The USD is the strongest and the GBP is the weakest as the new trading week begins. The move to the upside comes after stronger US job gains on Friday, but with a higher unemployment rate as well. Over the weekend Saudi Arabia said they would cut production leading to a move higher in oil prices. US treasury yields are higher. Stocks are little changed/mixed.
Overall, the up and down ranges in the major currency pairs are limited. For example, the EURUSD is only 25 pips. The NZDUSD range is only 26 pips, and the AUDUSD is only 31 pips. That is not a lot of price action.
Oil prices are up by $1.70, buoyed by the Saudi Arabia announcement to slash oil production by around one million barrels per day starting from July. This decision aims to further tighten the oil market in the second half of the year. In tandem, the OPEC+ group, including allies like Russia, has agreed to lower overall production goals from January 2024. This strategic move is a bid to lend additional support to oil prices that have been on a downward trajectory due to concerns over a global economic slowdown.
U.S. stock futures are little changed in the premarket trading. On Friday the major indices surged with the Dow Industrial Average rising over 700 points or 2.12% which was the largest increase since 2.13% back on January 6. The gains were spurred by the resolution of the debt ceiling stalemate and a robust May jobs report. Recall jobs showed an increase of 339,000 jobs last month (better than 190K estimate), but with the unemployment rate rising to 3.7% from 3.4%. The data has calmed fears of a looming recession and suggested a potential pause in the Federal Reserve's long-standing interest rate hikes.
Shifting focus to the to China, the Caixin Services index accelerated in May, marking a fifth consecutive month of increase since COVID restrictions were eased earlier in 2023. The index came in at 57.1 versus 55.2 estimate and 56.4 last month. However, last week the manufacturing industry, a vital contributor to China's economy, showed signs of contraction, potentially signaling a slowdown in the country's post-pandemic recovery.
For good order, President Joe Biden successfully averted a looming debt crisis by signing into law a bill that raised the nation's debt ceiling. This decisive action follows weeks of intense negotiations and global market unease. The bill effectively suspends the borrowing limit until 2025 and puts a cap on some government spending, thus staving off a potentially disastrous default.
IN Europe this morning, CPI data in Switzerland was as expected, EU PPI showed continued weakness.
German Trade Balance: EUR 18.4B, better than expectations of EUR 16.1B and higher than previous figure of EUR 14.9B.
Swiss CPI m/m: 0.3%, meeting expectations and an improvement compared to the previous figure of 0.0%.
EUR PPI: -3.2% which is lower than expectations of -3.0% and a further increase from the previous month -1.3 month
- Sentix Investor Confidence (EUR): -17.0, worse than expected -15.2 and a decrease from the previous months -13.1
The monthly PMI services indices in EU and UK came in below expectations in the EU, with Spanish, Italian, French, German, and Eurozone Final Services PMIs all underperforming. The UK's Final Services PMI, did exceed anticipations. When compared to their respective previous figures, a general decline was observed across the board in these services PMIs. The French Final Services PMI remained stable, maintaining its previous level, but no growth was reported.
Spanish Services PMI: 56.7, slightly below expectations of 56.9 and also lower than previous figure of 57.9.
Italian Services PMI: 54.0, worse than expectations of 57.0 and a decrease from the last figure of 57.6.
French Final Services PMI: 52.5, lower than the anticipated 52.8, but the same as the previous figure.
German Final Services PMI: 57.2, slightly below expectations and last figure, both of which were 57.8.
- Final Services PMI (EUR): 55.1, worse than expectations of 55.9 and lower than the previous figure also of 55.9.
Final Services PMI (GBP): 55.2, slightly better than the expected 55.1 and the previous figure of 55.1.
As a reminder, the Fed is in the quiet period ahead of the next Fed meeting on June 14. US Service PMI will be released at 10 AM (52.6 estimate), along with Factory Orders (0.8% estimate).
A snapshot of the markets are showing:
- Crude oil is trading up up $1.70 at $73.44
- Gold is trading down $6 at $1941.56
- Silver is trading down $0.15 at $23.45
- Bitcoin is trading at $26,770 versus Friday's $26,519
In the premarket of US stocks the major indices are mixed after sharp gains on Friday
- Dow Industrial Average is up 5.24 points after Friday's 701.19 gain on Friday
- S&P index up down -$1.87 after Friday 61.37 point rise
- NASDAQ index is down 26 points after Friday's 139.7 a point rise
In the European equity markets, the major indices mixed
- German DAX up 0.14%
- Frances CAC down -0.14%
- UK's FTSE 100 up 0.5%
- Spain's Ibex up 0.43%
- Italy's FTSE MIB down -0.22%
In the US debt market, US yields are higher.
- 2-year yield 4.551% +4.9 basis points
- 5-year yield 3.905% +6.3 basis points
- 10-year yield 3.752% +5.9 basis points
- 30-year yield 3.941% +5.8 basis points
In the European debt market, the benchmark yields are also trading higher despite the weaker ISM data and PPI data this morning:
