Main Themes: Sentiment in US markets remained cautious, depressing US bond yields and the US dollar. Gold prices rose to a six-year high.
Share Markets: The S&P 500 share market bourse edged away from record highs as expectations for easier monetary policy vied with concerns about a slowing global economy. The index fell 5 points (or -0.2%). Meanwhile, the Dow Jones closed 8 points higher (or +0.03%).
Interest Rates: US 10-year treasury yields fell from 2.05% to 2.01% and US 2-year yields fell from 1.77% to 1.73%.
Interest-rate markets are pricing 36 basis points of easing at the Federal Reserve’s July meeting. And a total of four rate cuts are priced by the middle of next year.
Foreign Exchange: The US dollar index fell 0.2 of a point overnight. EUR/USD rose from 1.1373 to a high of 1.1404 and USD/JPY ranged between 107.25 and 107.55. AUD/USD rose from around the 0.6930 handle to nearly 0.6970. NZD/USD rose from 0.6600 to 0.6626. And AUD/NZD ranged between 1.0510 and 1.0550.
Commodities: Gold rose 1.3% to a six-year high of US$1419 a tonne, supported by an assortment of global risks.
Australia: There was no major economic data released on Friday domestically. Financial markets continue to anticipate the RBA board meeting on Tuesday. We expect the RBA to deliver another 25bp rate cut at this meeting.
Europe: Germany’s IFO index for June slipped to 97.4, from 97.9 in May. Current conditions lifted 0.1 of a point to 100.8, but the fall in the more market-sensitive expectations index to 94.2 (prior 95.2) weighed on sentiment.
New Zealand: Credit card spending rose by 0.4%in May and the annual growth rate lifted to 6.6%.
United States: The Dallas Fed manufacturing activity index deteriorated to -12.1 in June, from -5.3 in May. The outcome was worse than consensus expected. The report also showed further deterioration in the six-month outlook.
This is the third Federal Reserve regional bank factory survey to weaken in June, adding to signs of waning momentum in manufacturing amid heightened trade tensions.
Overnight, Federal Reserve Bank President of Dallas Robert Kaplan sounded a note of caution on lowering interest rates. Kaplan expressed concern that monetary stimulus "would contribute to a build-up of excesses and imbalances in the economy" at a time when growth is "solid."
In geopolitical news, US President Trump imposed additional sanctions on Iran in retaliation for last week's downing of a US drone.
Today’s key data and events:
NZ Trade May exp NZ$2250mn prev NZ$383mn (8:45am)
JN PPI Services May y/y exp 1.0% prev 1.0% (9:50am)
UK CBI Retailing Reported Sales Jun exp -5 prev -27 (8pm)
US FHFA House Price Index Apr exp 0.2% prev 0.1% (11pm)
US CoreLogic CS 20-City Apr exp 0.10% prev 0.09% (11pm)
US Richmond Fed Mfg Index Jun exp 2 prev 5 (12am)
US New Home Sales May exp 684k prev 673k (12am)
US Consumer Confidence Jun exp 131.0 prev 134.1 (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.
Besa Deda, Chief Economist Ph:02-8254-3251