Market movers today
A busy day in the US calendar: ahead of the non-farm report tomorrow, we get ADP employment figures today, which should show a healthy pace of private-sector hiring just short of 200,000. Jobless claims will also be scrutinised closely by markets for any hints that employers are losing confidence in the economic outlook. We expect ISM non-manufacturing to ease slightly to 58.0 in June as a tightening labour market and heightened uncertainty from trade tariffs are taking its toll.
Today also brings FOMC meeting minutes. We do not expect much information from this, but it could be interesting if the Fed had discussions on when the balance sheet reduction should end as, at this point, it is still open-ended.
German factory orders for May are due out. After the surprisingly weak April print, it will be interesting to see whether we will see some recovery and to what degree rising global trade tensions continue to weigh on capital goods orders.
German Chancellor Angela Merkel will hold talks with UK PM Theresa May on how to move forward with the EU-Brexit negotiations. Merkel will also meet Hungarian PM Viktor Orban to discuss EU matters and, not least, migration policy.
In Scandinavia, Danish forced sales and bankruptcy figures and Swedish production data are in focus
Selected market news
Last night, there was an ECB story that some governing council members disagreed with the pricing of a first 10bp hike in December 2019 hit the wires. This fuelled a repricing of the September 2019 hike to 80% (from previously just off 70%) and lifted the euro. We continue to see the first 20bp hike in December 2019 and in light of this, even after yesterday s correction, market pricing remains slightly on the soft side. Watch out for the series of ECB speakers today for any further hints on ‘preferred market pricing’.
In a move seemingly trying to calm tensions, the Chinese Commerce Ministry stressed that China would not ‘fire the first shot’, and hence will not enforce its previously-announced retaliation tariffs ahead of the US ones taking effect on Friday. US tariffs on USD34bn worth of Chinese imports are set to come into effect at the end of the week; a further USD16bn will see levies at a later stage. Markets are now braced for the effect of the actual implementation of tariffs and possible next steps from either side.
Separately, US president Trump called upon OPEC Arabia in a tweet to increase production fast to dampen the upward pressure on prices. Saudi Arabia has said it is planning to ramp up to make up for lost Iranian output but markets are alert to this, implying that spare capacity in the oil market is being eroded. Crude oil prices remain off the USD80/bbl level but are still hovering close to four-year highs. Otherwise, it was a relatively quiet session with the US out for Independence Day yesterday: US equity futures trading was mixed but Asia struck a negative tone with Nikkei down close to 1%.
