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Financial Markets Summary 08 June 2018

European cash equity markets are broadly lower at the closing bell (FTSE -0.3%, DAX -0.4%, CAC 0.0%, FTSEMIB -1.9%, IBEX -0.8%).  US cash equity markets have closed with small gains this afternoon (DJIA +0.3%, S&P +0.3%, NASDAQ +0.1%).

We also saw a lower open on Wall Street with stocks pressured by rising trade tensions as the G7 meet in Canada. After today’s talks, EU Council President Tusk said Trump and other members continue to disagree on trade. 

Juncker added that they do not agree with Trump that the US have been treated unfairly. In the bond markets, core EU yields have nudged lower with US government borrowing costs are little changed on the day after a quiet US data slate – wholesale inventories were revised to +0.1% from 0.0%. 

The Canadian Dollar did drop after data showed the economy lost -7.5K jobs in May (f/c. +23.5K) but this proved short lived as wages grew by the most in six years. Elsewhere in FX, Sterling has slipped towards the bottom of the G10 pile after EU Brexit Minister Barnier rejected a key part of the UK’s backstop proposal for the Irish border by stating that the backstop cannot be applied to the whole of the UK. 

He did welcome the UK paper but said it raises more questions than it answers. The Dollar Index is up around 0.3% at 93.7. In energy space, oil prices are offside with Brent underperforming WTI ahead of the Baker Hughes rig count at 18:00 BST.

Key Headlines/Data:

* @realDonaldTrump – I am heading for Canada and the G-7 for talks that will mostly centre on the long-time unfair trade practiced against the United States. From there I go to Singapore and talks with North Korea on Denuclearization. Won’t be talking about the Russian Witch Hunt Hoax for a while!

* Canadian Housing Starts (May) 195.6K versus 218.0K expected, previous 214.4K revised to 216.8K

* Canadian Employment Change (May) -7.5K versus +23.5K expected, previous -1.1K
– Unemployment Rate 5.8% versus 5.8% expected, previous 5.8%

* Capacity Utilization (Q1) 86.1% versus 86.3% expected, previous 86.0% revised to 85.6%

* EU Brexit Minister Barnier rejected a key part of the UK’s backstop proposal for the Irish border by stating that the backstop cannot be applied to the whole of the UK. He did welcome the UK papers but said it raises more questions than it answers.

* @MichelBarnier – To avoid any confusion between the EU backstop & the UK customs paper: I reiterate that our backstop cannot apply to whole UK. 4 freedoms are indivisible. This is not a rejection of the UK customs paper on which discussions continue.

* UK government spokesman said they will never accept a customs border between Northern Ireland and the rest of the UK.

* Irish PM Varadkar said the UK backstop plan falls short

* German Finance Minister Scholz said there is no guarantee that a Brexit deal can be reached and businesses have to be prepared for every scenario.

* US Wholesale Inventories M/M (Apr F) +0.1% versus 0.0% flash/expected
– Wholesale Trade Sales M/M +0.8%, previous +0.3%

* EU Council President Tusk, speaking after the G7 meeting, said Trump and other members continue to disagree on trade

* EU Commission President Juncker said they want talks with the US on steel and aluminium but will not negotiate with a gun to its head. He added that they do not agree with Trump that the US have been treated unfairly.


































































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US Closing Report

Consumer staple stocks have led the broader market while energy names provided a weigh as oil prices fell – US crude futures settled at $65.74 (-$0.21). In the bond markets, US yields are little changed on the day while the Dollar Index is ahead but off its best levels. 

Elsewhere in FX, the Canadian Dollar has risen towards the top of the G10 pile despite a drop in employment reported earlier today (wages did grow by the most in six years). Sterling remains on the back foot after EU Brexit Minister Barnier rejected a key part of the UK’s backstop proposal for the Irish border by stating that the backstop cannot be applied to the whole of the UK. 

He did welcome the UK paper but said it raises more questions than it answers. At the G7 meanwhile, a French official said German Chancellor Merkel has proposed to set up a mechanism to discuss current trade differences with the US and prevent futures ones. It was also reported that it is highly unlikely there will be a final communique given the lack of consensus.

Key Headlines/Data:

* New York Fed GDP Nowcast (Q2) +3.08%, previous 3.26% | (Q3) +2.89%, previous 3.01%

* Atlanta Fed GDPNow (Q2) +4.6%, previous +4.5%

* According to French officials, German Chancellor Merkel has proposed to set up a mechanism to discuss current trade differences with the US and prevent futures ones.

* Baker Hughes: US oil rigs rise by one to 862 from 861

* G7 official said it is highlighy unlikely there will be a final communique given the lack of consensus.

* US crude futures settled at $65.74 (-$0.21) | Brent crude futures settled at $76.45 (-$0.86)                                                                                                                                                                                                                                                                                                                     Risk warning!
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