Market movers today
In Brussels, EU leaders will resume their quest to fill the European top posts after they failed to do so at a marathon summit stretching from Sunday to Monday. Discussion continues to centre on the Dutch Socialist lead candidate Frans Timmermans for the Commission Presidency.
In the US, we have two interesting Fed speakers: Williams (voter, neutral) and Mester (voter, hawkish). It will be interesting to hear their take on the trade standoff between the US and China and if there are any hints about the July rate decision.
Overnight, we get service PMIs in Japan and China. For both countries, it should give us more information about how the domestically oriented part of the economy is doing (although in the case of China the service PMI is quite volatile). Like in Europe, the services sector has been more robust than the manufacturing sector.
In Denmark, we get the FX reserve figures. Danmarks Nationalbank has not intervened in the FX markets since January, even though the DKK has at times traded somewhat on the weak side. However, the DKK strengthened in June. Danmarks Nationalbank is also scheduled to release May’s securities and foreign portfolio investment figures.
Selected market news
With the G20 meeting out of the way, market focus has returned to macro numbers to gauge how aggressive central banks will be in their easing steps in the coming months. In that light, yesterday’s June manufacturing PMIs did not bring much to lighten the mood. Across Asia, the US and Europe, the message was one of shrinking factory activity in a sign that the global manufacturing cycle took another hit at the end of Q2. Japan’s Tankan confidence index dropped to a three-year low, while the Chinese Caixin PMI fell back below the 50 threshold. In Europe, another marked decline in the periphery PMIs points to a clear risk that the manufacturing sector will return as a drag on growth in Q2 (see Euro Area Research – Catching up with reality ). In the US, the ISM manufacturing index fell back to the lowest level since October 2016 amid a sharp fall in new orders as the delayed impact from the tariff warfare is taking its toll on US companies.
After global stocks rallied following the US-China trade ceasefire over the weekend, the mood turned more sceptic about a fast turnaround in the global cycle following the lacklustre PMI signals and news that Washington is considering further tariffs worth EUR4bn on EU goods in retaliation for Airbus subsidies. 10Y German Bund yields dropped to a new all-time low of -0.35%, while the periphery fixed income markets saw further support from news that the Italian government is considering reigning in spending to avert EU budget sanctions. OPEC decided yesterday to extend output cuts by nine months. The decision was widely as expected after Saudi Arabia and Russia had agreed on this at a bilateral meeting over the weekend. Consequently, there was a limited impact on oil prices.
