MORNING ROLL CALL
Sterling fails to rise on news of U.K. government/DUP support, yen falls, U.S. equities rise, gold slumps
It’s been a dramatic period for politics in the U.K. since the general election held on June 8th. Only gaining 317 seats left the Tories 9 short of a majority. However, after support from a small Northern Irish party (the DUP) was finally agreed on Monday, the incumbent party (The Conservatives), have now limped over the line to have 325 seats, which technically is 1 short of a majority. But when the maths is done and accounting for another Irish party that doesn’t take it seats and the house speaker and deputies who also don’t vote, theoretically The Conservatives now have a “working majority”.
All things considered the markets haven’t been impressed by the chaos in the UK, with Brexit still a huge political football and issue, as a consequence sterling failed to rally versus its peers (other than versus yen, which slumped versus all its peers on Monday). GBP/USD ended the day at circa 1.2717, just hovering above the daily pivot point. EUR/GBP also ended the day close to the pivot point level, at 0.8790. In terms of economic news, the UK’s BBA revealed that loans to purchase homes in May increased slightly and beat expectations. The UK’s main index, the FTSE 100, closed up 0.31%.
In Europe the main markets rallied; STOXX 50 closing up 0.51%, CAC up 0.56%, and DAX up 0.29%. Germany statistics agency the IFO (The Institute for Economic Research) a Munich-based research institution, published encouraging data regarding Germany’s current situation; all three readings beat expectations, with the business climate reading coming in at 115.1, ahead of the forecast of 114.5. EUR/USD briefly touched R1 after disappointing durable sales data emerged from the USA, but gave up the gains, to end the day flat, resting on the daily pivot point at 1.1178.
The poor durable sales data from the USA for May, coming in at -1.1%, missed the forecast and was part a series of order data that all missed expectations. The Dallas Fed manufacturing activity also missed the economists’ forecast, as did the Chicago Fed national activity index. The DJIA closed up marginally by 0.07% and the SPX up by 0.03%. The NASDAQ closed down 0.29%. WTI (West Texas Intermediate crude) rose 0.8% to $43.48 a barrel, after experiencing five weeks of losses. Gold slumped by circa 1.0%, to $1,244 per ounce.
Economic calendar events for June 27th, all times quoted are London GMT time
10:00, currency impacted GBP. CBI Retailing Reported Sales (JUN). The UK’s economy has endured weak sales data recently, the expectation is for the CBI reading to remain unchanged, at 2 for June.
10:00, currency impacted GBP. Carney Speaks at Financial Stability Report Press conference. With Brexit and a hung parliament, only recently propped up by a small northern Irish party and with inflation creeping up, whilst the UK’s GDP is currently at 0.2% in Q1, there’s a lot of subject matter for the UK’s BoE governor to discuss.
13:00, currency impacted USD. S&P/Case-Shiller Composite-20 (YoY) (APR). This leading house price index is expected to remain at 5.9% growth annually.
14:00, currency impacted USD. Consumer Confidence (JUN). USA consumer confidence is expected to slip marginally to 116, from 117.9 in May.
14:00, currency impacted USD. Conf. Board Present Situation (JUN). The May reading of 140.7, is expected to remain relatively unchanged.
14:00, currency impacted USD. Richmond Fed Manufacturing Index (JUN). The analysts polled by Bloomberg and Reuters, expect this index to rise to 7, from the previous month’s reading of 1.
17:00, currency impacted USD. Fed’s Yellen Speaks on Global Economic Issues in London. Mrs Yellen is welcomed to London to give a wide ranging speech. Although listed as a high impact event, her subject matter is unlikely to ‘spook’ the markets.
