Will History show that Q2 2009 was the turning point for the global economy?

Stock markets and risk appetite seem to want to push higher as month-, quarter and half-year end nears...

MAJOR HEADLINES – PREVIOUS SESSION

US May Chicago National Activity Index out at -2.30 vs. revised -2.27 prior

UK Jun GFK Consumer Confidence out at -25, as expected, vs. -27 prior

JP Nomura/JMMA Manufacturing PMI out at 48.2 vs. 46.6 prior

JP May Unemployment out at 5.2%, as expected, vs. 5.0% prior

JP May Household Spending out at +0.3% y/y vs. -1.5% expected and -1.3% prior

AU May HIA New Home Sales out at -5.7% vs. +0.5% prior

JP May Overtime earnings out at -17.6% y/y vs. -18.8% prior

NZ NBNZ Jun Business Confidence out at +5.5 vs. +1.9 prior

THEMES TO WATCH – UPCOMING SESSION

Swiss UBS Consumption Indicator (0600)

UK Nationwide House Price Index (0600)

Denmark Prelim Q1 GDP (0730)

Sweden Retail Sales (0730) GE Unemployment (0755)

EU M3 Money Supply (0800)

NO Retail Sales (0800)

UK Final Q1 GDP (0830)

UK Q1 C/a Balance (0830)

EU Flash CPI (0900)

UK MPC Member Tucker speaks (0930)

CA Apr GDP (1230)

CA Raw Material/Industrial Product Prices (1230)

US S&P/Case-Shiller House Price Index (1300)

US Chicago PMI (1345)

US Consumer Confidence (1400)

US Fed’s Bullard speaks (1600)

US Fed’s Hoening speaks (2010)

US Fed’s Yellen speaks (0100 Jul 1)

Market Commentary

Will history show that Q2 2009 was the turning point for the global economy? Financial markets look to be still pinning massive hopes on this outcome with the closing stages of the second quarter seeing an extension of the recent sentiment of increasing risk appetite, with JPY crosses still in the ascendency overnight and “risk currencies” back in vogue. The positive mood was helped along by comments from Fed’s Rosengren indicating that positive US growth would return in H2, while PBOC’s Zhou was also singing from the same hymn sheet, calling for a better performance from China in H2.

Oil prices saw a sharp jump higher overnight, posting 6.4% gains from the lows yesterday amid reports that rebels had staged attacks against oil installations in Nigeria, despite earlier reports of a ceasefire/amnesty. In addition, the report that China was to increase its stockpiles of oil in coming years finally had an impact on prices. The gains continued into the Asian session with prices rising over 2% to an 8-month high of $73.38. The rebound back through $70 p/b gave energy counters a lift on the stock markets, but in FX-land the usual beneficiary, ie CAD, seemed to miss the boat, possibly amid hesitancy ahead of tonight’s Canadian GDP data for April.

Today’s data from Japan continued to highlight the global phenomenon of a worsening jobs situation. Unemployment rose to 5.2% in May from 5.0% in April (but was thankfully in line with expectations) while the job offers/seekers ratio fell to a record low of 0.44 from 0.46 the previous month. Month-, quarter- and half-year end book squaring/positioning had a relatively muted effect on activity in the Asian session today. Despite a strong performance by the Nikkei , touching the magical 10,000 mark briefly(window-dressing demand?), and early chatter of strong USDJPY demand at the Tokyo fix, the pair struggled to make much headway past 96.0 and JPY crosses remained range-bound. Japanese exporters were reportedly sitting on top of the market with steady flows.

Markets have a tad more data to digest today with UK Nationwide House prices and final Q1 GDP and current account data on tap. Elsewhere in Europe we see Denmark’s Q1 GDP, Sweden retail sales and German unemployment. Canada GDP for April will be a major focus for North American markets , along with price indices for May, while US Case-Shiller House Prices, Chicago PMI and consumer confidence round of the day’s session later. Fed’s Bullard, Hoening and Yellen all scheduled to speak today.

Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.