Market movers today
Today, German factory orders and euro retail sales should hopefully show a decent rebound in May. PMIs and the German retail sales at least point in that direction.
ISM non-manufacturing is going to be very interesting, especially after the ISM manufacturing index rose above 50. However, we see an increasing risk that we may see a setback in the gradual recovery in July and August due to the virus outbreaks in large states like California, Texas and Florida, which have led to local lockdowns. We will keep monitoring the virus development closely.
Later this week, we will look out for any new signals on the recovery fund from the Eurogroup meeting on Thursday.
Selected market news
COVID-19 still has a firm grip on several emerging markets. Brazilian service PMIs hit 35.9 in June, an improvement from May but still the fourth straight month of economic contraction. Brazil has 1.5 million COVID-19 cases and Latin America makes up 23% of the global total of people infected. On Friday, global coronavirus cases exceeded 11m.
Seven US states reported record increases in coronavirus cases on Friday and Florida’s most populous county imposed a curfew ahead of the Independence Day weekend. None of it was enough to ruin market sentiment, though, with Asian shares edging higher again this morning. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.05% and Nikkei is trading 0.4% higher.
In the euro area, service PMIs were generally revised higher from earlier flash estimates, on Friday. It is particularly positive that the Spanish PMI has joined the French one in climbing back into expansion territory. Overall, a picture of strengthening domestic demand across the euro area and in the absence of similar virus flare-ups as in the US, European PMIs should continue to edge higher in the coming months. Swedish service PMIs for June rebounded as expected, which leaves composite PMI at 48.7. We still need to see figures above 60 to talk about a true recovery, though.
We also had some good news out of the Nordics on Friday. The Norwegian unemployment rate dropped to 4.8% in June from 6.4% in May, which indicates that economic growth was again well above normal in June, albeit not quite as high as in May. Still, the jobless figures suggest that the economy is recovering in line with our expectations.
Norwegian housing prices continued to surge, up 1.0% m/m in June. Prices are now 1% higher than pre-coronavirus, so lower mortgage rates are counteracting higher unemployment. There is an increasing risk that the housing market could expedite the first rate hike from Norges Bank. We have seen a similar development with a surprisingly strong housing market in Denmark. Here prices have not quite caught up to pre-coronavirus levels yet, though.
