From Marc Chandler at Bannockburn Global Forex:
Bank of Canada's Turn
Overview: The recent equity rally is stalling. Asia Pacific equities were mixed, with Japan, South Korea, and Australia, among the major bourses posting gains. Europe’s Dow Jones Stoxx 500 is slipping lower for the second consecutive session, ending a four-day bounce. US equity futures are little changed. The US 10-year yield is edging higher at 2.86%, while European yields are slightly lower. The greenback is firm against most of the major currencies. The Australian and Canadian dollars are the most resilient, while the yen and Swiss franc are laggards. Most emerging market currencies heavier, but the South African rand and Hungarian forint are firmer.
Turning to commodities, gold is breaking down. Near $1830, it is near a two-week low. A break of the $1828 area could another $10 drop. It peaked near $1870 last week. July WTI is firmer near $116.30. There was no follow-through selling after yesterday’s reversal. US natgas prices are up almost 3% to stem the more than 9% drop in the past three sessions. Europe’s benchmark is up about 2.6% after rising slightly yesterday. Iron ore prices firmed to recoup yesterday’s minor loss. July copper is heavy for a second session. It has a two-week rally in tow. July wheat fell to two-week lows yesterday to bring the decline since the May 17 peak to around 15%.
Asia Pacific
Japan's final May manufacturing PMI was revised slightly higher to 53.3 from 53.2. Its recovery appears to be intact, though the mid-March earthquake and lockdowns in China is adversely impacted, as reflected in the sharp drop in April's industrial output figures released earlier this week. Exports and imports to China, its biggest trading partner fell. Still, the 2% year-over-year increase in March wage deals were the most n four years and helped underpin retail sales.
Australia's economy grew by 0.8% in Q1, which was slightly faster than expected. The final manufacturing PMI edged higher to 55.7 from the flash reading but still is a four-month lows after reaching 58.8 in April. The Reserve Bank of Australia meets next week, and the swaps market is pricing in a 30 bp rate hike.China's Caixin manufacturing PMI improved to 48.1 from 46.0, which was a little disappointing. Recall that the "official" version rose to 49.6 from 47.4. With Shanghai and Beijing gradually re-opening, the worst may be passed. The new stimulus measures will help, but when the World Bank releases its new forecasts tomorrow, growth projections will likely be cut. With the zero-Covid policy to remain, many economists do not expect the powerful V-shaped recovery seen in many other countries. A positive note, however, came from South Korea's May trade figures, which showed a larger than expected jump in both exports (21.3% year-over-year from 12.9% in April) and imports (32% vs. 18.6%)....
....MUCH MORE
