Despite the mildly upbeat tone following the weekend G20 meeting, where the US/China agreed on a truce in the trade war which is likely to see a positive start to the week for risk assets, Chinese state media has since stated that China and the United States will face a long road before they can reach any long term deal, with further tensions likely to loom in the months ahead. Overall though, the G20 went better than expected and should underpin stocks, and probably the commodity bloc currencies, early in the week.
US stocks moved higher on Friday, to end Q2 at close to all time highs, although traders appear to be struggling to discern how much longer the bull market can continue given the increasing prospect of slowing economic growth which looks likely to bring about a Fed rate cut sooner rather than later – possibly at the July 30-31 meeting.
Elsewhere, Russian President Vladimir Putin said over the weekend that Russia has agreed with Saudi Arabia to extend the deal with OPEC on reducing oil output. Further headlines will come later in the Monday session, when the OPEC Meeting takes place.
In early Monday trade, the big movers have been the commodities, with Gold/Silver sharply lower, while WTI has shot up $1pb following the G20 and ahead of today’s OPEC meeting in Vienna, helped on its way by comments from the Iraq Oil Minister who has said that $70 pb is his desired level. In the FX merkets, the Aud$ and Nzd$ are firm, while the Jpy is under some downside pressure. All these have created chart gaps which will require filling at some stage.
Looking ahead, this Thursday is going to be the US Independence Day holiday although it is going to be a busy week for economic data. Monday begins with a heavy schedule, with the Manufacturing PMIs being the major focus, beginning shortly with those of Australia and China, before heading on to the EU and the US. The other focus today will be on the Japan Tankan and then the US ISM manufacturing figures as well as the OPEC Meeting.
Tuesday’s main interest will be the RBA Interest Rate Decision – with a good chance (70% priced in) of a rate cut, by 25 bps, to 1%. There will also be some secondary EU/US data, later on Tuesday (German Retail Sales, UK Construction PMI, EU PPI, US Total Vehicle Sales and Global Dairy Trade Index), while Wednesday will focus on the Services PMIs, as well as the US ADP Jobs data, which comes ahead of Friday’s US employment report (exp 165K, 3.6%, Average Hourly Earnings;+0.3%). Have a good week.
Economic data highlights will include:
Mon: China Official Mfg/Non-Mfg PMIs (released on Sunday – both missing expectations), Caixin China Manufacturing PMI, AIG Australian Performance of Services Index, New Home Sales, RBA Commodity Index, TD Inflation, Japan Tankan, Consumer Confidence, EU/UK Mfg PMIs, EU Unemployment, US Mfg PMI, ISM Mfg PMI/Prices Paid, Construction Spending
Tue: NZ Q2 NZIER Business Confidence, RBA Interest Rate Decision, German Retail Sales, UK Construction PMI, EU PPI, US Total Vehicle Sales, API Weekly Crude Oil Stock Inventory, Global Dairy Trade Index
Wed: AIG Australian Performance of Services Index, Building Permits, Trade Balance, Caixin China Services PMI, EU/UK Services PMIs, US Trade Balance, ADP Jobs data, Jobless Claims, Services PMI, ISM Non-Mfg PMI, Factory Orders,
Thur: US Independence Day, Australian Retail Sales, Swiss CPI, EU Retail Sales,
Fri: Japan Leading Economic Index, Coincident Index, German Industrial Production, Factory Orders, US Jobs/NFP/Average Hourly Earnings data
Market moves, in brief:
FX: DXY 96.29 (+0.18%)
Bonds: US10Y; 2.005% (-0.49%), German 10Y; -0.328% (-2.76%), UK 10Y; 0.838% (+1.55%), Australian 10Y; 1.335% (-1.85%), NZ 10Y; 1.575% (-1.41 %), China 10Y; 3.292% (+1.77%)
Stock Indices: DJI; +0.28%, S+P; +0.58%, NASDAQ; +0.48%, EUStoxx50; +0.91%, FTSE100; +0.31%, Shanghai Composite; -0.60%,
Metals: Gold $1393 oz (-1.4%), Silver $15.18 oz (-0.85%), Copper $2.705 lb (-0.26%), Iron Ore $112.9 per tonne (NYMEX) (+1.27%),
Oil: WTI $ 59.50pb (+2.1%)
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