SCOREBOARD: Atlantic currents
US markets were nervous on Greek fears but Europe's bourses enjoyed a surprising rebound.
The European PMIs, for instance, fell again in May, the manufacturing index down to 45 from 45.9 and the service index fell to 46.5 from 46.9. The markets obviously brushed it off though and they weren’t too fazed by a small fall in the more respected IFO survey either – to 106.9 in May from 109.9. Probably that’s because Germans reckon the business climate is still well above the average (102). In any case that’s the PMIs in China and Europe were down and ordinarily you might think that commodities would be weaker on that but they weren’t. Metals, for instance, had a decent session, copper up 1.1 per cent, silver up 2.3 per cent and only gold was off smalls ($1559). Crude, too, was bid up with WTI up 1.2 per cent to $90.94 while Brent was 1.3 per cent higher at $106.9.
Despite the strong gains in Europe and the boost to commodities, Wall Street followed the Greek lead for much of the session and at the low was off 0.6 per cent. Only a rally in the last hour saw the S&P finish off in positive territory (0.1 per cent to 1320) and apparently that's because the Italian prime minister said most European leaders support a joint European bond, that Germany could possibly be persuaded and that Greece was likely to stay in the euro. Most sectors on the S&P saw positive gains with consumer goods, healthcare and telecoms the key outperformers. Tech and industrials were the key outperformers and energy stocks weren’t too far behind, and that’s despite gains in crude that I highlighted earlier. Otherwise the Dow rose 0.3 per cent (12529), the Nasdaq was 0.4 per cent lower (2839) and the SPI rose 0.4 per cent (4069).
Fixed income markets in turn traded lower generally and yields pushed higher. In the US, the 10-year yield was up 4 basis points or so to 1.78 per cent, the 5-year was a bit over 3 basis points higher at 0.783 per cent while the 2-year was up just under a basis point to 0.297 per cent. Aussie futures were down 6 ticks on the 3s (97.58) and 4 ticks on the 10s (96.885). Otherwise there wasn’t much excitement in forex land – euro traded on a big figure range and ended about 40 pips lower at 1.2539 (from 1630 AEST). The Australian dollar traded a very similar pattern – same range but ended little changed at 0.9767. Similar story for yen and sterling – at 79.6 and 1.5672 respectively.
Bits and pieces otherwise. US jobless claims were unchanged in the week to May 19 at 370,000 and continuing claims were little changed also. That’s about four weeks now they’ve been at that level. Then we saw durable goods orders up 0.2 per cent in April following a 4.2 per cent fall the month prior. Crossing over to the UK, the breakdown of first quarter GDP revealed that net exports were a key detractor to economic growth in the quarter (down 0.1 per cent) with consumption, business investment and government spending all higher. The UK services index was also higher in the three months to March, up 0.1 per cent after a 0.2 per cent gain. Most of Germany’s growth in contrast came from net exports – data revealed last night.
As for the calendar today it’s very quiet. There’s Japanese CPI data if you’re interested and then tonight Michigan University put their final estimate of May consumer confidence.
Adam Carr is a leading market economist. See Business Spectator's glossary for definitions of technical terms used in SCOREBOARD articles.
Follow @AdamCarrEcon on Twitter.
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