From Marc to Market:
Overview: Soft Asian manufacturing PMIs weighed on local shares after the S&P 500 set new record highs yesterday. European shares are recouping yesterday's month-end losses, while US futures indices are bid. The US 10-year yield is around 1.47%, and European yields are 1-2 bp higher. The dollar is beginning the quarter on firm footing, making new highs for the year against the Japanese yen (~JPY111.60). The euro has been unable to resurface above $1.1860 and is at its lowest level in nearly three months. No change by the Riksbank left the krona vulnerable, and the krona's 0.3% loss leads the majors. Russia, Turkey, and South Africa are firmer, while many emerging market currencies are softer. The JP Morgan Emerging Market Currency Index has a four-day slide in tow. Gold extended its recovery from $1750 but ran into resistance in front of $1780. Oil prices are firm in the wake of the latest drawdown of US inventories. The August contract set new highs above $74.50 as the outcome of the OPEC meeting is awaited. Speculation has centered around an increase of 500k barrels next month. The CRB Index settled yesterday at its best level in nearly six years. With June's gain of 3.75%, the index rose for the seventh month in the past eight.
Asia Pacific
Japan's Tankan survey showed improvement in large and small businesses. The outlooks also were better. While the gains lagged expectations, the results are consistent with a stronger economy going forward. Also, of note, capex plans were one area that beat expectations. A 9.6% increase is expected now after a 3% increase in the Q1 survey and expectations for a 7.2% gain. Separately, the June manufacturing PMI was revised to show a small decline from May's 53.0 reading than the 51.5 flash estimate. The final reading stands at 52.4. Recall that the decline from 53.6 in April to 53.0 in May coincided with a 5.9% slump in industrial output reported yesterday.
Australia's preliminary June PMI estimate of 58.4 was revised to 58.6. It stood at 60.4 in May and was at 55.7 at the end of 2019. The May trade surplus was reported at A$9.7 bln, an improvement from April's A$8.0 bln but less than the A$10.5 bln projected. Through May, the average monthly trade surplus was A$8.3 bln. This compares with an average of A$6.4 bln in the first five months last year and A$5.0 bln in 2019. Despite China's use of trade to express its dissatisfaction with Canberra's foreign policy, bilateral trade has risen by a little more than 6% this year. Iron ore and wheat exports reached record levels, and coal exports rose almost 10%, their highest (value) in a year.
China's Caixin manufacturing PMI slipped to 51.3 from 52.0, which was a little weaker than expected. This reflects a regional pattern in Asia, spurring some talk that the peak in the recovery has passed. Social restrictions in Taiwan and Malaysia took a toll, and with the former falling to 57.6 from 62.0 and the latter contracting a slower rate (49.5 vs. 47.6). Indonesia's PMI eased to 53.5 from 55.3. The Philippines and South Korea were more resilient, with the manufacturing PMI rising to 50.8 from 49.9, and edging higher to 53.9 from 53.7, respectively. Separately, South Korea reported a somewhat smaller than expected trade surplus of $4.44 bln, a sharp improvement from the $2.94 bln surplus seen in May. Exports slowed from 45.6% year-over-year to 39.7%. Imports accelerated to 40.7% year-over-year from 37.9%....
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