From Marc to Market:
Overview: The resurgence of the contagion in the US has stopped or reversed an estimated 40% of the re-openings, but the appetite for risk has begun the second half on a firm note, helped by manufacturing PMIs that were above preliminary estimates or better than expected. Except for Tokyo and Seoul, equities in the Asia Pacific region rose. The MSCI Asia Pacific Index rose almost 15.5% in Q2. European stocks are extending their advance for the third consecutive session. The Dow Jones Stoxx 600 rose a little more than 12.5% in Q2. The S&P 500 rose for the past two sessions to close the quarter with a 20% gain. Benchmark yields are firm with the US 10-year near 68 bp. European bond yields are 1-2 bp higher, and the Antipodeans saw a 4-6 bp increase. The dollar is mixed against the major currencies. While it is little changed against most, Norwegian krone and yen are the strongest, up about 0.8% and 0.4% respectively in late European morning turnover. Led by the Mexican peso, most emerging market currencies are firm, and the JP Morgan Emerging Market Currency Index is about 0.2% higher, which would be its biggest gain in a week. Gold made a new multiyear high near $1790, drawing near the $1800 target. Oil is bouncing back with the help of the firmer manufacturing PMIs and the large fall in API-estimated US inventories (-8.1 mln barrels).....MUCH MORE
Asia Pacific
Japan's Tankan showed a marked deterioration in sentiment in Q2 that was worse than expected. Large manufacturers' sentiment fell to -34 from -8, and large non-manufacturers fell to -17 from 8. The bright spot was that capex plans rose 3.2% from 1.8% in Q1. Separately, Japan's initial estimate for the June manufacturing PMI that showed a decline to 37.8 from 38.4 was revised up to 40.1.
China's Caixin manufacturing PMI rose to 51.2 from 50.7 in May. Recall that the official estimate rose to 50.9 from 50.6. Separately, note that although Hong Kong is closed for the national holiday (handover July 1, 1997), China wasted no time making a couple of arrests under its controversial new security law.
South Korea reported June trade figures. Exports and imports fell a little more than expected but still showed a marked improvement from May. Exports were off 10.9% from a year ago. In May, they had fallen by 23.6%. Imports fell 11.4% in June after 21% in May. The net result was a large trade surplus of $3.66 bln, the largest in Q2. It compares with an average of a $3.2 bln surplus in 2019. South Korea's manufacturing PMI edged up to 43.4 from 41.3. Separately, Taiwan's manufacturing PMI rose to 46.2 from 41.9, and India's rose to 47.2 from 30.8.
The dollar is posting a potential key downside reversal against the Japanese yen. It initially rose above JPY108 for the first time since June 9 after a strong gain in the US, but it quickly reversed and fell below yesterday's low (~JPY107.50). In this price action, the close is important. There is a $400 mln option at JPY107.30 that expires today. The bottom end of the range is JPY106.00, but the JPY107.00-JPY107.20 area may offer initial support. The Australian dollar recorded an outside up day yesterday, and follow-through buying today lifted it to about $0.6920, a five-day high. It is the third consecutive session the Aussie is higher. The next target is near $0.6975. There is a large option for A$1.8 bln that expires tomorrow at $0.6895.
Europe
The June manufacturing PMI for the eurozone was revised to 47.4 from the initial estimate of 46.9. It stood sat 39.4 in May and finished 2019 at 46.3. Germany's manufacturing PMI was raised to 45.2 from 44.6 and 36.6 in May. In December 2019, it stood at 43.7. The French PMI pushed further above 50, with the final reading of 52.3. It is a little higher than the flash reading of 52.1. In May, it was 40.6. Italy's stood at 47.5 after May's 45.5, and Spain's rose to 49.0 from 38.3.
French and German consumption bounced back in May....
