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July 5, 2017

U.S. markets reopened after the long Independence Day holiday break. Investors were greeted by the release of many more June purchasing manager survey results and have a number of events to get through.

  1. FOMC minutes will be released today.
  2. President Trump is embarking on his second trip abroad as president. He will be attending the Group of Twenty annual summit in Hamburg, Germany where he’ll have face-to-face talks with the leaders of Russia and China. What now is to be done about North Korea, which seemingly now has the capability to strike the U.S. with a nuclear missile? Trump has returned lately to his favorite economic theme on the campaign trail, which is to establish “fairer” trade conditions for U.S. exporters.
  3. The Labor Department releases its monthly labor force survey on Friday.

The dollar climbed 0.5% against the Mexican peso overnight but is otherwise flat to 0.2% higher against key currencies.

Equities in the Pacific Rim rose 1.2% in Singapore, 0.8% in China, 0.6% in Taiwan, 0.5% in Hong Kong, and 0.3% in Japan and South Korea but fell 0.7% in Indonesia and 0.4% in New Zealand and Australia.

Stocks in Europe are hardly changed in most cases.

Today’s big market move concerns oil, whose multi-day revival came to an abrupt end after Russia rejected any further production cut. West Texas Intermediate crude dropped 1.1% to $46.54 per barrel. Industrial metals like copper fell, too. Gold edged up 0.2% to $1,221.10 per ounce.

The yields on ten-year gilts and Japanese JGBs rose three and one basis points.

The results of June purchasing manager indices released today are as follows. Due to the holiday, the U.S. non-manufacturing PMI will not arrive until Thursday.

  • Euroland’s services PMI fell 0.9 points to a 5-month low but still robust 56.3 level. The composite PMI reading, 56.3, was the same as May’s 3-month low of 56.3. While Spain’s composite PMI rose to a 22-month high, those for Ireland, France, Germany and Italy were below May’s scores. The data suggest nonetheless that GDP likely accelerated to 0.7% in 2Q as a whole.
  • China’s services PMI of 51.6 fell 1.2 points to 51.6, indicating the second slowest pace in 13 months. The composite Chinese PMI as a result slipped to a one-year low.
  • Japan’s services PMI rose 0.3 points to a 22-month high of 53.3, but the composite index of 52.9 was a 2-month low.
  • Britain’s services PMI dropped 0.4 points to a 4-month low of 53.4, providing further proof that Brexit uncertainty is belatedly weighing on growth.
  • India’s services and composite purchasing manager indices rose in June to 8-month highs of 53.1 and 52.7.
  • Russia’s composite PMI of 54.8 constitutes an 8-month low. The services PMI fell to a 4-month low of 53.1.
  • Private PMI readings for Singapore (50.7), Lebanon (46.1) and South Africa (49.0) dropped to 8-, 8- and 14-month lows. But Hong Kong’s private PMI advanced 0.6 points to a 2-month high of 51.1.
  • Australia’s Performance of Services index jumped 3.3 points to a 6-month high of 54.8 in June.
  • Sweden’s services PMI slipped back 0.6 points to a 10-month low of 57.3.

Retail sales volume in the euro area beat expectations, rising in May by 0.4% on month and 2.6% on year. April-May combined had an average level that was 0.7% above the first-quarter mean.

Swedish industrial production in May surpassed its year-earlier level by 8.0%, most in 18 months.

British shop prices were 0.3% lower than a year earlier in June and down 0.4% on year in the second quarter. New car sales in the U.K. recorded a 4.8% on-year drop in June.

A member of the European Central Bank Governing Council, Praet, said the mission of restoring inflation to target is not yet complete and urged “patience and persistence” in keeping policy appropriately accommodative. The Bundesbank President Weidmann, who as aspirations to someday lead the ECB, has a more hawkish policy preference.

Central banks in Poland and Thailand kept their key interest rates unchanged at their latest reviews. Those rates are at 1.5% in each case.

U.S. factory orders figures will be released shortly.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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