Market movers today
We are starting the week with a host of PMI manufacturing releases, which will give an indication of where the global manufacturing cycle is heading amid the uncertainty prompted by the trade stand-off between the US and China. Markets will also keep an eye on the aftermath of the trade ceasefire over the weekend.
In Europe, there will be ongoing discussions on who will head key European institutions after difficulties agreeing on the candidates.
In the UK , the PMI manufacturing index for June is set to be released today. The index is likely to fall further, as it remains elevated compared with the equivalent euro area index and stockpiling ahead of Brexit.
In the US , we start the week with ISM manufacturing for June. We expect ISM to decrease and come in at 50.8, down from 52.2. In our view, the US manufacturing sector is not immune to the global slowdown but we think the index will remain just above the important 50 threshold. That said, risk is skewed to the downside.
Sweden’s industrial PMI has done well compared with the German PMI. However, there is still a risk that the Swedish June PMI turns down, as Swedish new orders and German industrial PMI have been negative over the past months. Likewise, we see a risk of a correction in manufacturing production on the back of weak German production.
In Norway, we expect the PMI to rise moderately to 54.5 in June, given that strong growth in oil-related industries has meant industrial activity has held up well despite the slowdown in global manufacturing. Industrial production increased by 2.2% in April after a relatively weak Q1 and is thus back in line with the underlying trend seen since mid-2017. Given the strong rise in April, we estimate a slight correction for May, with a decrease of 0.4% m/m.
Selected market news
The key event during the weekend was the truce between the US and China. The US and China are set to restart the trade negotiations. Furthermore, the restrictions on Huawei were eased a bit, as US companies are allowed to sell some products to Huawei. However, it is still very uncertain how long this truce is going to last and thus this should only bring a short-term relief to the markets. The JPY has weakened modestly, while commodity currencies have strengthened. 10Y JGBs have risen with some 2bp and most Asian equities are up 0.5%-2% this morning.
In Japan the Tankan survey showed that the sentiment among Japanese manufacturers fell to the lowest level in three years. The survey was conducted before the G20 meeting this weekend. However, domestic-focused companies were more upbeat on the economy.
