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Daily Briefing – Tuesday, June 20, 2017

Europe

Brexit talks opened yesterday amidst turmoil in the UK that is being completely ignored by financial markets. The FTSE closed up 0.81% on commodities and retail stocks, behind the Dax’s 1.07 and the Eurostoxx’s 1.13%, the latter on France’s parliamentary victory for President Macron’s centrist pro-EU En Marche party, but also retail & commodities. The GBP is also up against the USD also thanks to the Confederation of British Industry’s economic growth forecast – up 1.6% for 2017 compared to the previous 1.3 reading – all this in spite of Theresa May’s minority government. And Germany’s Producer Price Index for May is down 0.2% MoM but up 2.8% on a yearly scale.

 

US

New York Fed President William Dudley yesterday turned hawkish in spite of continuing weak US data. Dudley pointed to full employment and shrugged off low inflation. He was followed by Chicago’s Charles Evans who seemed to be following the route. Both policymakers are now in line with the Fed’s Yellen in working towards a reduction of the central bank’s balance sheet. The immediate result was an equities balance sheet in the green, led by the Nasdaq’s 1.42% rise, now recovering its week-long FAANG led freefall, and a short-lived rise in the dollar.

 

 

 

Asia

The increase in Chinese house prices continues to slow down thanks to tightening central bank policies. Indexes yesterday were mixed, with the Shanghai Composite down 0.1% and the Shenzhen Composite up 0.55%. The Nikkei closed 0.8% up this morning on a weakening Yen, while the Hang Seng and Kospi were in the red. This morning’s Royal central bank of Australia’s meeting minutes reveal concern over household debt, stagnant wages and a Q1 GDP slowdown. House prices were up 2.2% for that quarter and the dollar continues upwards.

 

Commodities

The South African mining sector is seeing its lowest price-2-earnings ratio in 5 years, since the country’s new mining charter went into effect. The regulation stipulates that local mines must be at least 30% owned by blacks. The Rand yesterday lost a full point against the USD on the news.

And gold last night double bounced off 1244 following the suddenly hawkish comments of Fed prezes Dudley & Evans. This morning sees the commodity in a potential upswing while oil continues to trend sideways along the 44.40 line. Meanwhile, Australia has decided to legislate natural gas export regulation.

 

Today’s Events

7:30 AM GMT UK BoE Governor Mark Carney’s speech
12 noon GMT US: Fed’s Stanley Fischer Speech
8:30 PM GMT API Crude Oil Inventories
11:50 PM GMT Japan: Monetary Policy meeting minutes

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