Main Themes: It was a mostly subdued session ahead of the Federal Reserve’s rate decision tomorrow. The exception was the British pound which fell to a two-year low against the US dollar on hard Brexit concerns.
Share Markets: US shares were mixed. While the Dow ended 0.1% higher, the S&P500 and the Nasdaq were dragged down by tech stocks, falling 0.2% and 0.4%, respectively.
Interest Rates: Yields on US treasuries were just marginally lower, as markets await the Federal Reserve’s key FOMC meeting tomorrow. US 10-year yields slipped one basis point to 2.06%. Markets have fully priced in a 25 basis point rate cut for some time.
Foreign Exchange: The US dollar index edged slightly higher. The big mover was GBP, which fell to its lowest in two years against the US dollar on concerns over a hard Brexit. The Australian dollar eased to a one-month low, as ongoing expectations of monetary easing by the RBA and ahead of key CPI data tomorrow weighed on the currency. AUD slid to around 69.02 US cents this morning.
Commodities: Oil prices edged higher on the prospect of lower interest rates from the Federal Reserve.
Global: Trade negotiations between the US and China have restarted in Shanghai this week for a two-day meeting. Trump however, has said that he thinks China may not want to sign a trade deal until after the 2020 election.
Australia: There were no major economic data releases yesterday.
Japan: Retail sales was flat in June, after a rise of 0.4% in May. The annual growth rate in retailing slowed from 1.3% in May to 0.5% in June.
United Kingdom: UK Prime Minister Boris Johnson has said that he would not restart talks with European Union leaders over Brexit unless they agree to reopen the deal that negotiated under Theresa May. European Union leaders have since refused. Johnson has insisted that the Irish border backstop must be taken out of the deal, but Irish Prime Minister has said it cannot be dropped from the agreement.
United States: The Dallas Fed manufacturing activity index improved from -12.1 in June to -6.3 in July, but it was still the third consecutive reading below zero. It provides an early reading that manufacturing activity is continuing to struggle into July.
Today’s key data and events:
NZ Building Permits Jun prev 13.2% (8:45am)
JN Jobless Rate Jun exp 2.4% prev 2.4% (9:30am)
JN Industrial Production Jun exp -1.7% prev 2.0% (9:50am)
JN Bank of Japan Policy Meeting (~)
EZ Economic, Busin., Ind., Serv. & Confidence Indexes (Jul)
AU Building Approvals Jun exp 0.2% prev 0.7% (11:30am)
US Personal Income Jun exp 0.4% prev 0.5% (10:30pm)
US Personal Spending Jun exp 0.3% prev 0.4% (10:30pm)
US CoreLogic CS 20-City May exp 0.2% prev 0.0% (11pm)
US Pending Home Sales Jun exp 0.4% prev 1.1% (12am)
US CB Cons. Confidence Jul exp 125.0 prev 121.5 (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