Main Themes: Risk appetite improved somewhat overnight. There did not appear to be any key catalyst – sentiment seemed to be helped by a lack of major news. Financial markets are likely to remain fragile and watchful of developments on trade. Overnight, US shares rose, bond yields rose slightly and the US dollar tracked sideways.
Share Markets: US shares lifted, boosted by tech stocks. The Nasdaq lifted 0.8%, while the Dow rose 0.4% and the S&P500 rose 0.6%.
Interest Rates: Yields on US treasuries rose marginally on the improvement in sentiment. Yields on US 10-year bonds rose 1 basis point to 2.84%, although yields are still holding close to a one-month low.
Foreign Exchange: The US dollar index tracked sideways, although USD strengthened against the yen as sentiment improved. GBP was under downward pressure on worries that Brexit negotiations were stalling following comments from Irish PM saying that it would have to make preparations for an unlikely scenario of no Brexit deal. The improvement in sentiment had a minimal impact on the Australian dollar, only lifting marginally. It is currently trading at 73.5 US cents this morning.
Commodities: Oil prices rose on expectations sanctions against Iran would cut supply. Prices of most other commodities were broadly weaker.
Australia: Job vacancies rose by 5.7% in the three months May. It follows a rise of 5.4% in the previous period.
Europe: Confidence indicators weakened over June. The business climate indicator fell from a revised 1.44 in May to 1.39 in June. Meanwhile, economic confidence edged down from 112.5 in May to 112.3 in June. The fall in confidence is not surprising given the increased worries on global trade tensions. Consumer confidence was unrevised at -0.5 in the final estimate for June, confirmed at an eight-month low but still at an above average level.
Japan: Retail sales fell by 1.7% in May, but are up 0.6% on a year ago.
United States: Initial jobless claims rose from 218k to 227k for the week ending June 23. The four-week moving average also edged higher from 221k to 222k, but remain at historically low levels and suggestive of further tightening of the labour market.
GDP in the March quarter was revised downwards from an annualised 2.2% to 2.0% in the March quarter. It reflected a downgrade in consumer spending as well as inventories. More recent data is however, indicating a rebound in activity over the June quarter.
Pending home sales fell 0.5% in May, following a 1.3% decline in April. The weakness in activity is continuing to reflect low housing inventory.
The Kansas City Fed manufacturing index edged down from 29 in May to 28 in June, remaining at a high level.
Today’s key data and events
NZ Building Permits May prev -3.7% (8:45am)
JN Jobless Rate May exp 2.5% prev 2.5% (9:30am)
JN Industrial Production exp -1.0% prev 0.5% (9:30am)
AU Private Sector Credit May exp 0.4% prev 0.4% (11:30am)
UK GDP Q1 Final exp 0.1% prev 0.1% (6:30pm)
UK Current Acct Q1 exp -£17.9 prev -£18.4 (6:30pm)
EZ Core CPI Jun y/y exp 1.0% prev 1.1% (7pm)
US Pers. Income May exp 0.4% prev 0.3% (10:30pm)
US Pers. Spending May exp 0.4% prev 0.6% (10:30pm)
US PCE Deflator May exp 0.2% prev 0.2% (10:30pm)
US Chicago PMI Jun exp 60.0 prev 62.7 (11:45pm)
US UoM Consumer Sentiment Jun exp 99.0 prev 99.3 Final (12am)
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 Ph:02-8253-0898