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Daily Briefing – Wednesday, July 5, 2017

 

Asia

The People’s Bank of China has reportedly launched a research institute to promote the launch of the world’s first blockchain-based fiat currency. Plans to create a digital Renmibi (the official name of the currency whose units are called “Yuan” – somewhat like the difference between Sterling and Pound) were instigated to supervise cash flows and prevent fraud. The bank is following similar initiatives by the Bank of England, Canada, Russia and Australia. This morning’s Caixin services PMI dropped a point in June, indicating a slowdown for China’s strongly recovering economy as the central government continues efforts to shift from heavy industry to services. Japan’s services PMI overnight for June increased 0.3 of a point to 53.3. However, core inflation remains low due to stagnating wages and slowing retail sales (2% in May, down from Aprils, 3.2%) despite improving exports. The yen is up after yesterday’s missile launch into Japanese waters yesterday, pushing the Nikkei down to a 3-week low. . The Australian dollar continues to suffer from its central bank decision to maintain current interest rates.

 

Europe

With tensions mounting in North Korea, European equities pulled back from a 2-month record rally. May PPIs for the zone fell more than expected yesterday by 0.4% – its fastest pace in a year. As economists warn against an estimated 40% collapse in housing due to inflation outpacing earnings growth, British construction in June slowed by a point-point two, and the FTSE lost a third – cushioned by mining and some retail-related stocks. Overall shop prices fell at their lowest pace (0.3% in June) since November 2013 reacting to Q4 deflation last year. And as Italy confronts Austria over its deployment of troops along borders to prevent refugee crossings, the EU has approved the government’s 5.4 bn Euro bailout of Monte dei Paschi di Siena – Italy’s 4th largest bank. Following last week’s approvals, Italians are now liable for a total of 20 bn Euros in bank bailout funds.

 

US

Following yesterday’s July 4th market holiday, analysts await tonight’s FOMC meeting minutes of its meeting a fortnight ago. Given poor economic performance, analysts doubt the Fed’s intention to raise interest rates again this year, chances now down to 47%. Against it, hawkish comments from Canada’s central banker, Stefen Poloz are sending the Canadian dollar higher against its southern counterpart.

 

 

 

Commodities

Oil is currently trading sideways after peaking last night at 47.3 (WTI) and 49.55 (Brent) after reports that OPEC’s attempts to stabilize prices are being thwarted by members Libya and Nigeria who are exempt from production cuts.

 

Today’s Events

7:15-8:30 AM GMT Portugal, Spain, France, Germany EU & UK: Markit services & composite PMIs
10 AM GMT EU: Retail sales
2 PM GMT US: Factory orders, followed at 6 by the FOMC meeting minutes
8:30 PM GMT API Weekly Crude Oil stocks
1:30 AM GMT (+1) Australia: Trade Balance

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