Stocks steady as pubs prepare to reopen

European stocks were steady near the flatline on a quiet Friday session with the US market closed for the Independence Day holiday. Stocks rallied in the prior session after a bumper US jobs report showed 4.8m jobs were created in June.

Despite this, as detailed yesterday, the unemployment rate remains very high at more than 11%, the more up-to-date weekly initial and continuing claims numbers are not improving quickly enough, and the recent spike in cases means several states are re-imposing lockdown restrictions, which will hamper jobs growth in July.

Risk assets gained more support as the Chinese services PMI rose to a 10-year high at 58.4 – the usual caveats about diffusion indices apply, as to the usual caveats about any data out of China, but it’s solidly encouraging for markets.  Australian retail sales bounced back almost 17%. The number of cases in the US continue to surge – more than 55k in a single day the latest total, with the governor of Texas now mandating the wearing of facemasks.

Major indices continue to track around the middle of the June range, though thanks to a decent run this week are now moving towards the upper end of the range having tapped the lower end last week. The S&P 500 cleared the 61.8% retracement yesterday but closed well off its highs, while the Dow is struggling to hold the 50% level.

In Europe the FTSE 100 is holding above the 50% level, while the DAX is facing resistance today at the 78.6% level. After a strong week and with the US shut, it might be a quiet session today. Scratch that – with pubs about to reopen and with every trader planning their weekend engagements, it will be a very quiet one in London.

UK government eases quarantine rules for travellers

Anyone arriving in England from a number of countries including Spain, France, Germany and Italy won’t need to self-isolate from July 10th, whilst the government is also easing international travel restrictions. A full list of countries that people can arrive from without self-quarantining will be published today.

Relaxing the draconian quarantine rules and allowing more ‘non-essential’ travel should come as a shot in the arm for many beaten up travel & leisure stocks, but there’s a long way to go to restore confidence and get people travelling as much as they did last year. It will take years to get air passenger numbers back to 2019 levels.

Pub and restaurant stocks have taken a beating during the pandemic, but investors may be able to raise a glass come Saturday as the various inns and hostelries reopen because share prices have recovered remarkably well. Marston’s has risen threefold from its March low, while JD Wetherspoon and Mitchells & Butlers have both more than doubled in that time. Mine’s a quadruple whisky.

Oil (WTI-Aug) drifted higher to the top of the Jun 8th peak around $40.70 where it’s pulled back to the $40 round number. The move higher has been steadily losing momentum and failure at the $40.70 area suggests perhaps the progression of the double top into a head and shoulders reversal pattern.

GBPUSD hits resistance, EURUSD bullish flag nears completion

In FX, the pound’s bounce ran out of steam and the euro has come back to its anchor. GBPUSD rallied strongly out of the channel but hit resistance at 1.2520 and has consolidated in a very narrow range around 1.2470. As markets opened in Europe the pair slipped this range and started a move lower – it could retrace towards the round number support at 1.24.

Meanwhile EURUSD has come back to 1.1230, the anchor point for the whole of June. This is the 23.6% retracement of the 2014-2016 top-to-bottom rout. As the bullish flag pattern nears completion, we should expect a breakout soon – the swing highs around 1.14-1.15 offering the main resistance.

Volgende week: Notulen FOMC en NFP domineren economische agenda

Hoewel de aandacht aan het begin van de week gericht zal zijn op de Chinese PMI’s, zal de VS de economische agenda de eerste dagen domineren. Zo staan onder meer de ISM Manufacturing PMI, de notulen van de FOMS en cijfers over de salarisstroken van niet-agrarische bedrijven op de planning.

Chinese PMI’s 

Het is weer tijd voor de Chinese PMI’s: aangezien het de eerste PMI-gegevens van de maand zijn, zullen de markten de cijfers met interesse volgen om te zien hoe het economisch herstel verloopt.

De Chinese wederopstanding kan in gevaar zijn gekomen door nieuwe uitbraken van COVID-19, maar de PMI’s blijven desondanks een soort blauwdruk voor hoe het andere landen zal vergaan nu de ogen wereldwijd voorzichtig weer op economisch herstel worden gericht.

Inflatie Duitsland, eurozone 

De consumentenprijzen zijn in mei in de hele eurozone met -0,1% gedaald, hoewel dit nauwelijks een verrassing mag zijn. De inflatiecijfers zouden deze week verdere dalingen kunnen laten zien, wat te verwachten valt gezien de ineenstorting van de vraag, de stijgende werkloosheid en de enorme bedragen die door de Europese Centrale Bank in de markt worden gepompt. Vorige week voorspelde Fitch dat de kerninflatie in de eurozone de komende 18 maanden zal vertragen en eind 2021 onder 0,5% zal uitkomen.

Een aanhoudende periode van deflatie zal de economie geen goed doen, maar op korte termijn vallen deze cijfers binnen de verwachtingen. De markteffecten van de CPI-gegevens zijn de laatste tijd dan ook minder sterk dan verwacht.

Detailhandelsverkoop Duitsland 

In de VS en het Verenigd Koninkrijk is de consumentenactiviteit sterk toegenomen sinds de lockdowns zijn versoepeld. Kan Duitsland dit voorbeeld volgen? De omzet van de Amerikaanse detailhandel steeg in mei met 17,7% en versloeg daarmee de marktverwachtingen van 8%, terwijl de omzet in het Verenigd Koninkrijk met 12% steeg ten opzichte van de prognose van 5,7%.

De Duitse detailhandelsverkopen daalden in april met -5,3%, al was dit veel beter dan de daling van -12% die analisten verwachtten. Een stijging van de online verkopen hielp het tempo van de ineenstorting te verzachten. De detailhandelsverkoop zal naar verwachting in mei met 2,5% zijn gestegen omdat fysieke winkels weer open zijn gegaan, maar net als in de VS en het VK kunnen we misschien wel een veel grotere stijging gaan zien.

Amerikaanse productiecijfers 

De Amerikaanse industrie heeft nog altijd moeite om te herstellen van de schokken van de pandemie. De ISM PMI steeg in mei, nadat in april de laagste cijfers in meer dan een decennium werden genoteerd. Desondanks werden de marktverwachtingen met een half procentpunt gemist. Voor juni wordt een scherpere opleving voorspeld, maar de PMI die vorige week door IHS Markit werd gepubliceerd stelde teleur omdat er nog altijd sprake was van krimp – zelfs nu de eurozone en het VK weer lichte groei laten zien.

Notulen FOMC-vergadering 

Het FOMC gaf de markten een flinke tik na de laatste vergadering, waarbij er slechter dan verwachte economische voorspellingen werden vrijgegeven die de hoop dat de VS een V-vormig herstel zou laten zien in de grond boorde. De beleidsmakers merkten op dat de rentetarieven tot minstens 2022 in de buurt van nul zouden blijven en dat het tempo van het aankoopprogramma de komende maanden zou stijgen.

De notulen van de vergadering zullen meer details geven, waarbij de markten met name geïnteresseerd zullen zijn in eventuele verwijzingen naar controle van de rentecurve (YCC). Waarschijnlijk zal dit het volgende beleidsinstrument zijn dat de Fed zal gebruiken om de rentetarieven laat te houden. Het tijdstip hiervan is nog onzeker, maar mogelijk zullen de notulen hier meer duidelijkheid over bieden.

Salarisstroken niet-agrarische bedrijven VS 

Vrijdag is het vakantie in de VS vanwege de viering van de Amerikaanse onafhankelijkheid, aangezien 4 juli dit jaar op een zaterdag valt. Dit betekent dat de cijfers over salarisstroken van niet-agrarische bedrijven voor juni al op donderdag zullen verschijnen.

De cijfers waren afgelopen maand verbijsterend: de werkgelegenheid nam toe met 2,5 miljoen banen, terwijl er een daling van -8 miljoen was voorspeld. Het kan erop duiden dat de Amerikaanse economie zich wellicht sneller herstelt dan eerder werd gedacht.

De laatste tijd zijn de wekelijkse werkloosheidscijfers echter teleurstellend. Hoewel er nog altijd sprake van dalingen is, neemt het tempo van de dalingen wel af. Wijst dit op meer permanente schaarste op de arbeidsmarkt en zo ja, moeten we er dan van uitgaan dat het NFP zulke sterke cijfers kan blijven leveren?

Hoogtepunten op XRay deze week

Bekijk de volledige agenda van financiële marktanalyses en trainingen.

07.15 UTC Daily European Morning Call
From 15.30 UTC 30-Jun Weekly Gold, Silver, and Oil Forecasts
17.00 UTC 01-Jul Blonde Markets
19.00 UTC 01-Jul Introduction to Currency Trading: Is it For Me?
12.25 UTC 02-Jul

US Nonfarm Payrolls: Live Market Analysis

 

Belangrijke economische agendapunten

Kijk uit naar de belangrijkste economische agendapunten deze week:

12.00 UTC 29-Jun German Preliminary Inflation
23.30 UTC 29-Jun Japan Unemployment / Industrial Production
After-Market 29-Jun Micron Technology – Q3 2020
01.00 UTC 30-Jun China Manufacturing, Non-Manufacturing PMIs
06.00 UTC 30-Jun UK Finalised Quarterly GDP
30-Jun easyJet – Q2 2020
09.00 UTC 30-Jun Eurozone Flash CPI
12.30 UTC 30-Jun Canada Monthly GDP
14.00 UTC 30-Jun US CB Consumer Confidence
After-Market 30-Jun FedEx Corp – Q4 2020
01.45 UTC 01-Jul Caixin Manufacturing PMI
06.00 UTC 01-Jul Germany Retail Sales
Pre-Market 01-Jul General Mills – Q4 2020
Pre-Market 01-Jul Constellation Brands – Q1 2021
12.15 UTC 01-Jul US ADP Nonfarm Payrolls Report
14.00 UTC 01-Jul ISM Manufacturing PMI
14.30 UTC 01-Jul US EIA Crude Oil Inventories
18.00 UTC 01-Jul FOMC Meeting Minutes
01.30 UTC 02-Jul Australia Trade Balance
12.30 UTC 02-Jul US Nonfarm Payrolls (Friday is US Bank Holiday)
01.30 UTC 03-Jul Australia Retail Sales
All Day 03-Jul US Bank Holiday – Markets Closed

Week Ahead: Central banks on tap, NFP faces massive Covid hit

The economic calendar is packed full of top-tier releases this week, starting with manufacturing PMIs from China and the US. The RBA, BOC, and ECB all announce their latest policy decisions – and, in the case of the ECB, potentially ruffle a few more feathers in Germany. And, of course, we have the latest US nonfarm payrolls report to round off the week. 

China Caixin Manufacturing PMI – does the headline reflect the story?

China’s Caixin Manufacturing PMI slipped back into negative territory in April, missing market expectations of another print just above the 50 mark. A look at the sub-indexes painted a rather more messy picture than the headline number. 

New orders slumped for a third month and export orders dropped the most since December 2008. Order backlogs rose, while supplier delivery times improved and input costs fell on the collapsing oil prices, pushing the headline number higher. 

May’s reading is expected to hold just below 50 – but once again, the vastly different performance of those sub-indexes is likely where the true story will lie. It looks like Chinese industry has a lot further to go yet before growth returns properly. 

US ISM PMIs to stabilise

US manufacturing collapsed last month, with the index diving to 41.5 from 49.1 in March. Despite being the worst drop since April 2009, the reading was still better than market expectations of 36.9, although this was because of a surge in supplier delivery times. While usually a sign of a strong economy, deliveries were held up by supply shortages due to the Covid-19 pandemic. 

Things are expected to have stabilised in May, but getting back into growth territory (a reading above 50) could take a while; Oxford Economics doesn’t expect output losses to be recouped until 2021. 

The decline in non-manufacturing is expected to moderate slightly, with the index forecast to tick higher to 44.2 from 41.8. 

RBA, BOC, ECB interest rate decisions

The Reserve Bank of Australia is the first of three central banks to hold monetary policy meetings this week. Rates are already at a record low 0.25%, which is effectively zero, and the board has no appetite for taking them negative. 

ASX 30 Day Interbank Cash Rate Futures for June show markets are pricing in nearly 50-50 odds of a cut to zero, but many analysts think the RBA has done all it will do, and that rates will remain unchanged for two or three years. 

This week’s Bank of Canada rate announcement coincides with the start of Tiff Macklem’s tenure as governor. Senior deputy governor Carolyn Wilkins said recently that the BOC could look at adjusting its asset purchasing programme with the aim of stimulating the economy, rather than just enhancing the liquidity of financial markets, although policymakers may not be ready for such a move just yet.  

The European Central Bank is expected to leave rates unchanged, although the pandemic emergency purchase programme (PEPP) is likely to be extended and expanded. Christine Lagarde will face questions about Germany’s ruling on the ECB’s quantitative easing programme during the post-meeting presser. Read our full preview on the ECB monetary policy meeting here.

Last week Isabel Schnabel, a member of the ECB board who joined in January, shrugged off the ruling, suggesting it was for the Bundesbank and Germany’s government to resolve the issue. 

“I’m sure there is going to be communication between the Bundesbank and the German parliament and the German government, and one will have to find a solution,” Schnabel told the Financial Times last week. “If the ECB can be constructive in supporting that process, we will of course do so.” 

Australia quarterly GDP: the end of three decades of growth

First-quarter economic data is expected to show that the Australian economy contracted -0.8% on the quarter and -1.2% on the year. Australia is expected to fall into recession for the first time in three decades this year, with GDP dropping -10%. 

Last week, Prime Minister Scott Morrison outlined the government’s plans to help revive the economy, but he also warned that any recovery was likely to take between three and five years. 

Eurozone retail sales and Germany factory orders

The collapse in Eurozone retail sales is expected to have worsened at the start of Q2. Analysts are forecasting a month-on-month decline of -18.6% during April, after a -11.2% drop in March. Year-on-year sales are predicted to have cratered -24%. 

Germany’s April factory orders data will likely reveal some similarly painful numbers. Orders fell -15.6% in March and economists are expecting a -21.3% drop when the April data is published on Friday.  

US NFP – jobless rate to hit 20%?

After tanking -20.5 million last month in the worst drop on record, this week’s US nonfarm payrolls report is expected to show another decline in employment of up to -5 million. The jobless rate, which leapt to nearly 15% in April, is likely to print just shy of 20%. Economists expect unemployment will peak around 25%, although Goldman Sachs analysts have suggested it could climb higher. 

Join Markets.com chief market analyst Neil Wilson for live analysis of the market reaction to the US nonfarm payrolls report with our free webinar.

Heads-Up on Earnings 

The following companies are set to publish their quarterly earnings reports this week:

After-Market 02-Jun Zoom Video Communications – Q1 2021
Pre-Market 03-Jun Campbell Soup – Q3 2020
After-Market 04-Jun Broadcom – Q2 2020
After-Market 04-Jun Slack – Q1 2021
05-Jun Toshiba Corp – Q4 2019

Highlights on XRay this Week 

Read the full schedule of financial market analysis and training.

07.15 UTC Daily European Morning Call
From 15.30 UTC 02-June Gold, Silver, and Oil Weekly Forecasts
12.50 UTC 03-June Asset of the Day: Indices Insights
19.30 UTC 04-June Daily FX Recap and Looking Forward
10.00 UTC 05-June Supply & Demand – Approach to Trading

Key Economic Events

Watch out for the biggest events on the economic calendar this week:

01.45 UTC 01-Jun China Caixin Manufacturing PMI
14.00 UTC 01-Jun US ISM Manufacturing PMI
01.30 UTC 02-Jun Australia Company Operating Profits (Q/Q)
05.30 UTC 02-Jun RBA Interest Rate Decision
07.15 – 08.00 UTC 02-Jun Eurozone Member State Finalised Manufacturing PMIs
08.30 UTC 02-Jun UK Finalised Manufacturing PMI
01.30 UTC 03-Jun Australia GDP (Q/Q)
01.45 UTC 03-Jun China Caixin Services PMI
07.15 – 08.00 UTC 03-Jun Eurozone Member State Finalised Services PMIs
08.30 UTC 03-Jun UK Finalised Services PMI
14.00 UTC 03-Jun Bank of Canada Interest Rate Decision
14.00 UTC 03-Jun US ISM Non-Manufacturing PMI
14.30 UTC 03-Jun US EIA Crude Oil Inventories
01.30 UTC 04-Jun Australia Retail Sales / Trade Balance
09.00 UTC 04-Jun Eurozone Retail Sales
11.45 UTC 04-Jun ECB Interest Rate Decision
12.30 UTC 04-Jun ECB Press Conference
14.30 UTC 04-Jun US EIA Natural Gas Storage
06.00 UTC 05-Jun Germany Factory Orders
12.30 UTC 05-Jun US Nonfarm Payrolls

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