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Daily Markets Update, 1 June

 

  • Oil rises as Trump decides on climate pact, yuan surges
  • Yen, gold and Treasuries decline.
  • Markets Are Ignoring the Looming U.S. Debt Ceiling Showdown

 

U.S. stocks were poised to start the month a touch higher Thursday while European stocks were on track to break a five-session losing streak.

The pound declined as better-than-expected manufacturing data failed to offset political risk before the impending election, and crude steadied.

Oil prices rose on Thursday, lifting energy company shares, on expectations the United States will withdraw from a global pact to fight climate change, while China’s yuan shrugged off weak factory data to hit a seven-month high against the dollar.

S&P futures are little changed this morning, while Asian shares rise and European stocks (+0.5%) are poised to snap a five-day losing streak amid a broad-based rally.

The euro fell after two days of gains while the dollar edged higher. European manufacturing activity grew at its fastest rate in more than six years in May, according to the final eurozone PMI index.

The PMI has signalled expansion in each of the past 47 months.

  • Germany 59.5 (flash: 59.4) 73-month high
  • Austria 58.0 2-month low
  • Netherlands 57.6 4-month low
  • Ireland 55.9 22-month high
  • Spain 55.4 4-month high
  • Italy 55.1 3-month low
  • France 53.8 (flash: 54.0) 2-month low
  • Greece 49.6 9-month high.

IHS Markit said: “The eurozone upturn is developing deeper roots as factories enjoy a spring growth spurt. Demand for goods is growing at the steepest rate for six years, encouraging manufacturers to step up production and take on extra staff at a rate not previously seen in the two-decade history of the PMI survey.

Many investors in Europe also focused on a speech from German central bank President Jens Weidmann, who said late Wednesday that the European Central Bank should start discussing when to reduce its monetary stimulus.

“The current economic outlook, together with the improvement in the balance of risks, suggests that the [ECB’s rate-setting committee] is beginning to discuss whether and when it will be time to adjust our forward guidance,” he said.

 

China’s onshore yuan shrugged off poor PMI data and headed for the biggest four-day advance in almost 12 years, rising to a seven month high amid speculation policy makers are trying to discourage bets against the currency.

The onshore Yuan rose 0.18% to 6.8062, extending the four-day gain to 1.2%, as of late trading in Shanghai.

 

Emerging markets are behaving  less volatile than expected:

Rising prices and low volatility place emerging markets firmly in line with a broader global trend in 2017, in which continued global monetary stimulus and expectations of improving economic growth are helping to mute price swings.

 

 

 

Oil prices rose on Thursday, lifting energy company shares, on expectations the United States will withdraw from a global pact to fight climate change, while China’s yuan shrugged off weak factory data to hit a seven-month high against the dollar.

  • OPEC COULD REVIVE IDEA OF DEEPER SUPPLY CUT AT NEXT MEETING IF OIL INVENTORIES STAY HIGH – TWO SOURCES FAMILIAR WITH MATTER

 

“WTI has jumped a tad on these Reuters headlines – trying to rally above $47.70. To be fair, this is known information. OPEC shared that it would discuss deeper cuts but decided to deliver the market consensus. Now $47.50.”

 

Key upcoming events:

  • The U.S. jobs report Friday may bolster the case for a rate hike, with a gain of 180,000 positions expected.

Markets wrap up via Bloomberg:

Stocks

  • The Stoxx Europe 600 Index advanced 0.4 percent as of 8:55 a.m. in New York, after finishing May with a 0.8 percent increase.
  • Futures on the S&P 500 added 0.1 percent. The underlying gauge fell 0.1 percent Wednesday, trimming its May gain to 1.2 percent. It closed Friday at a record.

Currencies

  • The pound fell 0.3 percent to $1.2858.
  • The euro weakened 0.3 percent to $1.1211.
  • The Bloomberg Dollar Spot Index rose 0.2 percent, following a 1.5 percent decline in May for the biggest monthly drop since January.
  • The yen slipped 0.5 percent to 111.33 per dollar, after gaining in the month of May.

Commodities

  • West Texas Intermediate crude oil was little changed at $48.33 a barrel after a 2.7 percent drop in the previous session.
  • Gold dropped 0.4 percent to $1,263.98 an ounce, giving back some of Wednesday’s 0.5 percent gain.

Bonds

  • The yield on 10-year Treasuries rose two basis point to 2.23 percent.
  • Italian benchmark yields increased five basis points.

Asia

  • The MSCI Asia Pacific Index rose 0.2 percent, after capping its fifth straight monthly gain for the longest winning streak since 2013.
  • Japan’s Topix rallied 1.1 percent as capital spending topped estimates. The Shanghai Composite Index retreated after a private gauge of China’s manufacturing fell below 50.
  • The onshore yuan climbed 0.1 percent, advancing for a fourth day amid speculation policy makers are trying to discourage bets against the currency.
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