MORNING ROLL CALL
Oil slumps, USA equities remain flat after Fed meeting minutes reveal no change, currencies mostly flat on the day
The Fed’s June meeting minutes, published on the evening on Wednesday, contained no surprises or changes concerning the Fed’s prevailing hawkish stance. Analysts still remain convinced that a third interest rate rise will occur before December 2017. In the Fed’s notes, there also appeared to be a commitment to begin to unwind the Fed’s $4.5 trillion balance sheet, built up through the various asset purchase schemes/quantitative easing programmes, which were been launched since 2008, finally terminated in 2016. How the Fed divests itself of the assets/gilts it’s bought, without ‘hurting’ the equity markets, represents quite a challenge.
In other USA related economic calendar news, May factory orders fell to a low not seen since November 2016, missing forecast by coming in at -0.8%, whilst durable goods orders for May also came in down -0.8%.
The DJIA closed flat, SPX up 0.15% and the Nasdaq up 0.67% as tech stocks bounced back. USD/JPY closed up circa 0.3% after at one stage, during the London trading session, reaching R2. Gold rose by circa 0.3% at $1226 per ounce, after breaching S2 and a session low of $1217 per ounce. WTI crashed by circa 3.7% on Wednesday, to approx. $45.17 per barrel, dramatically bringing to a halt the unbroken eight day rally. With the 200 dSMA sighted at $49.48, many analysts were previously targeting the oil rally to reach this level, as a first test. The Dollar Spot Index strengthened by circa 0.1%.
Looking towards Europe, the UK’s Markit PMIs for June continued to disappoint and miss forecasts. The services PMI, in a country whose economy is 80% driven by and reliant on services, came in at 53.4, down from 53.8 in May. New car registrations in the UK have continued their recent collapse, whilst production has fallen back by -0.5% in the last quarter (Q2), to plumb a level not seen since before the banking crisis in 2007. GBP/USD closed the day out up circa 0.1%, at 1.2927. Sterling was flat versus the majority of its peers on Wednesday. The UK’s FTSE closed up 0.14%.
For the Eurozone there were several PMIs published; France, Germany and overall Eurozone services and composites came in ahead of forecasts, the exception was Italy, who’s two PMIs both missed forecasts and fell marginally. Retail sales for the single currency bloc, came in ahead of forecast, at 2.6% YoY and 0.4% growth for the month of May. EUR/USD weakened by circa 0.1% to $1.1348, after breaching S2 mid morning in the London session, reaching a session low of 1.1312. The euro closed the day (on average) close to flat, or near the daily pivot point, versus the majority of its peers. STOXX 50 closed down 0.03%, DAX up 0.13%, CAC up 0.10%.
Economic calendar events for July 6th, all times quoted are London GMT time
06:00, currency impacted EUR. German Factory Orders n.s.a. (YoY) (MAY). Orders are forecast to have grown in May to 4.5%, from 3.5% in April.
07:15, currency impacted CHF. Consumer Price Index (YoY) (JUN). Key inflation is forecast to have fallen to a reading 0.3%, from 0.5% in May.
07:15, currency impacted CHF. CPI EU harmonised (YoY) (JUN). The forecast is for no change from the previous reading of 0.4%.
07:30, currency impacted EUR. Markit Germany Construction PMI (JUN). The reading is expected to remain unchanged at 55.3.
08:10, currency impacted EUR. Markit Germany Retail PMI (JUN). The reading is expected to come in similar to May’s reading of 55.
08:10, currency impacted EUR. Markit Eurozone Retail PMI (JUN). The retail PMI is expected to come in unchanged at 52.
11:00, currency impacted USD MBA Mortgage Applications (JUN 30). The expectation is for an improvement on last week’s reading of -6.2%.
11:30, currency impacted EUR. ECB account of the monetary policy meeting. Analysts will monitor this publication for clues regarding forward guidance, in relation to interest rates and asset purchasing being tapered.
12:15, currency impacted USD. ADP Employment Change (JUN). Job gains are predicted to come in at 180k, far short of the 253k created in May.
12:30, currency impacted USD. Initial Jobless Claims (JUL 01). Claims are predicted to come in at 243k, just below the 244k of last week.
12:30, currency impacted USD. Trade Balance (MAY). The trade balance deficit is forecast to improve to -$46.3b, from -$47.6b in April.
14:00, currency impacted USD ISM Services/Non-Manufacturing Composite (JUN). The reading is expected to come in at 56.5, a slight fall from 56.9 in May.
15:00, currency impacted USD. DOE U.S. Crude Oil Inventories (JUN 30). With crude oil price collapsing by circa 3.7% on Wednesday, this reading will be monitored carefully, for any change from last week’s reading of 118k.
