0.3% in Singapore.  Japan’s Nikkei dipped 0.1%.  In Europe, the German Dax, British Ftse and Paris Cac are up by 0.6% , 0.5% and 0.4%.

Ten-year German bund and Japanese JGB yields firmed a basis point, while the British gilt is unchanged.

Both Comex gold and WTI oil fell by 0.7% to $1,321.80 per ounce and $103.80 per barrel.

Japan’s service-sector purchasing managers index dipped 0.3 points in June to a 2-month low of 49.0 and was below 50 for a third straight month.  The composite PMI rose 0.8 points, however, to 50, which was a 3-month high.

HSBC reported that China’s service-sector PMI jumped by 2.4 points to a 15-month peak of 53.1, and the composite index went up 2.2 points to 52.4, also a 15-month high.

From a five-year low in May of 47.1, Russia’s composite PMI rebounded 3.0 points to 50.1, helped by a 3.7-point recovery of the services index to 49.8.

Heartened by the election victory of Modi as Prime Minister of India, that country’s composite PMI leaped to a 16-month high of 53.8 in June from 50.7 in May, and its services PMI advanced 4.2 points to a 17-month high of 54.4.

The non-oil purchasing managers indices of Egypt, Saudi Arabia, and the U.A.E. respectively rose 2.8 points to a 6-month high of 51.5, 2.2 points to a 5-month high of 59.2, and 0.9 points to a 2-month high of 58.2. 

Lebanon’s private-sector PMI increased 1.1 points to an 8-month high of 49.1, while South Africa’s fell by 0.2 to a 2-month low of 49.5.

Euroland’s composite PMI score of 52.8 was unrevised from the preliminary indication and constitutes a 6-month low after 53.5 in May.  Germany (an 8-month low of 54.0) lost some momentum, and France (48.1) further confirmed renewed recession with a 4-month low.  Spain’s 55.2 was a 3-month low but a solid figure nonetheless.  Italy scored a 38-month high of 54.2, and Ireland’s reading of 59.7 was the best in the group and at a 2-month peak.

Euroland’s service-sector PMI of 52.8 also matched its preliminary score and constitutes a 3-month low after 53.2 in May.  Germany’s 54.6 was a 3-month low.  France’s 48.2 was a 4-month low.  Spain’s 54.8 was a 3-month low, but Italy’s climbed to a 43-month high of 53.9.  Ireland posted a 62.6 score, best in 88 months.

The British service-sector PMI dipped 0.9 points to a 3-month low of 57.7.  The composite U.K. PMI of 58.0 suggests another stellar quarter of 0.8% GDP growth in 2Q14.

Sweden’s services PMI in June fell by 3.9 points to 54.6. 

Australia’s service sector PMI floundered at 47.6, down 2.3 points from May’s reading and at a 6-month low.  Even more worrisome, Aussie retail sales sank 0.5% in May, most since March 2013, trimming their 12-month rate of increase to 5.3%.  But the rise in building permits of 9.9% from April and 14.3% from May 2013 exceeded expectations by a big margin.

Euro area retail sales stagnated in May on a volume basis, cutting the 12-month increase more than in half to just 0.7%.  Sales in April-May were just 0.1% above the average 1Q level.

Turkish CPI inflation slowed to 9.2% in June from 9.7% in May.  PPI inflation dropped to 9.75% from 11.3%.

The Swedish repo rate was cut by a greater-than-forecast 50 basis points to 0.25%, and the predicted rate path was also reduced such that no tightening is likely before 2016.  Notably, this decision passed in spite of dissents by Governor Ingves and his Deputy Governor in a 4-2 vote.  Negative inflation has spooked the majority.  An intent of this record low interest rate is krona depreciation, which indeed happened on the news.  In that way, it is hoped that price expectations may adjusted soon and avert deflation.

The Chinese yuan was fixed at its weakest dollar level in almost a month.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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