Market movers today
An eventful week lies ahead, culminating in the introduction of US and Chinese tariffs and the US jobs report on Friday.
In the US, ISM manufacturing for June is being released today. Indicators for general activity and new orders fell this month, supporting our view that the US manufacturing indices should move lower in the next 3-6M. Based on the regional PMIs and Markit PMI manufacturing, we expect ISM for June to remain unchanged.
Today, we will also get final manufacturing PMI readings for the euro area, including first readings for Spain and Italy.
In the Scandies, PMI manufacturing figures are also due out for June in Sweden and Norway (see next page). The main event this week will be the Riksbank meeting tomorrow. See Riksbank Preview – Staying put, possibly soft verbal forward guidance , 28 June.
Selected market news
Stock markets are slightly lower in Asia as we enter a week of anxiety with a potential escalation of the US-China trade conflict, when tariffs on goods worth USD34bn are implemented on Friday in both China and the US. The EU warned US President Trump over the weekend that tariffs on European cars could prompt retaliation on up to USD300bn worth of US goods, see FT . Oil prices fell on a tweet by Trump saying he had asked Saudi Arabia to increase oil production ‘maybe up to 2,000.000 barrels…’ and that ‘he has agreed’.
North Korea is believed to have increased its production of fuel for nuclear weapons according to US Intelligence agencies, see NBC News . The White House has not yet responded to the reports but it could trigger a return of the US-North Korean conflict.
In Germany, the CDU-CSU dispute over immigration is still unresolved after separate meetings for the two parties over the weekend stretched into late night, see Bloomberg . The CDU and CSU are expected to hold joint talks on Monday to reach a compromise. Polls suggest Merkel has increased backing for her stand-off with the CSU. See also Flash Comment – Germany’s political future at stake after EU Summit, 29 June 2018.
In China, PMIs were slightly weaker but overall still holding up quite well in contrast with other Chinese data. Caixin PMI manufacturing for June fell to 51.0 (consensus 51.1, previously 51.1) while the official PMI manufacturing fell to 51.5 (consensus 51.6, previously 51.9).
The CNY continues to face depreciation pressure, pushing towards the weakest level in 1½ years. We continue to see downside pressure on the CNY as the trade war with the US is set to escalate further this week with the implementation of tariffs on goods worth USD34bn on Friday.
In Mexico, voters elected Andrés Manuel López Obrador as their new president, the first left-wing president in decades. It could strain Mexican relations with Trump further, see Politico.
