Arne Lohmann Rasmussen
Danske Bank A/S
Market movers today
-
It is time for flash euro area PMI for June. It will be interesting to see if there is any effect of the recent deterioration on the trade front. The data is typically collected from the 12-21 in the month. Manufacturing PMI has fallen for five consecutive months and after peaking at 60.6 in December 2017, it fell to 55.5 in May 2018. We expect a further fall to 54.8 in June. Service PMI has seen a similar development, declining from 58.0 in January to 53.8 in May. We expect service PMI to fall to 53.7 in June from 53.8 in May.
-
Markit PMI for the US is also due to be released. The manufacturing index has moved up since mid-2017. However, we look for some moderation as hard data on exports, investment orders and consumption has been soft. We expect a decline from 56.4 in May to 56.0 in June.
Selected market news
Focus returned to Italy yesterday as the new government appointed two very eurosceptic lawmakers to influential parliamentary committees that deal with economic policy. Alberto Bagnai, who in two books has advocated for a dismantling of the monetary union, was appointed to head the financial committee and Claudio Borghi was appointed to head the budget committee in the lower house. The latter has been arguing strongly for so-called mini-BOTs, which could be seen as a parallel currency. 2Y and 10Y BTP yields widened 30bp and 22bp, respectively, to Germany.
The pressure on Italy might very well continue today after the IMF s Christine Lagarde said last night that financial markets could react violently to any fiscal easing or reversal of reforms. An IMF team is due to visit Italy in two weeks to deliver the scheduled assessment of the Italian economy.
While things are heating up in Italy once again, a deal between Greece and its euro area creditors was reached overnight. Maturities on the EUR96.6bn Greece received in its second bailout will be pushed out for 10 years and Greece will receive a grace period also of 10 years in respect of coupons and interest rates. The deal should clear the way for Greece to exit its bail-out programme in August.
Equity markets have been under pressure both in Europe and in the US. The combination of the Italian political crisis flaring up and a profit warning from Daimler weighed on sentiment in Europe. Especially the latter fuelled fears that the global trade war is now having a real impact on growth and profits. The negative sentiment was carried over to the US and the major indices all ended the day lower. Nikkei is also in the red this morning.
OPEC is set to meet today to review current production cuts that are due to expire by the end of the year. Tonight, a preliminary deal to hike oil production by 1mb/d was reached though the actual production rise will probably be somewhat lower around 600,000 barrels a day. But it might be difficult to reach a formal agreement today, as Iran that walked out of the meeting overnight. Iran does not want a hike in production. Without Iran and possibly Venezuela, a formal communique might not be send out. Note that non-OPEC member Russia is part of the current deal. The disagreement among OPEC members has pushed oil up by a dollar overnight.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.