Wednesday, July 24, 2019

Capital Markets: "Poor PMI Weighs on Euro Ahead of ECB"

From Marc to Market:
Overview: Disappointing flash PMI pushed an already offered euro lower ahead of tomorrow's ECB meeting. European bonds rallied and equities, amid a rash of earnings, is trying to extend the advance for a fourth consecutive session. Italian and Spanish 10-year benchmark yields are off four-six basis points, while core bond yields are off two-three basis points. Asian equities were mixed, with the biggest markets, including Japan, China, Hong Kong, and Australia advancing, while most of the others slipped lower. US shares are trading lower after the S&P 500 closed above 3000 for the first time in a week. Confirmation of an antitrust review of several large tech firms weighs down the benchmark. Oil prices are a little firmer following news late yesterday that API estimate of US oil stocks. It saw a nearly 11 mln barrel drawdown, the sixth consecutive drop, which is the longest streak since January 2018.

Asia Pacific
News that US negotiators will be in Shanghai in the first part of next week
to resume face-to-face talks were greeted optimistically by the market. However, the rhetoric around the negotiations has not improved. Previously, the US was saying that a deal was close and 90% of an agreement was in hand. Now, it is playing down the prospects. At the same time, it is noteworthy that China's Commerce Minister will join the talks alongside Liu He. Some Chinese officials, like from the central bank, often have a liberal-reformer bias, while the Commerce Department is often less so and usually takes a seemingly harder line, and that is seen to be the case with Zhong Shan.

The Bank of Japan meets next week. While it is not expected to ease, there is increased talk that it will likely reduce its outlook for inflation. Its 1.1% forecast seems too high. A downward adjust would lay the groundwork for some policy response if necessary after the sales tax increases in October. In yesterday's IMF economic updated, Japan's 2019 growth forecast was shaved by 0.1% to 0.9%....