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Germany PMIs stay in contraction, likely to be a protracted recovery

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    Germany PMI Manufacturing rose to 44.6 in June, up from 36.6, above expectation of 41.0. PMI Services rose to 45.8, up form 32.6, above expectation of 41.1. PMI Composite rose to 45.8, up from 32.3, hitting a four-month high but stayed in contraction.

    Phil Smith, Principal Economist at IHS Markit said: “While the loosening of lockdown restrictions has had a positive effect on some parts of the economy, the PMI’s latest reading is still within contraction territory, which shows this is likely to be a protracted recovery as coronavirus-related disruption and uncertainty continue to weigh on demand. There was no separating manufacturing and services in terms of output trends in June, with both seemingly over the worst but far from firing on all cylinders.”

    Full release here.

    France PMIs: Finally enter recovery, manufacturing at 21-month high

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      France PMI Manufacturing rose to 52.1 in June, up from 40.6, well above expectation of 46.0. That’s also the highest level in 21 months. PMI Services rose to 50.3, up from 31.1, beat expectation of 45.2. That’s the highest level in 4 months. PMI Composite rose to 51.3, up from May’s 32.1, also a four-month high.

      Eliot Kerr, Economist at IHS Markit said: “The latest PMI data suggests that France is finally entering a period of recovery as we move past the peak of the coronavirus crisis. The further loosening of restrictions has allowed some semblance of normality to resume, with many businesses and workers returning to work, particularly in the manufacturing sector. Barring any large scale second outbreak, demand should also follow activity into expansion territory, as confidence continues to recover. Given ongoing cross-border restrictions in many countries around the world, this will most likely be driven by the domestic market in the short-run, with international demand taking a little longer to recover.”

      Full release here.

      Japan PMIs: Two-speed recovery to undermine a sustainable return to pre-coronavirus level

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        ActionForex.com
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        Japan PMI Manufacturing dropped to 37.8 in June, down from May’s 38.4. The data indicates productions fell at the more severe pace since March 2009. PMI Services, on the other hand, recovered to 42.3, up from 26.5. PMI Composite rose to 37.9, up from 27.8, staying well in contraction region.

        Joe Hayes, Economists at IHS Markit, said: “While the services sector downturn eased noticeably, goods production fell at at accelerated pace in June. The rate of decline in manufacturing order books remained severe, hinting that the shape of the recoveries in the services and manufacturing sector could be very different. A two-speed recovery would undermine a sustainable return to -pre-COID-19 levels of economic activity”.

        Full release here.

        Australia CBA PMI composite rose to 52.6, economy back in expansion

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          ActionForex.com
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          Australia CBA PMI Services rebounded strongly to 53.2 in June, up from 26.9, back in expansionary region. PMI Manufacturing also rose to 49.8, up from 44.0, very close to 50 stabilization level. PMI composite rose to 52.6, up from 28.1, also back in expansion, and hit the highest level in 9 months.

          CBA Head of Australian Economics, Gareth Aird said: “The June PMIs are consistent with our view that we are now past the low point in economic activity. Overall conditions are still very soft, but there were a few encouraging pieces of information in the PMIs. Confidence has improved in both the manufacturing and services sectors. And the lift in both input and output prices is welcome as it suggests we are more likely to be in a period of disinflation rather than deflation. The further decline in employment was disappointing, but given the lagging relationship between employment and output it is not surprising. We should see headcount lift from here.”

          Full release here.

          Navarro’s trade deal over comments taken wildly out of context

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            The markets had a roller coaster ride as White House trade adviser Peter Navarro was quoted by Fox news that the US-China trade deal is “over”. But Navarro quickly clarified that “my comments have been taken wildly out of context”, and the trade deal is “not over”. President Donald Trump also tweeted “The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!”

            Navarro did indicated that the “turning point” came when Chinese official went to the US on January 15 to sign the trade deal, “a full two months after they knew the virus was out and about”. “It was a time when they had already sent hundreds of thousands of people to this country to spread that virus, and it was just minutes after wheels up when that plane took off that we began to hear about this pandemic.”

            He later explained in a statement, “they had nothing at all to do with the Phase I trade deal, which continues in place. I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world.”

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            Fed Rosengren hopes to keep rates low at short- and long- end

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              Boston Fed President Eric Rosengren said Fed is still a “long way from raising rates” and the central bank hopes to keep both short- and long-term borrowing costs “quite accommodative. The US will be in a situation “where the economy is growing more slowly than we might have hoped a few months ago”.

              Rosengren noted that “some of the better economic data we’ve been getting has reflected the fact that those places are opening up, but they may not be opening up as safely as they need to.” He’s concerned that positive headline may mask the underlying health implications of re-opening.

              Eurozone consumer confidence rose to -14.7, still well below long-term average

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                ActionForex.com
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                Eurozone consumer confidence rose 4.1 pts to -14.7 in June. EU consumer confidence rose 3.9 pts to -15.6. Both readings were well below their long-term averages of −11.1 (Eurozone) and −10.5 (EU).

                Full release here.

                UK CBI manufacturer output dropped to historical low in June

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                  ActionForex.com
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                  UK CBI manufacturer output volume dropped to -57 in the three month to June, down from -54. That’s the fastest pace of decline on record since July 1975. Output dropped in 15 out of 17 sub-sectors. Nevertheless, total order books improved slightly to -58, up from May’s -62, even though it remained poor by historical standard. Export order books dropped sharply to -79, down from May’ -55, lowest on record since 1977.

                  Anna Leach, CBI Deputy Chief Economist, said: “The UK manufacturing sector remained in a deep downturn in June due to the ongoing COVID-19 crisis. Output volumes declined at a new record pace and export order books fell to an all-time low, reflecting the significant fall in demand in the UK and abroad. Firms are again hoping that this will ease somewhat in the next three months.

                  Full release here.

                  ECB de Guindos: Markets sometimes overreact, but ultimately remain realistic

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                    ActionForex.com
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                    In a Spiegel interview, ECB president Luis de Guindos attributed the strong rebound in the stock markets to two factors. Firstly, the “rapid measures taken by the central bank and governments to cushion the economic consequences of the pandemic have increased optimism”. Secondly, “the view had prevailed that the pandemic was largely under control”.

                    But he also warned that “we also know that markets sometimes overreact, both downwards and upwards. Ultimately, the stock exchanges must remain realistic: At the beginning of the pandemic, we saw sharp price falls on the stock markets. ”

                    He also reiterated that in the middle scenario of the economic impact of coronavirus pandemic, Eurozone economic activity would decreased by -9% in 2020. Prices will only increase by 0.3%. That is “significantly lower” that ECB’s just under 2% inflation target. The central bank is therefore buying more bonds to promote growth and inflation. “Given this sharp decline in economic activity and inflation,” he emphasized, “we had to act. It is our duty to do what is necessary within our mandate.”

                    Full interview here.

                    BoE Bailey: Level of reserves should be adjusted first when withdrawing stimulus

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                      ActionForex.com
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                      In a Bloomberg op-ed, BoE Governor Andrew Bailey said the “the current scale of central bank reserves mustn’t become a permanent feature.” Also, “elevated balance sheets could limit the room for maneuver in future emergencies”.

                      Hence, “when the time comes to withdraw monetary stimulus, in my opinion it may be better to consider adjusting the level of reserves first without waiting to raise interest rates on a sustained basis.”

                      Bailey’s idea was in contrast to former BoE Governor Mark Carney’s. Carney indicated before that BoE would raise interest rate materially, before starting to lower the holding of the asset purchased.

                      RBA Lowe: Interest rate to stay at current level for years

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                        ActionForex.com
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                        RBA Governor Philip Lowe said today that “it’s likely we’re going to see interest rates at their current level for years”. “We do face a world where there’ll be a shadow from the virus for quite a few years,” he added”. “People will be more risk-averse, they won’t want to borrow, in Australia we’re going to have lower population dynamics.”

                        He also said the 7.1% unemployment in Australia was a “misleading indicator” because many people had already given up looking for jobs. Work hours were also lower than they would want. “We just don’t know what constitutes full employment in terms of an unemployment rate,” he said. “We should be seeking to get to full employment however we define that in terms of unemployment, underemployment and hours worked.”

                        Regarding the Australian Dollar, he’d “like a lower” one, with “lower unemployment and slightly higher inflation”.

                        Bundesbank Weidmann: Economic trough is behind, but followed only by a gradual recovery

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                          ActionForex.com
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                          Germany Bundesbank President Jens Weidmann said the country suffered the “deepest economic slump” in history in the last months. Nevertheless, “the good news is: the trough should be behind us by now, and things are looking up again,” he added. “But the deep slump is being followed only by a comparatively gradual recovery.”

                          He also hailed that the government was right to act quickly in supporting the economy with stimulus. The image of a frugal nation was wrongly portrayed. “She is not saving for the sake of saving, but so that there is money that can be spent sensibly and in case there are difficult times. And that is precisely the case here,” he noted.

                          Separately, the Robert Koch Institute (RKI) said the estimate 4-day R-value of coronavirus jumped to 2.88 on Sunday. That’s a sharp increase from 1.06 on Friday. It’s also back at the level since early March. The number means that out of 100 people who contracted the coronavirus, a further 288 other people will get infected. To keep the pandemic under control, the R-value needs to be kept below 1. The surge in R-value indicates the risk of a second wave in Germany.

                          Canada retail sales dropped -26.4% in April, ex-auto sales dropped -22.0%

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                            ActionForex.com
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                            Canada retail sales dropped -26.4% mom in April to CAD 34.7B, well worse than expectation of -14.0% mom. Ex-auto sales dropped -22.0% mom, versus expectation of -7.3% mom. Retail sales were down in every sub sector in for the first time in 27 years since May 1993. Motor vehicle and parts dealers sub sector dropped -44.3%, contributing the most to the sales declines.

                            Full release here.

                            UK retail sales rose 12% in May, ex-fuel sales rose 10.2%

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                              ActionForex.com
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                              UK retail sales rose 12.0% mom in May while ex-fuel sales rose 10.2% mom. However, over the year, retail sales dropped -13.1% yoy while ex-fuel sales dropped -9.8% yoy.

                              In quantity bought terms, fuel grew 2.7% mom. Non-store retailing grew 3.8%. Non-food stores grew 5.9%. Food stores dropped slightly by -0.2%.

                              Full release here.

                              Australia retail sales rose record 16.3% in May, insufficient to recover April’s record decline

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                                ActionForex.com
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                                Preliminary data showed that Australia retail sales rose 16.3% mom in May. that’s the largest rise on 38 years of record. But that wasn’t enough to recover the record contraction of -17.7% mom in April.

                                ABS said, “there were large rises for clothing, footwear and personal accessory retailing and cafes, restaurants and takeaway food services, as restrictions on trade were lifted during May. Despite the rises, both these industries remain well down on the levels of May 2019.”

                                Full release here.

                                Japan: Economy still in extremely severe situation but had almost stopped worsening

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                                  ActionForex.com
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                                  In the last monthly report of Japan’s Cabinet Office, it’s noted that the economy remained in an “extremely severe situation” but it had “almost stopped worsening”. Private consumption is picking up. However, business investment is in a “weak tone”. Exports are “decreasing rapidly”. Industrial production is “decreasing”. Corporate profits are “decreasing rapidly”. Employment situation is “showing weakness”. Consumer prices are “flat”.

                                  “Concerning short-term prospects, the economy is expected to move toward picking up from an extremely severe situation, supported by the effects of the policies while the socio-economic activities will be resumed gradually with taking measures to prevent the spread of infectious diseases. However, attention should be given to the trend of domestic and overseas infections, and the effects of fluctuations in the financial and capital markets.”

                                  Japan CPI core dropped -0.2% yoy, staying in deflation for second month

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                                    ActionForex.com
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                                    Japan national CPI core (all items less fresh food) was unchanged at -0.2% yoy in May, worse than expectation of an improvement to -0.1% yoy. That’s also the second straight month of negative reading. Nevertheless, CPI core-core (all times less fresh food, energy) rose back to 0.4%, up from 0.2% yoy, which might be a sign of relief. Headline CPI (all items) was unchanged at 0.1% yoy.

                                    In the minutes of April 27 BoJ meeting, one membered warned that “the economy might fall into deflation”, “fiscal and monetary authorities could further cooperate with each other”. Another member said BoJ should “consider what was necessary to avoid deflation”. A member said it was appropriate to “revise the forward guidance” with a view to “not allowing deflation to take hold”.

                                    UK consumer confidence improved, could be that infamous dead cat bounce

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                                      ActionForex.com
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                                      UK Gfk consumer confidence rose 6 pts to -30 in June, hitting the highest level since March. That’s also the biggest improvement in nearly four years. Expectations on general economic situation over the next 12 months improved by 9 pts to -48, but stayed deeply negative.

                                      “We have seen queues as some shoppers return to battered high streets,” said Joe Staton, GfK client strategy director. But “with the labor market set for more job losses, we have to question whether we are seeing early signs of economic recovery or that infamous ‘dead cat bounce.'”

                                      Fed Bullard: Definitely don’t think we’re out of the woods

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                                        ActionForex.com
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                                        St. Louis Fed President James Bullard said yesterday that the he “definitely don’t think we’re out of the woods”, from the coronavirus crisis. The US is still at a high, high risk level here,” he warned, “Any crisis, I think you have to keep in mind that many things can happen – many twists and turns can occur.””If you get massive business failures, you’ll face depression risk or financial crisis risk or both,” Bullard said. “And we want to stay out of those situations,”

                                        Minneapolis Fed President Neel Kashkari said yesterday that “economic recovery is likely to be bumpy and it’s going to be more muted.” “My base-case scenario is that we are going to continue to see peaks, second waves, etcetera, unfortunately, for the rest of the year, until we get to some form of effective therapy or some form of vaccine or very, very widespread testing, and we are not there yet,” he added.

                                        Canada ADP employment rose 208.4k, early signs of a rebound

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                                          ActionForex.com
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                                          Canada ADP private employment rose 208.4k in May. Goods producing industries added 13.3k jobs. Service-providing industries added 195.2k jobs.

                                          “The job market appeared to show early signs of a rebound in May as restrictions eased and many began to return to work,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Industries that led job growth were construction, healthcare and administrative support services while manufacturing and finance continued to show loss as a result of COVID-19.”

                                          Full release here.

                                          Also released, wholesale sales dropped -21.6% mom in April, versus expectation of -10.6% mom. New housing price index rose 0.1% mom in May versus expectation of 0.2% mom.

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