Main Themes: Sentiment faded overnight, possibly reflecting lingering concerns about trade tensions. Investors are looking towards the G7 meeting on developments on trade policy. Share markets were mixed, bond yields fell, and the US dollar edged lower.
Share Markets: There was little clear direction in US share markets. A fall in tech stocks dragged the Nasdaq 0.7% lower while the S&P500 dropped 0.1%. The Dow however, gained 0.4%.
Interest Rates: Yields on US treasuries fell, partially reversing the lift in the previous session. Weaker risk appetite helped to boost demand for safe-haven bonds. US 10-year yields rose 5 basis points to 2.92%.
Foreign Exchange: The US dollar edged slightly lower, while the euro extended its gains on expectations the European Central Bank (ECB) would signal the end of its bond purchasing program. Despite US dollar weakness, the Australian dollar pared its post-GDP gains, weighed down by the softer risk environment overnight. It is currently trading at around 76.2 US cents this morning.
Commodities: Oil prices rose on concerns about falling exports from Venezuela, and on comments suggesting that OPEC may not raise production. Copper prices lifted on expectations of supply disruptions. Gold prices edged higher, helped by US dollar weakness.
Australia: The trade surplus narrowed from $1.7 billion in March to $977 million in April, the smallest surplus in four months. The weaker trade position was mostly as a result of a pullback in commodity prices in April. Export values fell 2.2% in April, the first decline in six months. Weaker commodity prices impacted negatively on metal ores & minerals, coal, coke & briquettes and non-monetary gold. Imports were flat in April, reflecting a 2.3% decline in consumption imports.
The AiG performance of construction index slipped from 55.4 in April to 54.0 in May. The weakness came from a fall in the commercial construction sub-index, although apartment building was the weakest performing sub-sector. The sub-index for apartment building has signalled contraction for 3 consecutive months. Activity is mostly being driven by home building and engineering construction.
Europe: German factory orders fell 2.5% in April, against expectations for a 0.8% rise. It was the fourth consecutive monthly drop signalling a slowdown in European economic activity is extending.
United Kingdom: Halifax house prices rose 1.5% in May, partially recovering from a 3.1% drop in April. On an annual basis, price growth slowed from 2.2% to 1.9%.
United States: Initial jobless claims fell 1k to 222k for the week ending June 2. While the four-week moving average lifted slightly from 223k to 225k, claims continue to indicate that the labour market remains tight.
US consumer credit rose $9.3 billion in April, which was the smallest increase in seven months.
Today’s key data and events
JN GDP Q1 final exp -0.1% prev -0.2% (9:50am)
JN Current Account Apr exp ¥2.1trn prev ¥3.1trn (9:50am)
CH Trade May exp $33.8bn prev $28.38bn (~)
Exports y/y exp 11.3% prev 12.7%
Imports y/y exp 18.8% prev 21.5%
EZ German Industrial Production Apr exp 0.4% prev 1.0% (4pm)
EZ German Trade Balance Apr exp €20.2bn prev €24.7bn (4pm)
CH PPI May y/y exp 3.9% prev 3.4% (Sat 9 Jun, 11:30am)
CH CPI May y/y exp 1.8% prev 1.8% (Sat 9 Jun, 11:30am)
Times are AEST. All data forecasts are m/m or q/q and seasonally adjusted unless otherwise specified. Forecasts for Australian data are our forecasts and for other countries they are consensus forecasts.
Janu Chan, Senior Economist