• Markets:
    • Interest-rate differentials continue to dominate currency markets. With the can kicked down the road again in a partial Greek solution, the EUR rallied. The USD fell as disappointing economic data pushed back tightening expectations. If this risk-off phase continues I expect the USD to rise on risk aversion but at present all scenarios seem to be negative for the USD: it fell on bad economic data last week, but good data would mean a risk-on phase with carry trading pushing down the USD. GBP continued its long weakening trend, owing to the state of the economy. AUD and JPY look directionless in the short term. CHF continues to strengthen.
    • The month-long downtrend in the S&P 500 continues, and Treasuries and Bunds continue to rally. Global equities continue to drift downwards, with Europe looking like the US, Japan and EM continuing recent downtrends, and Hong Kong and Korea struggling to stay near recent highs.
    • Gold traded upwards, presumably on Greek concerns, but silver and platinum lagged. 
    • Commodity markets continued to look generally weak. Oil is flatlining and copper staged a limp rally that failed to break a volatile downtrend. Cocoa and coffee remained near recent lows. However, palladium has had a strong upward spurt in its volatile downtrend, natural gas ran strongly upward, and the agricultural complex moved up as weather concerns continued to dominate the markets.
  • Newsflow:
    • Further EU aid to Greece looks likely.
    • Ollanta Humala in the lead in counting of Peru’s presidential vote. Markets react negatively (on account of his past support for Chavez) but both candidates are committed to continuing pro-growth policies of the present government.
    • Socialists were beaten by the Social Democrats in Portugal’s election; the latter will likely form a coalition government with the People’s Party. All three main parties are committed to fiscal austerity. Voters have yet to understand that they will not end their subservience to Europe by electing establishment parties.
    • Japanese politics remains a farce. Kan survives a vote of no confidence only by promising to step down when the immediate crisis is past.
    • Clashes in Yemen as Saleh has an operation in Saudi Arabia to mend damage from a missile strike last week.
    • China average land price in transactions falls 32% MOM, but this is likely caused by the governments diktat on social housing — are developers waiting for a policy reversal?
    • Wholesale Market Brokers’ Association launches Sterling Ronia (Repurchase Overnight Index Average) as an alternative to LIBOR that reflects banks’ true funding costs.
  • Commodities:
    • Crude inventories had a decent jump, vs. expectations for a decrease.
    • Weather-related problems with the current seasons’s crops look increasingly real. Russian authorisation of grain exports (mainly wheat) from 1 Jul weighs on the wheat market.
    • Czarnikow continues to predict a large sugar surplus, with the ISO and USDA forecasting smaller surpluses; but reports of low output in the ongoing Brazilian harvest buoy the market.
  • Data:
    • US:
      • ISM PMI drops to 53.5 — a big disappointment.
      • Non-farm payrolls disappointed significantly. Unemployment rose to 9.1%. Initial claims appear entrenched at late-2010 levels.
      • Personal spending growth disappoints at 0.4%; growth falls for a second month. Personal income +0.4% as expected.
      • Pending home sales -11.6% vs. expectation of -0.9%; challenging YOY comparison and a MOM drop.
      • Factory orders -1.2% vs. -0.7% expected.
      • ISM Non-manufacturing PMI was up after a big drop last month.
    • Eurozone:
      • PMI has a small drop to 54.6, as expected.
      • Services PMI dropped back; flat trend.
      • German retail sales and French consumer spending disappoint.
      • Unemployment remains at 9.9%.
      • Flash CPI 2.7% vs. 2.8% expected.
    • UK:
      • Services PMI fell for a second month.
      • Net lending to individuals and mortgage approvals still bumping along the bottom.
      • M4 0.1% MOM disappoints expectations.
    • Australia: 
      • GDP -1.2% QOQ as floods disrupt economy.
      • Strong Q1 demand and monthly retail sales revive rate-hike expectations. 
      • Trade surplus continues declining trend and current account deficit widens.
    • China:
      • PMI drops to 52 but beats expectations. HSBC PMI rises a little to 51.6. 
    • Switzerland: 
      • Strong PMI and retail sales.
    • Japan:
      • PMI rises to 51.3 after two months below 50.
      • Household spending -3%, disappoints.
      • Unemployment increases to 4.7%.
      • Preliminary IP +1%.
This week:
  • Tue: AUD rate statement, Eurozone retail sales, Bernanke speaks.
  • Wed: OPEC meeting, UK inflation report hearings, Beige Book.
  • Thu: Japan final GDP, AUD unemployment, UK and ECB interest-rate decisions, US trade balance.
  • Fri: China trade balance, UK manufacturing production, NIESR GDP estimate and PPI, G8 meetings.
Next week:
  • China monthly rash of data.
  • Japan interest-rate decision.
  • UK CPI, retail sales and employment data.
  • US CPI, PPI, TIC, building permits and retail sales.
  • German Ifo business climate.
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