Asia’s negative risk mood extended to Europe, but there was some improvement in the US with help from a strong manufacturing survey and in late NY, an agreement on migration to shore up German Chancellor Merkel’s coalition which helped the euro trim losses.
Key Quotes:
“Asian equities closed very poorly, including -2.2% on the Nikkei, Shanghai Composite -2.5% and the Kospi -2.4%. Concern over US trade policy was heightened by the leaked memo showing the Trump administration had looked into the US leaving the World Trade Organization.”
“European equities were also weak, though less so. The euro was undermined by worries over German chancellor Merkel’s coalition government, with interior minister Seehofer threatening to resign over migration policy. EUR/USD fell as far as 1.1591,down a cent from its early Sydney highs. But in the NY afternoon, the German government announced it had reached an agreement on the issue, defusing the threat to Merkel’s leadership, at least for now. The euro popped up to 1.1645, still -0.4% from Friday’s close.”
“Underperformer AUD was hurt by broad USD strength and the poor risk mood, extending the fall from Sydney morning trade above 0.7400 to 0.7311 – an 18-month low – before edging back to 0.7340 as US equities turned early losses into small gains. NZD/USD was also weak, falling from 0.6780 to 0.6690 – a two-year low. AUD/NZD rose from 1.0890 to 1.0950 – a one-month high – but then pulled back to be flat on the day.”
“USD/JPY was also flat over the full day, around 110.90. USD/CAD rose a net 50 pips to 1.3185 as oil prices lost momentum. GBP/USD followed the broad US dollar trend, falling as much as 1 cent to 1.3100 before trimming losses to 1.3140.”
“US manufacturing activity firmed in June, the Institute for Supply Management’s (ISM) survey rising to 60.2 from 58.7 last month; a whisker below the fourteen year highs of 60.8 hit earlier this year in February, rubber stamping US growth leadership. The detail is not as upbeat as the composite index though; almost all the gain came from higher production and rising supplier delivery times, the latter hitting a fourteen year high and signaling growing bottlenecks. Forward looking components such as new orders edged lower to 63.5 from 65.7 as did employment, to 56 from 56.3.”
“The Atlanta Fed GDP “nowcast” was revised back up to 4.1% after the ISM data, from 3.8% late last week. May construction spending was a little softer than expected, up 0.4% and with a downward revision to April.”
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