A quiet tight-ranged session was the name of the game in Asia with no data points to influence activity, as the market remains focused on the end-of-the week EU summit.
The only data release was Japan’s service sector corporate prices, which continued to suggest that the BOJ’s inflation rate target is still a way off. Service sector prices increased by a marginal 0.1 percent from a year ago, the second increase in a row, but the increase was slower than April’s 0.2 percent.
Attempting to paint a brighter picture, China’s Commerce Ministry said today that Chinese export growth is expected to improve for the rest of the year and the country will meet its exports and imports growth target of 10% for the year. However, the ministry’s spokesman did not go into further details on how these targets will be achieved. Certainly the May data suggested some kind of rebound, with export growth rebounding to 15.3 percent y/y compared 4.9 percent y/y in April. However, market chatter that recent Chinese data reports have been inaccurate and overstated continues to undermine the validity/impact of any such improvement.
There was a general risk-off mood in markets overnight with AUDUSD testing below parity and EURUSD slipping below the 1.25 mark. There was no particular one event that caused the slide, just a build-up of established reasons to remove risk from the table. Spain formally asked for bank aid amid rumours of further Spanish bank downgrades to come from Moody’s, while the theory that Chinese economic data has been overstated in recent months appears to be gaining more traction (as per a NYT article overnight).
On the data front, the Chicago Fed activity index disappointed with a below-forecast -0.45 print (-0.30 expected, +0.08 last) though this was countered somewhat by better than expected US new home sales (+7.6% m/m) and an improvement in the Dallas Fed activity index to +5.8 from -5.1. Nevertheless, Wall St pondered the European situation ahead of the summit at the end of the week and ended on a weak note. DJIA down 1.09 percent, S&P -1.6 percent and the Nasdaq -1.95 percent.
Data Highlights
US May Chicago Fed Activity Index out at -0.45 vs. -0.30 expected and revised +0.08 prior
US May New Home Sales out at +7.6% m/m vs. 1.0% expected and revised -1.2% prior
US Jun. Dallas Fed Manufacturing Activity Index out at 5.8 vs. -2.0 expected and -5.1 prior
JP May Corp. Service Price Index out at +0.1% y/y vs. 0.3% expected and 0.2% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
SI Industrial Production (0500)
GE GfK Consumer Confidence (0600)
Swiss UBS Consumption Indicator (0600)
Sweden PPI (0730)
UK Public Finances (0830)
UK BOE MPC Members to speak to UK parliament (0900)
US S&P/CaseShiller House Prices (1300)
US Consumer Confidence (1400)
US Richmond Fed Manufacturing Index (1400)
Andrew Robinson,
SAXO BANK