Tag Archives: United States

article 3 months old

Are Things Turning Sour For The US Economy?

By Kathleen Brooks, Research Director UK EMEA, FOREX.com

In a holiday-shortened week, the US economy generated quite a few headlines to chew over during the 4th July celebrations. The first is the state of the US labour market. Although the economy created more than 200k jobs for the second consecutive month, the fourth +200k reading this year, there were a couple of things that may sound a word of warning.

Watch for downward revisions:

Firstly, the two month payroll net revision saw payrolls get trimmed by 60k, suggesting that the economy is not as good as it looked earlier in Q2. Second, June tends to be the month when payrolls are more likely to be downwardly revised, so there is a chance that the jobs rate was weaker than the headline figure suggested. Third, is the much talked about drop in wages, and last is the fall in the participation rate.

The unemployment rate illusion

This final point is worth considering. Although the US unemployment rate fell 0.2% to 5.3%, its lowest level for 7 years, the labour force participation rate fell at a faster rate of 0.3% last month to 62.6%, the lowest level since 1977. This means that the number of working age Americans not in the labour force is close to a 40-year high. Sure, some of this can be explained by baby boomers retiring earlier and an older population, but some of it is down to disheartened Americans dropping out of the workforce entirely and no longer even looking for a job.

When the participation rate falls at a faster rate than unemployment it is worth worrying about. This means that the unemployment rate could be artificially reduced – as people drop out of the search for work there are fewer people technically unemployed, making the official rate look better yet some of those people don't actually have jobs. Maybe the US labour market is not as robust as some had expected.

Where's wage growth?

One sign that the labour market may not be as strong as the headline figure suggests is wage data. The last time that the unemployment rate was this low wage growth was in the 7-10% per annum range. During this economic cycle, wages are fairly stagnant – only 2% per year – which could limit growth in a consumer-led economy like the US.

This is one reason why rating agency Fitch said earlier on Thursday that the US economy is unlikely to sustain 3% GDP growth in 2016-17. Thus, the US economy may need to get used to a prolonged period of mediocre growth… 

Overall, these holes in the labour force are important in the long-term; one of the Fed's two mandates is to maintain full employment. If the unemployment rate is not telling the whole truth then the Fed may disregard it from their discussion on interest rates, which could ultimately delay their plans to raise interest rates.

Could dollar weakness be here to stay?

The first thing is that rates could stay lower for longer, the second is that the much-anticipated dollar rally from last year could take longer to reappear and may be more shallow than initially thought. A weaker dollar could also have ramifications for stocks and commodity prices as the buck can have an inverse correlation to both of these asset classes. However, a weaker dollar may not be universally good for stock markets as a weaker US economic outlook could also keep the lid on US stocks and global equities with an export focus.

Takeaway:

  •          The US unemployment rate may be overstating US labour market strength.
  •          The falling participation rate is concerning, and could be artificially lowering the unemployment rate.
  •          Rating agency Fitch cut its US growth forecast for this year and does not think that the economy can grow at greater than 3% next year.
  •          A weaker than expected labour market outlook could keep the Fed on hold for longer than currently expected.
  •          This could also limit dollar strength, with big ramifications for global financial markets.

 


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article 3 months old

The Monday Report

By Greg Peel

Reality

We can only assume that rallies on Bridge Street on Wednesday and Thursday last week, to take us back to the same 5600 level of a week ago, lent themselves to some level of expectation Greece would vote “yes” in its referendum, as the pools seemed to indicate, thus making a deal between Greece and its creditors finally achievable, and that Beijing would do whatever it had to to stem the tide of its crashing stock market.

For there really is no other explanation, and by Friday uncertainty was again prevalent. The polls in Greece had shifted to become inconclusive, and the Chinese stock market continued to fall, down another 5.8% on Friday to take its fall from the peak to almost 30%. The ASX200 fell again towards the critical 5500 mark.

Of little consequence on Friday was the potentially good news that Australia’s service sector PMI crept back into expansion territory in June with a 1.6 point rise to 51.2. I say “potentially” given Australia’s PMI results seem to be inexplicably volatile compared to the rest of the world, although not so much in the significantly larger service sector, more so in the small and ever diminishing manufacturing sector. Perhaps size is the simple reason, but given Australia’s economy is now very much service-driven, the PMI should at least be heartening.

Not so heartening was May retail sales, which at 0.3% growth missed forecasts of 0.5%.

And not so heartening was HSBC’s read on China’s service sector PMI, which fell to 51.8 in June from 53.5 in May.

No

Economic data are nevertheless but a sideshow this morning given the Greeks have voted with a resounding “oxi”. Uncertainty is now king.

Tsipras arguably whipped Greece into a frenzy of hatred towards the evil empire of Germany, the “terrorists” at the ECB and the general attack on Greek sovereignty with his desperate pleas on national television leading into Sunday. He also promised that were the “no” vote to prevail, he would jump straight on a plane to Brussels and have a new and less austere deal negotiated within 48 hours. The banks, he said, would then reopen on Tuesday.

All pure politics, of course, but unless Tsipras actually is a few olives short of a tapenade even he must appreciate that what he has said is very much detached from reality.

The eurozone and ECB are now hastily convening meetings to decide just what to do now, and presumably conceding to the will of the Greek people is not one of the options. If the Greeks are assuming the banks will open on Tuesday they could be in for a rude shock. It’s difficult to see why the ECB would extend any further emergency credit to Greek banks, whether or not Tsipras had called ECB officials “terrorists”.

It is difficult to see any path from here that does not involve Greece’s exit from the eurozone, despite there being no clause in the eurozone constitution outlining such a process. It is not clear whether the citizens of other peripheral nations will see Greece as the poster child and decide to follow suit. Presumably when Greece falls into abject poverty immediately following the reintroduction of the drachma, they may think twice.

Although the reintroduction of the drachma, and its significant devaluation to the euro, may just be what Greece needs to see its economy restored in two or three years from now.

One can speculate till the goats come home, but quite simply, nobody knows what happens now. Uncertainty is the enemy of markets, so we can only presume it could get ugly today and tonight as risk is quickly taken off the table.

In theory a Grexit is positive for the euro, given the remaining 18 member economies are stronger without the drag of Greece. But on immediate uncertainty, the euro has tumbled this morning in early trade. As a possible precursor of things to come, we note the Aussie was down 1.5% on Friday to US$0.7517 on Saturday morning and as I write is trading at US$0.7477.

China

But then there’s China.

There are still those who suggest that given the Chinese stock market has doubled in a year, even a 30% correction is not too concerning. But when 20% quickly became 30% last week, Beijing stopped being alert and started to be alarmed. The interest rate and RRR cuts it enacted over the prior weekend had had absolutely no impact.

Hence Beijing has now pulled out the kitchen sink. Hastily convened meetings this weekend have resulted in the government planning to provide direct assistance to investors looking to access margin lending to buy Chinese shares. IPOs have been banned for the time being, such that investors can only buy existing listed stocks. And the PBoC will look to establish what is known in the US as the Plunge Protection Team – a Fed special ops unit that works under a cloak of secrecy and steps into to buy US stocks at times of free-fall, using Fed funds, in order to stabilise the stock market.

Will these new measures have an impact? Well once more, nobody knows. We’ll only know later today when the Shanghai Exchange opens.

So we have what may well prove to be a Chinese stock market’s saving grace in action this morning, with the dark cloud of Greek uncertainty hanging low. There’s a bit of a gap from the world’s second biggest economy down to an economy half the size of that of NSW, when it comes to global financial markets, and thus in reality the Australian market should be more concerned today about what happens in Shanghai than what might happen in Brussels.

It’s all very well to say that, however.

The SPI Overnight closed down 7 points on Saturday morning, but that means nothing this morning.

Wall Street was closed on Friday night. European stock markets closed slightly weaker, but would have been squaring up ahead of the vote.

Commodity Crunch

With US markets closed, volumes were thinner than usual on the London Metals Exchange on Friday night. Fears about what might happen in Greece were sufficient to encourage selling, resulting in half to two percent falls for all base metals bar zinc, which fell only slightly.

Iron ore fell another US$1.70, or 3%, to US$54.10/t. The iron ore price fell almost 11% over the week.

For the oil markets, Greece has not been as much of a focus as global supply-demand issues, thus lower oil prices on Friday night were more about a US rig count which has started rising again. West Texas crude fell US$1.01 to US$55.50/bbl and Brent fell US$1.52 to US$60.33/bbl.

Gold was a tad higher on Friday night at US$1168.30/oz. One might assume the “no” vote would encourage gold buying this week but you just never know with the shiny metal these days. The US dollar index was slightly weaker on Saturday morning at 95.95 but that will be different this morning once trading ramps up.

The sovereign bonds of the likes of Germany, the US and UK will likely be sought after in the wake of the “no” vote while the US dollar, pound and yen will see safe haven buying. Risk assets will be sold.

The Week Ahead

There’s no use speculating. We’ll just have to wait and see.

The Fed will release the minutes of its last meeting on Wednesday which at least for a moment will refocus markets on Fed rate rise timing. The US will see its services sector PMI release today, trade balance on Tuesday, chain store sales on Thursday and wholesale trade on Friday.

Beijing will release China’s inflation numbers for June on Thursday.

The RBA will hold a policy meeting tomorrow. While no rate cut is anticipated, the very weak trade numbers prevailing in April and May will have given the board pause for thought.

Today sees the ANZ job ads series and the TD Securities inflation gauge. Tomorrow it’s the construction PMI and on Thursday the June jobs numbers are due. Friday sees housing finance – the other topic du jour.

On the local stock front, the first of the resource sector June quarter production reports will begin to trickle out later in the week.

Strap in.

Rudi will appear on Sky Business on Wednesday at 5.30pm and on Thursday at noon.
 

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article 3 months old

Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

Yes or no? Presumably we’ll know sometime on Monday or Tuesday. Then what happens? No idea.

But life will go on.

For Australia, next week will be otherwise dominated by the RBA policy meeting on Tuesday and the roll-of-the-dice jobs numbers on Thursday. While it is not likely the RBA will cut its rate this month, it may provide hints as to whether it might be leaning in that direction following some disturbing trade numbers..

We’ll also see ANZ’s job ad series on Monday.

Central bank focus will also prevail in the US next week with the release of the minutes of the June Fed meeting. In this case, hints will be sought with regard the timing of the first Fed rate rise.

US data releases next week include the services PMI, trade balance, chain store sales and wholesale trade.

Germany will release industrial production data next week which will remind us that there actually is more going on in Europe than just the obvious. The Bank of England will hold a policy meeting but with UK data disappointing of late, there are no expectations of any policy changes.

China will release inflation data on Thursday.

In the local stock market, the end of next week ushers in the first of the June quarter resource sector production reports. The trickle will turn to a flood in ensuing weeks.
 

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article 3 months old

The Overnight Report: Holding Pattern

By Greg Peel

The Dow closed down 27 points or 0.2% while the S&P was flat at 2076 and the Nasdaq lost 0.1%.

What Crisis?

The ASX200 closed last Thursday at 5600. The ASX200 closed yesterday at 5600. One would be forgiven for thinking there was not much going on in the world at present.

On Monday the ASX200 closed at 5422, following the worst session on Bridge Street in three years. That 2.2% drubbing, and in general the 3.2% fall from last Thursday to Monday, was all about joining in the global risk adjustment for a possible Greek exit, and all about a Chinese market plunging to a 20% correction. A Grexit is no less possible now than it was a week ago, and the Shanghai index has done nothing but fall ever since.

Yesterday revealed Australia’s trade deficit retreated to $2.75bn in May, following April’s blow-away record of $4.14bn. While that looks like good news, the fact is it’s still a significant deficit for an export economy, and it missed forecasts of $2.2bn.

Exports rose a net 1%, including a 6% rise for iron ore and 9% for coal. While there was some price improvement from April to May, increased values reflect increased volumes, and prices have since begun to fall back again. A 4% drop in imports included a 16% drop in capital goods, reflecting rapidly diminishing resource sector construction, often erroneously referred to in the press as “the end of the mining boom”.

Despite the improvement from April to May, these are not numbers that would warm the cockles of a central banker’s heart. It is notable that while the ASX200 rallied from the open yesterday, with a little help from a positive Wall Street, the rally initially stalled. Only after the release of the trade balance numbers did the index really take off.

This might suggest the market was yesterday driven by a Wall Street-style “bad news is good news” expectation that the RBA will have to cut again. Certainly, the banks led the charge. Utilities also had a good session. But so did materials and energy, despite lower commodity prices, and despite the fact that while these sectors do contain some reasonable dividend payers, they're not really “yield” sectors.

The underperformer on the day was the telco. Furthermore, the most volatile market of all when it comes to RBA speculation is the currency market, and the Aussie barely moved.

We might perhaps give a nod to a sudden burst of M&A activity, which started with Buffet and IAG, has seen rumours around Woolies, saw Asciano leap on Wednesday, and saw something funny going on yesterday in BlueScope.

Or we might simply assume yesterday saw a “Buy Australia” order or two from offshore and the momentum fed on itself. We’re certainly not going to look a gift horse rally in the mouth, but you have to admit, things are all just a little bit crazy at present.

On the subject of China, having failed to stem the tide of falling stock prices with last weekend’s rate cut, Beijing has taken to more drastic measures. Yesterday the government introduced rules to allow Chinese investors to put up their houses as collateral for leveraged share market investment.

What could possibly go wrong?

Greece

I have declared this morning’s Report a Greece-free zone. You all know the story.

Wall Street

The US added 223,000 jobs in June, short of expectations. The unemployment rate fell to 5.3% from 5.5% to mark its lowest level in seven years, but only because the participation rate fell back again. Some 432,000 left the workforce in June, mostly reflecting school leavers who stepped out into the world and promptly crawled back under the doona.

Wage growth was flat in June, for a 2% annual rate.

It’s another one of those neither here, neither there non-farm payrolls results. In isolation it would not drive any expectations of a Fed champing at the bit to make its move. But we know that the Fed is champing at the bit to make its move – at least many in the FOMC are – and thirteen months of 200k plus job additions out of fifteen would seem reason enough to finally shift off zero, if just to test the waters.

The result is probably not enough to stave off a September rate rise.

There was certainly no emphatic response in US markets. The dollar index dropped, but only by 0.2% to 96.10. The US ten-year yield dropped, but only by 2 basis points to 2.39%. The stock indices actually opened higher before drifting lower to midday and drifting back up again to a modest closing loss.

One has to take into consideration (1), most of Wall Street would have cleared off by lunchtime to get to their Fourth of July holiday destinations and (2), no one would want to go home with a big position in either direction ahead of Sunday’s Greek referendum.

Ironed Out

The iron ore price has fallen US$3.10 or over 5%, to US$55.80/t. The fall has been blamed on the latest Chinese steel production data, which showed a big drop.

And for the first time since December, weekly US rig count data showed an increase last week rather than a decrease. The irony here is that many a rig has been switched back on thanks to the oil price’s bounce back up to 60, but higher production could well see oil back in the 40s again.

The market’s response was not too dramatic, with West Texas falling US37c to US$56.51/bbl and Brent falling US18c to US$61.85/bbl.

An 1% rally for nickel and a 1% drop for zinc were the biggest moves in an otherwise mixed and uneventful session on the LME.

Gold continues to drift away, falling another US$2.70 to US$1165.60/oz.

The Aussie is 0.2% lower at US$0.7634.

Today

The SPI Overnight closed down 23 points or 0.4%.

It’s service sector PMI day today across the globe, with the exception of the US. HSBC will wave the flag for China.

Locally, we also see May retail sales numbers.

Wall Street is closed tonight.

I assume that when I sit down to write The Monday Report on Monday morning, they’ll still be counting in Greece. Unless the result is already decisive one way or the other.
 

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article 3 months old

The Overnight Report: Descent Into Farce

By Greg Peel

The Dow closed up 138 points or 0.8% while the S&P gained 0.7% to 2077 and the Nasdaq added 0.5%.

Freight Train

The first local session of FY16 began with a flurry to the upside and was boosted by a takeover bid for rail haulage company Asciano. That stock jumped 17% and helped float all boast in the transport logistics space, pushing the industrials sector index up 4% to lead the day.

If fund managers were opening fresh accounts for the new year, growth was on the menu and solid gains were seen for healthcare, energy and consumer discretionary while staples, the telco and utilities – the yielders – were left behind. The banks split the difference. Materials was the only sector to fall, following a drop below 60 for the iron ore price.

Nor was the materials sector provided much support from China’s PMI releases on the day. Beijing’s manufacturing PMI was flat in June at an almost stalled 50.2, although the service sector was a little more positive with a rise to 53.8 from 53.2 in May. HSBC’s take on the matter was less encouraging, with the independent manufacturing PMI rising to 49.4 from 49.2 but remaining in contraction.

Australia’s manufacturing PMI means little these days for two reasons – there’s not much of a manufacturing sector left in this country and the monthly numbers are so volatile as to render this a meaningless series. There was excitement last month when the local PMI jumped into expansion at 52.4 but June saw a plunge to 44.2. No other developed country in the world sees PMI swings of such magnitude – not even close – surely bringing into question the survey process.

The good news for the Australian economy, on the other hand, was a 2.4% jump in building approvals in May for an annual rate of 17.6%, when economists had forecast a rise of 1.0%. It’s all about apartment blocks, nonetheless, as the Singaporisation of Sydney and other capitals continues a-pace. Apartment approvals surged 15.1% in the month alone while detached housing approvals fell 8.5%.

Never mind, foreigner buyers aren’t expected to value “the great Aussie dream”.

Dwelling prices jumped 2.1% in June for an annual rate of 9.8%, with most of the growth in Sydney. Approvals are a long-lead indicator and the faster they grow, the faster housing supply can catch up with demand. This should, in theory, weigh on prices down the track. But interest rates and foreign demand are the other driving factors.

The 56 point rally for the ASX200 yesterday took us back past the 5500 mark, having looked over the precipice at 5422 only on Monday. There is little for Australia to be concerned about vis a vis Greece, unless the whole financial world implodes, but no one expects that to happen. It is interesting, however, that we rallied yesterday despite another 5% drop in the Shanghai index to mark 22% for the ongoing correction.

Farcical

Last night the German and French stock indices each rallied 2% on the news that Alexis Tsipras had drafted a new proposal for Greece’s creditors to consider which included many concessions to the creditors’ earlier demands. This is it, the European markets assumed, Tsipras has buckled. There was even talk of the referendum being called off.

But when the finance ministers, who continue to be holed up in Brussels, took a look at the new proposal, they could not find anything different. Their frustration then turned to anger when Tsipras appeared on state television to again implore the Greek people to vote “no” on Sunday, suggesting a “no” vote would mean the creditors would be forced to bend to Athens’ will.

Incensed, the ministers arranged a quick phone hook-up and decided they would all pack up and go home for the weekend. They’ll wait until to Monday for the outcome of the referendum.

If this is Tsipras’ idea of political brinkmanship, then it would be more at home on Looney Tunes than in the halls of sovereign diplomacy. It’s now down to the Greek people, and the most recent polls have clouded the issue. Earlier in the week “yes” seemed way ahead, but now “no” is rapidly making a comeback.

We’ll all have to wait until Monday.

Wall Street

European stock markets had closed by the time the finance ministers were booking their flights. The positive mood had flowed over to New York early in the session, sending the Dow up 182 points from the open. On realising it was all just a farce, Wall Street drifted back, but domestic issues provided enough support to ensure a solid start to the second half nonetheless.

The ADP private sector report showed 237,000  new jobs being added in June, beating 225,000 forecasts. There is now talk of tonight’s non-farm payrolls number potentially surprising to the upside, maybe up to 290,000.

New vehicle sales posted another very strong month with Fiat-Chrysler leading the pack by a margin. It’s all about American car buyers not holding back. You bought a what?

A 0.8% increase in US construction spending in May took it to the highest level since October 2008, suggesting that after all this time construction spending has finally returned to pre-recession levels.

The only downer was the US manufacturing PMI, which fell to 53.6 from 54.0 to mark its lowest pace of growth since October 2013.

But overall the data were to the positive side, and the interesting thing here is Wall Street finished the day in the green despite the implications for Fed timing. But if early buying represented relief over Greece, tonight’s session (ahead of a long weekend and Greek referendum) might be interesting.

Currency and bond markets were more inclined to take Fed policy into account, with the dollar index rising 0.7% to 96.27 and the US ten-year bond yield rising 8 basis points to 2.42%.

Commodities

Similarly, the LME closed on a high note on the assumption Tsipras had conceded to doing a deal. Having been beaten down on Greek woes this past couple of weeks, short-covering rallies in base metals saw lead jump 1%, aluminium and zinc 2.5% and tin 4.5%. Copper moved a little higher but nickel fell slightly.

Iron ore fell another US40c to US$58.90/t.

It’s funny how the iron ore price and West Texas crude price continue to mimic each other, having fallen to 45 and bounced back to 60 pretty much in lockstep, despite having very little connection. Last night West Texas fell US$2.18 to US$56.88/bbl on higher than expected weekly US inventories, which underscores the realisation that despite a big drop in rig count, US oil production is actually on the increase again.

And the Saudis are pumping more than ever. Brent fell US$1.22 to US$62.03/bbl.

Gold fell US$4.30 to US$1168.30/oz on the stronger greenback.

The Aussie is down 0.7% to US$0.7648 on the stronger greenback.

Today

After yesterday’s strong opening gambit, the SPI Overnight closed down 3 points.

Australia’s May trade balance numbers are out today, following on from April’s shocker of a record deficit.

Tonight it's jobs numbers in the US, ahead of the Fourth of July long weekend. There will no doubt be much activity on the floor of the NYSE in the morning, and tumbleweeds in the afternoon.

Presumably we can stop talking about Greece now until Monday.
 

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article 3 months old

Second Half 2015 Outlook: Global And Local

By Greg Peel

Global Double Trouble

Russell Investments echoes the views of several market analysts in assuming global financial markets are currently at risk of volatility from two macro uncertainties – the timing of the first Fed rate hike and whatever becomes of Greece – but that any pullback in markets will provide investment opportunities.

On the Greek front, Standard & Poor's now puts the odds of a Greek exit of the eurozone at 50-50. One might be inclined to dismiss such a view as a disingenuous coin toss, but the truth is S&P had a Grexit at lower odds prior to last weekend.

The pervading view amongst global analysts looking on is that Greece will more likely remain in euro, some way, somehow. But there are plenty who are beginning to assume a Grexit is inevitable. The bottom line, nonetheless, is simply that no one knows. Were Sunday's Greek referendum to return a "yes" vote, implying acceptance of a bailout package's requisite reforms, but implicit of a vote to stay in the euro, then one assumes a deal could indeed be reached with a new Greek negotiating team. A "no" vote would simply be inconclusive, but would probably lift S&P's odds of a Grexit to beyond even money.

Russell Investments was backing Greece to remain in the eurozone when it published a third quarter outlook last week. The analysts also expect the Fed will move in September, but acknowledge a deal of uncertainty surrounding both calls. Uncertainty is the enemy of markets, and thus a source of volatility.

From a global economic perspective, Russell is still assuming the September quarter will see moderate growth for the US, the recovery in Europe becoming more entrenched, and improvement from Japan. Emerging market economies will nevertheless remain under pressure, and Russell sees the Chinese slowdown as having further to run.

While 2.5-3.0% growth is expected for the US in the second half of 2015, supported by robust single-digit corporate earnings growth, the expensive US stock market and low bond yields mean investors need to be cautious heading into the Fed rate rise. Greece may upset Europe's recovery path, but Russell would look to any pullback as a buying opportunity.

In the Asian region, Russell notes the Chinese, Australian and New Zealand economies continue to slow, but that policy accommodation makes deep downturns unlikely. Japan remains the pick of the region.

Deutsche Bank, too, is expecting the Fed to move in September. Deutsche's economists see the global economy posting slightly lower growth in 2015 than the already below-trend pace of 2014, before rising slightly to above trend in 2016 at 3.8%. The US appears to have overcome its weak first quarter and Deutsche believes growth in most major regions will pick up significantly, with the exception of Asia ex-Japan.

The analysts suggest the risk of another 50-100 basis point jump in longer term US bond yields once the Fed has made its first move is manageable, given implicit forward momentum in the US economy and resultant support of risk assets. However the analysts won't rule out a sudden panic jump in rates due to current low liquidity in bond markets, and a subsequent spill-over into risk asset volatility. This would only occur if the Fed were forced to keep raising faster than it would like due to inflationary pressures, and is unlikely in Deutsche's view.

China tends to be relatively less sensitive to developments in US financial markets and here Deutsche sees monetary and fiscal easing, and emerging signs of stability in China's property market, as supporting modest growth in the second half.

Were the referendum in Greece to prove the catalyst for heightened uncertainty and nervousness, Citi would expect a rush into US, German and UK bonds and strength for the US dollar, pound and probably yen. Gold might find support and equities could pull back further.  But a survey conducted by Citi has found most equity investors are not that worried about Greece and the potential for global disruption.

Most would see further pullbacks as a buying opportunity.

Australia

The rally experienced on the ASX in the March quarter thanks to a falling Aussie and the global demand for yield now seems but a distant memory, admits Morgan Stanley. Since the broker asked the question back in April whether the old "Sell in May" adage might play out in 2015, the ASX200 has fallen over 8%.

"Sell in May" might be dismissed by some as mere folklore but Morgan Stanley's analysis back to 1937 for the All Ordinaries does confirm June as the second worst month on average after September, with December being the best (thanks Santa).

Morgan Stanley believes Australia's macro outlook remains challenging as the domestic economy struggles with its transition due to lower commodity prices and labour cost pressure. The growth outlook for developed markets in general has been improving but a patient Fed has kept the Aussie dollar higher than warranted, constraining domestic growth and earnings. The analysts expect Greece and a slowing China will weigh on consumer and business sentiment in the short term, supporting Morgan Stanley's below-consensus forecasts for growth and employment.

The ASX200 is currently trading on a one-year forward PE of 15.2x compared to the long run average of 14.1x, suggesting the index offers 7% further downside to around 5000. Earnings upgrades are required to support such a PE and they rely heavily on cyclical improvement, hence Morgan Stanley believes the Australian market remains more vulnerable than those of developed market counterparts.

Morgan Stanley would not be surprised if 5000 is tested, before a recovery towards the broker's 5650 target for mid-2016.

On the subject of corporate earnings, Macquarie notes the last few weeks (known as the "confession session" ahead of year-end books close) have seen a number of high profile downgrades, with the likes of Woolworths ((WOW)), Seek ((SEK)), Flight Centre ((FLT)), Qube Holdings ((QUB)), Nine Entertainment ((NEC)) and Virtus Health ((VRT)) all cutting FY15 and/or FY16 guidance. The broker believes, nonetheless, that while conditions remain challenging generally these downgrades are more company specific and/or structural than implicit of macro issues.

The broker also notes forecast earnings growth for the market ex resources remains relatively unchanged, with 6.5% expected for FY15 (FY14 saw 5.2%) and 7.8% expected for FY16. After the February result season, these numbers were 6.3% and 8.0%.

The ratio of earnings upgrades to downgrades was showing positive momentum in April-May and has pulled back somewhat in June, but the ratio remains above the lows of twelve months ago, Macquarie points out. The broker has identified a group of stocks for which revision ratios have been positive yet stock prices have underperformed. The group includes Oil Search ((OSH)), Mirvac Group ((MGR)), CSR ((CSR)), Fairfax Media ((FXJ)), Navitas ((NVT)), Fletcher Building ((FBU)) and Transfield Services ((TSE)).

Conversely, the group that has seen negative revisions yet share price outperformance includes ALS ((ALQ)), Tabcorp ((TAH)), Orica ((ORI)), Austal ((ASB)), Ainsworth Gaming ((AGI)), Steadfast ((SDF)), Mantra Group ((MTR)) and SAI Global ((SAI)).

UBS notes the sell-off on the ASX in the June quarter was led by the banks and consumer staples, while rallies for consumer discretionary and REITs provided some offset. The ASX200 PE has fallen back year to date, but this principally due to resources.

UBS expects global interest rates to push higher in the second half of 2015 but does not expect a panic sell-off in bonds. Global and Australian stock markets should be able to cope with a moderate rise in yields over the next six to twelve months and the Aussie still has downside potential, UBS believes, which should offer earnings support for corporates.

UBS' ASX200 target for end-2015 has been pulled back to 5800 from 5900 due to risks surrounding bank capital requirements and risk for the iron ore price. The broker still sees mid-single digit earnings growth in FY16, in line with consensus forecasts.

UBS is underweight mining, REITs, telcos, consumer staples and general insurance, and overweight US dollar earners, housing construction plays and energy. The broker is neutral on the banks.

UBS' favoured stocks include Asciano ((AIO)), Challenger ((CGF)), CSL ((CSL)), Harvey Norman ((HVN)), Incitec Pivot ((IPL)), Origin Energy ((ORG)), Qantas ((QAN)), QBE Insurance ((QBE)) and Sonic Health Care ((SHL)).

Housing

Credit Suisse agrees with UBS on the housing construction front. The broker notes Australian house prices rose at a 7% annual pace in the March quarter, down from 11% in the December quarter but still strong given a weakening economic backdrop and anaemic income growth.

While tight supply and low mortgage rates have been obvious drivers, so too has demand from Chinese buyers, Credit Suisse notes. In FY14, Chinese buying grew by 60% on FY13, the broker estimates, and Chinese demand represents 15% of national housing supply. City preference is split from Sydney (23%) to less than 6% in Perth, Adelaide and Hobart.

Sydney has not been signalled out for Chinese attention globally, with Melbourne, Auckland, Hong Kong, Singapore, London, San Francisco and Vancouver all proving popular, making these cities some of the most expensive in the world.

Australia sits at the doorstop of the greatest wealth creation in history, Credit Suisse notes, which is why Chinese demand for Aussie housing is unlikely to abate. The broker suggests a number of local companies should continue to benefit from this longer term theme, including developers, building material producers and property websites, and has now added Boral ((BLD)) to its preferred portfolio.

Commodities

When will it be time to risk investment in commodities once more? Deutsche Bank believes lows in commodity prices should be hit during the second half before tightening fundamentals and higher prices begin to emerge in some markets in 2016.

Chinese monetary and fiscal measures are set to improve the outlook for industrial metals going forward, Deutsche suggests. The broker has a preference for nickel, zinc and palladium. Producer cuts will nevertheless be required to reduce oversupply of iron ore and coal.

The outlook for gold is not so rosy, in the face of expected Fed rate increases and subsequent rises in US yields and the greenback. There is no evidence investors are positioned in gold in case of a negative outcome for Greece, the broker notes.

Nor does Deutsche expect the sharp decline in US shale drilling activity to promote any tightening in energy markets. Not only are productivity increases offsetting the impact, production looks to be accelerating into the second half. Assuming OPEC continues to dismiss the notion of production cuts, the global oil balance should tilt to oversupply in 2016, the broker suggests.
 

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article 3 months old

The Overnight Report: Stabilising

By Greg Peel

The Dow closed up 23 points or 0.1% while the S&P gained 0.3% to 2063 and the Nasdaq rose 0.6%.

Rollercoaster

Yesterday’s volatile trade on Bridge Street was basically a tale of two cities – Athens and Shanghai – or for all you Leaguies, a game played in two halves.

On Monday night stock markets in Europe had tanked on the news from Greece and Wall Street followed suit with a 2% fall. The ASX200 promptly fell 32 points from the open and it looked like we might be in for another shocker, but for the fact we’d already had our 2% fall in Monday’s session.

That fall arguably led itself more to China, Australia’s most critical trading partner, than to Greece, less than 1% of trade, or even Europe in general. So ahead of the Shanghai Exchange opening late morning Sydney time, why were we selling again?

Within half an hour the cavalry had arrived and the ASX200 began rapidly recovering, all the way to a 20 point gain by mid-morning. Then the Shanghai market opened, and promptly fell 5%. The ASX200 turned and fell to be down around 10 points. Shanghai then began to recover, and thus so did we. As momentum built to the upside in China, the ASX200 closed up 36 points, and closed the financial year, and everyone hit the showers.

Shanghai continued to rise to a 5.5% closing gain. This is the sort of result the world might have expected on Monday after Beijing’s rate cut, but it took an extra day for the Chinese market to bottom out below the 20% correction mark.

On the ASX, sector gains were relatively consistent at 0.5-1.5% other than tiny info tech and that enigma utilities, which closed flat. Given all the ex-divs on Friday, there’s probably not a great incentive to rush into utilities right now with a Fed rate rise looming.

No one is paying a lot of attention to domestic issues at present but yesterday’s private sector credit numbers for May indicated investor loan growth for housing may have now peaked, thanks to APRA’s clampdown. Overall credit rose 0.5% in May to be up 6.2% year on year. Investor loans grew 0.8% for 10.4% annual growth, but APRA restrictions in theory cap this growth rate at 10%, suggesting further growth is limited.

The good news is business loans grew 0.4% for 5.2% annual, continuing a gradually rising trend.

Underscoring a potential peak in the investor housing bubble are yesterday’s new home sale numbers for May, which showed an overall fall of 2.3% after four months of gains. However apartment sales continue to fire along, and that’s where the investors are mostly playing.

Greece

As I write, Greece’s bailout package has expired and the IMF repayment has not been made. Last night the Greek drama took a somewhat theatrical twist.

Ahead of expiry, Tsipras took what was basically his same proposed package back to the eurozone finance ministers and requested Greece be granted a two-year bailout extension. The ministers had already rejected the same package last week, so why on earth did Tsipras think the creditors would suddenly change their minds?

Because the creditors desperately want Greece to remain in the eurozone, as is evident by various leaders’ indirect appeals to the Greek people. If they’re so desperate, thought Tsipras, then at five minutes to midnight they must be ready to buckle.

They weren’t, of course. In the lead-up to Sunday’s referendum, we have the bizarre situation of Tsipras pleading with his people to vote “no” (we will not accept the creditors’ conditions) because then the creditors will simply have to buckle to keep Greece in the eurozone. Meanwhile, European leaders are pleading for a “yes” vote so that Greece can stay in the eurozone.

As it stands so far, “yes” is still winning in the polls, and last night’s “yes” vote rally in Athens saw greater numbers than Monday night’s “no” rally. While there will be more proposals and finance minister meetings between now and Sunday, Angela Merkel has said that no decisions will be made until after the referendum.

Presumably she’s banking on a “yes” result.

Wall Street

Having been thumped on Monday night, European stock markets traded lower again last night. Wall Street opened higher, over 100 points up for the Dow, but succumbed to the European influence to be flat by midday. Europe then closed and the Dow rallied back 100 points again, only to fade away to the final bell.

Being the end of quarter, and end of half year, late trading cannot be taken as particularly indicative. Tonight will tell more of a tale.

Both the Dow and S&P500 closed the first quarter in the red after nine consecutive quarters in the green. The broad market S&P – the “real” Wall Street index – closed up 0.2% for the first half of 2015. The Dow is down 1.1%.

Greece, China and of course, Puerto Rico still drove uncertainty last night but there is still a domestic story playing out underneath. The Case-Shiller 20-city house price index showed another gain in April, but the pace of growth continues to slow. The Chicago PMI improved, but remains under 50. On the other hand, the Conference Board’s monthly consumer confidence index jumped in June and beat forecasts.

At some point the global dust will settle and we’ll return to the more familiar but no less tiresome task of trying to second-guess the Fed.

To that end, the US dollar index jumped 0.7% to 95.56 last night as the euro traded lower, while the US ten-year bond yield remained steady at 2.34%.

Commodities

The jump in the greenback did not help commodity prices in this uncertain time. On the LME, aluminium, copper, lead and zinc all traded 0.5-1.5% lower while tin fell 3%. Having crashed 5% on Monday night, nickel recovered 2%.

Iron ore fell US$1.20 to US$59.30/t.

The oils may have come under pressure as well, except that nuclear negotiations between Iran and the West could not reach a conclusion and thus the deadline has been extended. No Iranian oil to flow just yet. West Texas rose US83c to US$59.06/bbl and Brent rose US$1.21 to US$63.25/bbl.

Gold fell back US$7.50 to US$1172.60 but despite the rally in the greenback, the Aussie dollar is up 0.3% at US$0.7705.

Today

The SPI Overnight closed down 31 points or 0.6%. Not sure what the futures market is anticipating there.

It’s the first of the month, so that means global manufacturing PMI releases today, including for Australia and China, both official and HSBC. Australia will also see house price, building approval and inflation numbers.

Tonight in the US the private sector jobs numbers for June are released, ahead of tomorrow night’s non-farm payroll data.

Happy New Year.

Rudi will appear twice on Sky Business today (and none tomorrow). First on Market Moves, 5.30-6pm, then later he will host Your Money, Your Call Equities.

Tomorrow he will present at Invast offices in Sydney.


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article 3 months old

The Overnight Report: Global Turmoil

By Greg Peel

The Dow fell 350 points or 2.0% while the S&P lost 2.1% to 2057 and the Nasdaq dropped 2.4%.

East Meets West

Last Friday the Shanghai stock market fell 7% to take its correction to close to 20%. On Sunday Beijing responded by cutting its interest rate for the fourth time since November. When Shanghai re-opened yesterday it did trade higher, very briefly. By early afternoon it was down 8%.

If there were no issue with Greece at present, one would not necessarily be surprised by the plunge on Bridge Street yesterday. If rapid-response monetary stimulus from Beijing is not enough to halt a Chinese stock market crash, what else can be done?

Beijing has been tacitly supportive of the runaway Chinese market, despite clamping down on margin lending loopholes and widening the opportunity for short-selling in order to prevent too much of a bubble. The Chinese have seen their property investments sour, so they turned to the stock market. Now that, too, looks like ending badly.

The good news is that after the Australian market closed, the Shanghai market staged a late rally to close down only 3.8%. That 3.8% still takes the correction over the 20% mark, but perhaps there is a ray of hope. Ignoring “bear market” suggestions, a market that doubles in less than a year can handle a 20% fall and still be well ahead. As long as the selling starts to abate.

The Australian economy needs a wealthy China, and a confident China. Yesterday the local market sold off across the board, with only a 3% fall for consumer discretionary standing out amongst what were otherwise fairly consistent sector falls of around 2%.

Of course, as traders remained glued to the Shanghai Exchange screen yesterday there was a big elephant standing behind them, called Greece. What will happen if Greece defaults to the IMF? No one knows – no common currency country has ever defaulted before. What happens if Greece exits the euro? No one knows.

Good news is good for stock markets and bad news is bad. But worst of all is uncertainty.

Greece

If the Greek economy fell in the forest, would anybody hear? No. There are twenty cities in China bigger, than Greece, which is why Wall Street, too, was less worried about Greece last night than it was about China. Greece is a minnow swimming in the same sea as a German whale in the eurozone waters. But the implication of a Grexit is that the eurozone experiment has failed, and that’s not what the German government, nor most of its fellow eurozone governments, wants to see. If Greece goes, who might be next?

The Greek crisis is thus more political than financial, but it still provides for uncertainty. It is notable that the euro was stronger overnight against the greenback, because a eurozone without Greece and its endless requirement for bail-out funds is a stronger economy.

The Greek banks are now closed for a week ahead of Sunday’s referendum. A “yes” vote means conceding to the creditors, copping the austerity, and staying in the euro. A “no” vote means telling the creditors to bugger off.

Alexis Tsipras was last night appealing to the Greek people to vote “no”, as he believes this is the best way to force the creditors into having to concede to a deal. European leaders were appealing to the people to vote “yes”, implying that’s the only way to stay in the euro. Recent polls suggest “yes” voters outnumber “no” voters two to one. If this is Sunday’s result, then the negotiations will start again. Presumably after Tsipras offers his resignation.

And then the whole sorry saga can drag on and on into eternity.

Puerto Rico

Bad luck, they say, comes in threes. With China and Greece causing a deal of concern on Wall Street last night, it was really not a good time for Puerto Rico, a member of the US commonwealth, to declare it was close to defaulting on its debt.

That’s its sovereign debt – government bonds – not an IMF obligation a la Greece.

Cleary Puerto Rico is also a minnow in the scheme of things, but that did not stop relevant US banks and bond insurance stocks from being carted last night, just to add to the maelstrom.

Wall Street is now down for the year, and unless tonight conjures up the mother of all window-dressing rallies for the end of quarter, it will be the first quarter in nine in which Wall Street has ended lower.

There was also much attention paid to the bond market, where the US ten-year yield fell 15 basis points to 2.33%. Such a rally in bonds lends itself mostly to Greece, with a bit of Puerto Rico thrown in. The German ten-year fell 12 basis points to 0.80% while the French dropped 5bps to 1.24%. The yields of Portugal, Spain and Italy all increased by 20-30bps, to illustrate contagion fear. However such moves are small compared to what was going on back in 2011-12 when last Greece was threatening to bring down the world.

The VIX volatility index on the S&P500 jumped a whopping 34% last night, just to underscore the uncertainty factor, but that only takes it to just under 19. It’s been wallowing around at a very complacent 11-12 up to now, and only when 20 is exceeded is it suggested markets are truly worried.

All this is going on in the lead up to what will no doubt be a much appreciated long weekend in the US, but before we get to that there is the small matter of the June jobs report on Thursday, and any subsequent Fed policy ramifications.

With the euro rallying, the US dollar index is down 0.5% to 94.90. If the world truly were panicked about Greece, gold would have rallied more than US$5.90 to US$1180.10/oz.

Commodities

In commodity markets, there was also more going on than just Greece.

The Shanghai Futures exchange last night announced it will accept three Norilsk nickel brands for delivery against its nickel contract, thus expending the pool of deliverable metal. Nickel subsequently fell 5% on the London Metals Exchange. Otherwise, tin was the only base metal to move significantly last night in the uncertain conditions, down 3%. All others were mixed on small moves.

Iron ore fell US20c to US$60.50/t.

For oil markets, Greece is one focus of attention but another is tonight’s deadline for Iran to reach an agreement with the West regarding its nuclear policy and resultant economic sanctions. If an agreement can be reached, Iranian oil exports will flow once more. If not, the deadline will be extended.

Last night West Texas fell US$1.42 to US$58.23/bbl and Brent fell US$1.13 to US$62.04.

Today

The SPI Overnight closed down 34 points or 0.6%. Presumably this reflects a 350 point plunge in Wall Street, but if so, how much is double-counting from yesterday?

The critical market today will again be the Shanghai stock market. Tonight Greece will be in arrears to the IMF. The Fed has said it will not step in and prop up Puerto Rico, just as it didn’t step in to prevent the city of Detroit defaulting on its municipal bonds.

Anything can happen, and probably will.

Locally we’ll see new home sales and private sector credit numbers today, in case they matter right now, and tonight Glenn Stevens will deliver a speech in London.

Tonight also sees a flash estimate of eurozone June CPI, in case that matters right now, and a consumer confidence survey will hit the wires on Wall Street.

And today is the end of financial year. Enjoy.
 

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article 3 months old

The Monday Report

By Greg Peel

Turbulence

Friday’s sell-off on Bridge Street represented a new element in the macro picture, that of China. But between China and Greece, developments over the weekend cloud the issue of what happens now.

The Shanghai index began to tip over early in June and its correction has featured some solid down-days, including at least one 6% fall. While such moves have sparked nervousness and much debate, the general feeling was that a stock market that had doubled since only late last year was clearly due a correction, and thus the odd big fall should not necessarily suggest it’s time to panic.

That the ASX200 was last week pushing back up to the 5700 mark even as China’s stock market remained brittle is testament that no one was all that worried at the time. However late on Thursday in China’s session, the Shanghai index started diving and ended the day down 4%. On Friday it fell 7.4% as it approached the 20% correction mark. A 20% correction is said to signify a bear market.

This is a load of unsubstantiated rubbish of course, but enough to encourage some precursory selling in the Western world’s proxy for Chinese investment – the Australian stock market. Friday saw a 2.8% fall for the materials sector and 3.2% for energy, with industrials also copping a 2.8% beating. Rumours of private equity interest meant Woolworths had endured enough punishment, for now, hence consumer staples bucked the trend with a 0.6% gain.

And bizarrely, yet again, the sector that should be the least volatile was the most, with utilities falling 4% (including stocks going ex-div). Perhaps the market sees Chinese investors as the only supporters of Australian commercial property.

Whatever the case, yesterday the PBoC cut interest rates by 25 basis points for the fourth time since November. The borrowing rate falls to 4.85% and the deposit rate to 2.0%. The central bank also cut the reserve ratio requirement (RRR) by another 50 basis points for banks serving rural areas, agriculture and small business.

How these cuts impact on the Chinese stock market will become apparent later today when the Shanghai exchange opens.

Fat Lady Warms Up

On Saturday night, negotiations between Greece and its lenders again broke down as the Greek government left the table. Prime Minister Tsipras thus decided it was time to readdress his anti-austerity mandate by putting the question to his people. He called a referendum for this coming Sunday which will basically be a question of do we maintain the rage, and risk a Grexit, or do we bow to the creditors.

If he thought the creditors were going to sit back and wait for the result, and supply interim funding in the meantime, he was dead wrong.  An angry European Commission has insisted there will be no bail-out extension beyond Tuesday night’s expiry. An angry IMF has insisted there will be no extension for repayment of the E1.6bn due on Tuesday -- money Greece does not have.

On Saturday the people of Greece were queuing up to get what they could of their money out of ATMs. Yesterday those machines were running out of cash. In the wake of the weekend’s breakdown in negotiations, the ECB has refused to extend any further emergency funding to Greek banks. Tsipras has ordered the banks be closed tonight, and the stock market, in what is no doubt a precursor to currency controls.

Default looms on Tuesday night. EU representatives will continue to hold meetings during the week, but this time it won’t be about compromise, it is assumed. This time it will be about planning the Grexit.

Wall Street

In Friday night’s session Wall Street was still in watch and wait mode regarding Greece. Tonight’s action will determine the response to the weekend’s developments.

The Dow closed up 56 points or 0.3% but the gain was almost entirely attributable to one stock – Nike – following a very positive earnings report and a 4% share price jump. Otherwise, the S&P was flat at 2101 and the Nasdaq fell 0.6%.

The economic data release of the day was the fortnightly Michigan Uni consumer sentiment survey, which showed a rise to its highest level in five months, beating forecasts. While this news provided some support, no one was prepared to take on risk over the weekend. And the slide in the Shanghai index did not go unnoticed.

The US bond market was nevertheless prepared to be more introspective, focusing on the ongoing stream of pretty solid US data. The US ten-year yield rose 8 basis points to 2.48% to mark its highest close since last September. The market is still very long US bonds and a Fed rate rise looms ever nearer, but it will be interesting to see what happens in global bond markets this week.

The US dollar index rose 0.2% to 95.40.

Commodities

The Aussie dollar took a beating on Friday, in line with the local stock market. It was down 1% to US$0.7658 on Saturday morning and is lower still, at US$0.7613 in early trade this morning.

All round uncertainty led to a mixed session on the LME on Friday night and again, we must remember that the Greek breakdown and Chinese rate cut have occurred in the interim. Copper and tin rose half a percent and zinc fell half a percent, while aluminium and lead fell one percent and nickel fell two percent.

Iron ore fell US60c to US$60.70/t, closing the week exactly where it started.

The oil markets were deathly quiet on Friday night. West Texas was little changed at US$59.65/bbl and Brent down just a tad to US$63.17/bbl.

Gold was little changed at US$1174.20/oz.

On Saturday morning, before the weekend’s developments, the SPI Overnight closed up 10 points.

The Week Ahead

World markets are this morning suffering from vu-deja – that eerie feeling that nothing like this has ever happened before. As late as Saturday morning, the prevailing belief was that somehow, in some way, Europe would manage to once again kick the Greek can down the road. That expression is getting pretty tiresome, but I haven’t yet come up with another one.

But right now it is hard to see past at least a Greek default. Sunday’s Greek referendum seems irrelevant in that context, but were the Greek people to vote heavily in favour of capitulation, then perhaps the EU will be able to sort something out with regard remaining in the eurozone.

Meanwhile, all Asian region eyes will be on the Shanghai stock market today to see whether yesterday’s rate cuts are enough to stabilise the tumbling index.

The world will revolve regardless, and this week features some rather important data releases.

Tomorrow is the end of financial year in Australia, and the end of quarter anywhere else. Wednesday is the first of the month, and thus features global manufacturing PMI releases. Beijing now releases both its manufacturing and service sector PMIs on the first of the month, while HSBC still spreads its results two days apart. Friday sees the global round of service sector PMIs.

It’s a short week in the US, with markets closed on Friday for the Fourth of July long weekend. It’s also the first week of the month, which means jobs numbers. The ADP private sector number will be released on the Wednesday as usual, but the non-farm payrolls report is this month brought forward to the Thursday.

Other US releases include pending home sales tonight, and Case-Shiller house prices, Conference Board consumer confidence and the Chicago PMI on Tuesday. Wednesday it’s construction spending and vehicle sales, and Thursday factory orders.

A flash estimate of eurozone CPI is out tomorrow night, which will at least give us a guide to how the rest of the zone is faring.

Australia sees new home sales and private sector credit tomorrow, and the RBA governor will deliver a speech in London. On Wednesday it’s the manufacturing PMI, building approvals, house prices and the TD Securities inflation gauge. Thursday it’s the trade balance, and Friday sees retail sales and the services PMI.

Pass the ouzo.

Rudi will appear on Sky Business on Wednesday at 5.30pm and later on the same day, 8-9pm, to host Your Money, Your Call Equities. On Thursday he'll appear at noon and again between 7-8pm for the Switzer Report.
 

For further global economic release dates and local company events please refer to the FNArena Calendar.

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article 3 months old

Next Week At A Glance

For a more comprehensive preview of next week's events, please refer to "The Monday Report", published each Monday morning. For all economic data release dates, ex-div dates and times and other relevant information, please refer to the FNArena Calendar.


By Greg Peel

The fate of Greece will be decided at a meeting tomorrow night, we’re led to believe, although that fate may yet be an extension to negotiations. The IMF nevertheless seems pretty intent that Greece will be in arrears if it does make good on its repayment on Tuesday. Arrears is not default, just a step towards it.

Meanwhile it appears the Australian market is crashing in anticipation, although I doubt Greece has much to do with such end of financial year volatility.

It’s a busy week around the globe next week, Greece notwithstanding, and includes a short week in the US given the Fourth of July long weekend. Being the first week of the month we will, as usual, see global PMIs and US jobs numbers.

Wednesday sees manufacturing PMIs from Australia, Japan, China (HSBC), the eurozone, UK and US, and the official Chinese manufacturing and service sector PMIs from Beijing. On Friday everyone repeats with their own service sector numbers except the US, where markets will be closed.

Economic releases in the US next week include pending home sales, Case-Shiller house prices, the Chicago PMI, consumer confidence, vehicle sales, construction spending and factory orders. The ADP private sector jobs report is out on the Wednesday as usual but the non-farm payrolls numbers will be brought forward to Thursday due to the holiday.

With Greece in the balance, the eurozone will see a flash estimate of June CPI next week.

The RBA governor will speak on Tuesday ahead of the usual first of the month PMI, house price index and TD Securities monthly inflation gauge, along with building approvals. The services PMI on Friday wraps up Australia’s economic week.

Tuesday is end of financial year, and as we can probably gauge from today’s activity on the ASX, we may yet see more volatility.
 

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