Market movers today
Today is rather thin in terms of economic data releases. Focus is on Norway, where we get PMI manufacturing for May and the weekly unemployment data.
The ECB is set to publish details on the allocation of its PEPP programme and focus will be on the potential skew towards Italian and French government bond holdings.
Otherwise, focus is on the usual suspects: COVID-19 developments and how the economies are doing now they have started to reopen (or are close to reopening), USChina tensions, ongoing Brexit negotiations and now also the US protests (see more below).
British and EU negotiators will begin their fourth and final scheduled round of Brexit trade talks. EU demands of so-called ‘level playing field conditions’ remain the major hurdle and we continue to expect no breakthrough ahead of the important deadline on 1 July, when the UK and EU need to decide on whether to extend the transition period.
Selected market news
More negative news emerged from the US over the weekend: President Trump not only withdrew US support from the WHO, but also announced he would revoke special trade privileges for Hong Kong in response to the newly installed Chinese security laws (without specifying the details). Meanwhile, protests against police violence continued to rage across the country and a number of cities have imposed curfews as a consequence. That said, the market impact of the latter is limited so far, although it might delay the openingup phase in some cities.
Equity markets mostly shrugged off the negative news flow yesterday, as worse was probably feared with respect to the China-US trade tensions and Trump did not yet pull out of the phase-1 deal. A rise in the Chinese Caixin manufacturing PMI back into expansionary territory for the first time since January and a stabilisation in May’s ISM manufacturing also helped to boost investors’ mood. That said, US futures and Asian stocks point to a more mixed session today, amid growing unease that Trump’s decision to deploy the military is stoking further social unrest in the US. As the OPEC+ meeting draws nearer, hopes for an extension of output cuts gained momentum after Trump discussed this with Russia’s President Putin and Brent oil rose above USD38/bbl this morning. The Australian dollar was little changed after the Reserve Bank of Australia left its cash rate unchanged at 0.25% and said it remained committed to an accommodative approach as long as needed.
This morning, we published our new global macro update: The Big Picture – Reopening, recovery and risks. While the world economy is in the deepest economic recession since the Great Depression, we continue to think it will be relatively short-lived, seeing a rebound on the cards in late Q2/early Q3 as economies open up. High-frequency data support the view that the advanced economies are recovering, as the virus comes under control and economies start to reopen.