Continuing Brexit Concerns and FOMC Day

June 15, 2016

A fifth published poll of British voters gives an edge to those favoring an exit from the European Union.

Today’s main event will be the FOMC statement due at 18:00 GMT and subsequent press conference.

China made news in three ways earlier today.  First, MSCI announced it will not include equities in its indices. The second development of note is the released of money aggregate and bank lending data.  Loans totaling CNY 985 billion in May exceeded forecasts but was close to the CNY 962 billion average in the previous two months.  On-year M2 growth of 11.8% in May was slower than expected and the lowest in at least nine months. Finally, the yuan slid to a 5-year low earlier, moving past 6.6000 per dollar and is 0.2% weaker at the moment.

The dollar fell 0.6% against sterling despite the aforementioned disturbing opinion poll.  The FOMC is not expected to raise interest rates this month, and only low odds are given to the possibility of tightening at the following meeting in July.

The dollar has fallen by 0.5%, 0.4% and 0.3% versus the Aussie dollar, kiwi and euro.  The U.S. currency has strengthened 0.2% relative to the Swiss franc and 0.1% versus the yen but is 0.1% softer vis-a-vis the loonie.

European share prices have thus far rebounded by 2.2% in Spain, 1.9% in Italy, 1.7% in France, 1.5% in Germany and Switzerland, 1.2% in Greece and 1.1% in Britain.  Stocks climbed 1.6% in China, 1.1% in India, and 0.4% in Japan and Taiwan but dropped 1.1% in Australia.

The 10-year Treasury yield, which slid earlier this week below 1.60% to a 4-year low, is trading at 1.63% in futures markets, up a basis point.  The 10-year British gilt yield advanced 4 basis points, but the 10-year Japanese JGB yield is 2 basis points lower.  The Bank of Japan’s Policy Board began a 2-day meeting today.

West Texas Intermediate crude oil dropped 1.0% to $48.01 per barrel.  Copper rose more than 1.0%, but gold is 0.3% softer at $1,284.90 per ounce.

British labor statistics revealed a 0.4K drop in jobless unemployment claims in May, a lower 5.0% ILO-basis unemployment rate in February-April, and continuing subdued on-year wage growth in April of 2.0% overall and 2.3% excluding bonus pay.

New Zealand’s current account deficit narrowed slightly to 3.0% of GDP (NZD 7.5 billion) over the four quarters through 1Q16.  The deficit last quarter was NZD 1.495 billion.

According to the Westpac measure, Australian consumer sentiment weakened 9.5 points to -1.0 this month.

The 12-month rate of decrease in Japanese machine tool orders was revised to 27.4% in May from 25.0% reported initially.  This was the deepest drop thus far in 2016.

South Korea’s seasonally adjusted jobless rate held steady at 3.7% in May.  Singaporean retail sales fell 3.8% in the year to April.  Malaysian consumer prices rose 2.0% between May 2015 and May 2016.

Euroland’s seasonally adjusted trade surplus widened EUR 4.3 billion to EUR 28.0 billion in April, larger than in any month of the first quarter.  Exports and imports posted monthly increases of 4.9% and 2.6%.  The unadjusted EUR 81.3 billion surplus in January-April was 20.3% bigger than a year earlier.

French consumer prices in May were unchanged from a year earlier.  Dutch retail sales in April were 0.1% lower than a year before.

Treasury-compiled U.S. monthly capital flow data get released late today, but attention will be focused on what the FOMC statement says and what Janet Yellen shares at the subsequent press conference.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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