US Stock markets put aside the current geopolitical tensions and the fears of a full-blown trade war on Tuesday and rose by 0.2%/0.7%, underpinned by more strong corporate results. Currencies were generally quieter although the Aud$ and the Kiwi were in demand, as was Cable which saw some short covering in lacklustre conditions. Elsewhere, markets were generally steady although WTI climbed by around 1.2% as concerns about oversupply eased amid expectations that US oil stockpiles fell last week. The EIA Crude Oil Stocks Weekly Change is due on Wednesday and is expected to show domestic crude supplies, already close to 3-year lows, fell by 2.3 million barrels.
In terms of data, the PMIs were mixed. The EU PMI manufacturing rose to 55.1 in July, up from 54.9 and beat expectation of 54.6, but the PMI services dropped to 54.4, down from 55.2 and missed expectation of 55.1. The PMI composite dropped to 54.3, down from 54.9 and hit a 2-month low. The German PMI manufacturing rose to 57.3 in July, up from 55.9; way above expectation of 55.7, but again, the PMI services dropped to 54.4, down from 54.5 and missed expectation of 54.5. The PMI composite rose to 55.2, up from 54.8, and hit a 5-month high. The France PMI manufacturing rose to 53.1 in July, up from 52.5 but missed expectation of 53.9. PMI services dropped to 55.3, down from 55.9, but beat expectation of 54.3. PMI composite dropped 0.4 to 54.5, hitting a two month low.
Wednesday will begin with the NZ Trade Balance for June (exp +$NZ 200 mio) and will be closely followed by the Australian Q2 CPI (CPI; exp 0.5% qq, 2.2% yy, Core; exp 0.5% qq, 1.9% yy). Inflation is generally expected to have picked up a little due to higher petrol prices but will have limited effect with regards to any potential RBA rate hike which is still a long way off. Later in the day, the EU will have the German IFO Business Climate/Expectations, the UK, the CBI Industrial Trends Survey (Realised), and the US will look to the New Home Sales and the EIA weekly crude oil stock change for guidance. Most likely it will be a mostly rangebound session today while awaiting the outcome of the meeting in Washington between Trump/Juncker who will be negotiating US/EU trade relationships. On Thursday we then get the EU Interest Rate Decision/Statement and on Friday the Q2 GDP. It will be a busy few days.
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