Macro Roundup (Jul 2)

SHANGHAI, Jul 2 (SMM) – This is a roundup of global macroeconomic news last night and what is expected today.

Last night

The US dollar rose to two-week highs as US-China trade tensions eased after the world’s two largest economies agreed to restart trade talks. 

Base metals ended mostly lower as LME zinc lost 1.24%, lead slid 0.85%, copper fell 1%, aluminium dipped 0.14%, nickel declined 2.76%, while tin nudged up. SHFE zinc eased 1.58%, copper slipped 1.29%, tin fell 0.31%, aluminium went down 0.83%, nickel closed 2.26% lower, while lead advanced 0.03%.  

China’s manufacturing shrank unexpectedly in June, notching its worst reading since January, according to the Caixin/Markit survey results.

The Caixin/Markit factory purchasing managers’ index (PMI) for June stood at 49.4, compared with the expected 50.1. PMI readings above 50 indicate expansion, while those below that signal contraction.

The lacklustre reading was due to new orders falling into contractionary territory, pointing to shrinking domestic demand, said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, a subsidiary of Caixin. 

“The gauge for new export orders also returned to contractionary territory, but was better than the levels seen from last April to last December. Front-loading by exporters was likely to support this gauge as the China-US trade relationship was under great uncertainty,” Zhong wrote in a report. 

“Overall, China’s economy came under further pressure in June. It’s crucial for policymakers to step up countercyclical policies. New types of infrastructure, high-tech manufacturing and consumption are likely to be the main policy focuses,” he added.

Manufacturing in the eurozone was weaker than forecast, as the manufacturing PMI fell for the fifth consecutive month, analysts at IHS Markit said on Monday.

The final eurozone manufacturing PMI was assessed at 47.6 for June, falling from the flash assessment of 47.8 for manufacturing released earlier in the month.

Despite reaching a four-month high, Germany remained the weakest performing nation at 45, with Austria, Spain, Ireland and Italy also recording PMI readings below 50, and only marginal growth recorded for the Netherlands.

Unemployment in Germany fell slightly in June compared to the previous month, data from the Federal Labour Office showed on Monday, but underemployment grew, pointing to a weakening in the economy.

Seasonally adjusted unemployment fell by 1,000 to 2.281 million compared to the month before. The unemployment rate remained at 5%.

According to the US manufacturing PMI report published by the IHS Markit, the business activity in the manufacturing sector in June expanded with the headline PMI ticking up to 50.6 from 50.5 in May.

"US manufacturers reported business conditions to have remained the toughest for nearly a decade in June. The past two months have seen the lowest readings since the height of the global financial crisis in 2009," commented by Chris Williamson, chief business economist at IHS Markit.

Separately, the US manufacturing PMI for June surveyed by the Institute for Supply Management (ISM) also beat market expectations. The index dipped to 51.7 from the prior reading of 52.1, but above the expected 51.

Day ahead

Germany will release data on its actual retail sales for May. The sixth OPEC and non-OPEC ministerial meeting will take place today in Vienna, Austria.