Financial Markets Summary 28 June 2018

Dollar Index has moved lower but held on to the 95 handle while the Euro has
emerged as one of the stronger G10 currencies behind the Canadian Dollar.

Closing Report

Dollar Index has slipped into negative territory in recent trade after rising above 95.5 earlier this morning. The Euro has seen some upside in recent trade after mixed Euro Zone confidence indicators and German state CPI released earlier on. Canadian Dollar has clawed back some of the Poloz inspired losses while the New Zealand Dollar is at the bottom of the G10 pile following the RBNZ policy decision. 

Key Headlines/Data:

* German State CPI (Jun):
– Saxony: MoM +0.1%, previous +0.5% | YoY +2.1%, previous +2.2%
– Brandenburg: MoM 0.0%, previous +0.7% | YoY +2.2%, previous +2.4%
– Hesse: MoM 0.0%, previous +0.5% | YoY +1.8%, previous +1.9%
– Bavaria: MoM +0.2%, previous +0.5% | YoY +2.4%, previous +2.3%
– Baden Wuerttemberg: MoM +0.2%, previous +0.5% | YoY +2.4%, previous +2.3%
– North Rhine Westphalia: MoM +0.1%, previous +0.4% | YoY +2.1%, previous +2.1%

* German GFK Consumer Confidence (Jul) 10.7 versus 10.6 expected, previous 10.7

* Spanish CPI Data (Jun P):
– CPI M/M +0.3%, previous +0.9%
– CPI Y/Y +2.3% versus +2.2% expected, previous +2.1%
– CPI EU Harmonized M/M +0.2%, previous +0.9%
– CPI EU Harmonized Y/Y +2.3% versus +2.3% expected, previous +2.1%

* Spanish Retail Sales Y/Y (May) -0.3%, previous +0.5%

* South Korean and US Defence agencies have agreed that UN sanctions against North Korea will remain in place until they take solid and irreversible measures towards denuclearisation.

* Swedish Retail Sales (May):
– Retail Sales M/M +0.2% versus +0.3% expected, previous +0.6%
– Retail Sales Y/Y +3.1% versus +3.6% expected, previous +3.3%

* Swedish Trade Balance (May) -2.6 Bln, previous -6.5 Bln revised to -6.1 Bln

* Bank of Japan Deputy Governor Wakatabe said the benefits of the current policy stance totally outweigh the costs, adding that he does not think the side effects warrant immediate policy action at the moment.

* Bank of England Agents Summary of Business Conditions:
– Retail sales growth had ticked up over the past month, boosted by stronger sales of seasonal clothing and footwear; growth in consumer services had slowed.
– Growth in domestic manufacturing output had edged up; growth in export output had eased slightly but remained robust.

* Euro Zone Confidence Indicators (Jun):
– Consumer Confidence -0.5 versus -0.5 flash/expected, previous 0.2
– Economic Confidence 112.3 versus 112.0 expected, previous 112.5
– Business Climate Indicator 1.39 versus 1.40 expected, previous 1.45 revised to 1.44
– Services Confidence 14.4 versus 14.2 expected, previous 14.3 revised to 14.4
– Industrial Confidence 6.9 versus 6.4 expected, previous 6.8 revised to 6.9

* Italian CPI Data (Jun P):
– CPI M/M +0.3% versus +0.2% expected, previous +0.3%
– CPI Y/Y +1.4% versus +1.3% expected, previous +1.0%
– CPI EU Harmonized M/M +0.3% versus +0.2% expected, previous +0.3%
– CPI EU Harmonized Y/Y +1.5% versus +1.4% expected, previous +1.0%

* UK Trade Minister Fox said early evidence would suggest that safeguards may be necessary to protect the steel industry following US tariffs.

* Italy sold €4.5 Bln of 2023 & 2028 BTP’s versus €3.5-5.5 Bln target

* EU Trade Minister Malmstrom said we are not in a trade war yet but we are moving towards one.

* Looking ahead, we await the pan-German CPI readings ahead of US Q1 GDP and jobless claims. We also expect comments from BoE’s Haldane plus Fed President’s Bullard and Bostic.


European cash equity markets have added to earlier declines this afternoon with automobile and technology stocks the worst performers (FTSE -0.3%, DAX -1.7%, CAC -1.2%).

We saw a mixed open on Wall Street meanwhile with any potential upside limited by heavy losses in healthcare stocks after Amazon unveiled plans to buy drug delivery group PillPack. In fixed, we did see some minor upside in core EU debt although it has since pulled back with Treasuries now leading a move to the downside.

This is despite the downward revision to US Q1 GDP from +2.2% to +2.0% although the GDP Price Index was nudged higher. Data elsewhere saw US jobless claims rise to 227K (f/c. 220K) from 218K while German CPI was in line at +2.1% YOY. In currency space, the Dollar Index has moved lower but held on to the 95 handle while the Euro has emerged as one of the stronger G10 currencies behind the Canadian Dollar.

The New Zealand Dollar is still the weakest meanwhile after the RBNZ policy decision overnight. Elsewhere oil prices have moved higher with US crude futures reaching the $74 a barrel mark. At the Fed, St Louis President Bullard said the best bet is that the US will remain in a low growth/inflation regime for at least a couple more years.

He repeated that he favours leaving rates where they are now. Still to come today, possible comments from Atlanta Fed President Bostic at 17:00 BST and a $30.0 Bln 7-year note offering at 18:00 BST.

Risk warning!                                                                                                                                                        ---------------------------------------------------
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