SMM News: although the trade situation improved after the G20 summit over the weekend, the global manufacturing industry was hit again at the end of the second quarter, indicating that the outlook for global economic growth has worsened as international trade tensions continue to brew. Manufacturing activity in Asia and Europe shrank in June, while manufacturing indicators in the United States fell for the third month in a row, according to a report on Monday.
South Korean exports fell nearly 14 per cent, Japan's short-term confidence index fell to a three-year low, and German manufacturers faced weak external demand. Still, global stock markets rose as investors were inspired by trade optimism after the G20 summit in Japan.
The economic outlook is bleak
But if economic data continue to weaken, the broader gloom will not be easy to dispel. As a result, Morgan Stanley cut its forecast for global economic growth, saying global trade uncertainty remained, which would be a drag on the economic outlook.
For many, the situation is bad enough that the world's major central banks need to act. Investors are pricing the Fed to cut interest rates this month, and Goldman Sachs said the ECB would cut deposit rates by 20 basis points and restart asset purchases in September.
"focus on trade, maybe tensions have eased," said Rabobank, head of foreign exchange strategy at the Cooperative Central Bank of the Netherlands. But if we take a step back and look at the economic data, what will we see? Bad news from the short view survey, as well as another bad export figure from South Korea. All of this is very worrying, and it is yet another testament to the slowdown in global economic growth. "
Poor performance of manufacturing data in the UK and the US
In the US, the Institute for supply Management's manufacturing index fell to its lowest level since October 2016, but the decline was smaller than analysts had expected. The IHS Markit manufacturing index is better than the initial value, but it is still close to a 10-year low.
The IHS Markit manufacturing index showed general weakness. Swiss manufacturing indicators shrank the most in seven years, and Spain, long the leader of the euro zone, also recorded its worst data since 2013. Manufacturing in the euro zone as a whole shrank for the fifth month in a row, and challenging economic conditions led to another drop in orders.
In the UK, Markit manufacturing PMI fell short of expectations in June, breaking the lowest level since February 2013. Specific data show that the manufacturing PMI is only 48, less than the expected 49.5, the previous value is 49.4.
Markit economist Duncan Brock pointed out that the decline in British manufacturing continued, falling for two months in a row, the biggest contraction in seven years; the aftermath of the delay in Brexit, the weakness of the domestic economy and the decline in exports have dealt a triple blow to new orders. All signs are that the data will continue to slide next month unless the uncertainty of Brexit disappears.
The focus is on the Fed to cut interest rates
As the trade outlook improved, the dollar index rose on Monday, refreshing an eight-day high of 96.87. Spot gold hit a new low of $1381.9 an ounce since June 20. the dollar strengthened and investors flocked to risky assets, depressing safe-haven gold.
Although the market sentiment is optimistic on the surface to the disadvantage of gold prices, but according to the futures market, the market is still expected to cut interest rates in July 100%. Fund managers believe that while the trade situation has made progress, it is not enough to shake up a popular deal: shorting the dollar.
Aberdeen Standard Investments said overall market expectations for the Fed's rate cut had not changed, meaning the market would continue to sell dollars.
Since the Fed hinted at being open to cutting interest rates for the first time in more than a decade, the dollar has fallen about 2 per cent from its May high. The swaps market suggests that investors expect the Fed to cut interest rates by 25 basis points in July, ushering in a new easing cycle.
Pay attention to the June non-farm payrolls report
In addition, the most important economic data for the United States this week will be the June non-farm payrolls report. Although the number of jobless claims rose slightly earlier this month, it still shows that the rate of layoffs is very low.
At the same time, hiring activity is likely to remain relatively low, according to Markit's composite PMI index. The index shows that private sector employment is growing at its slowest pace in more than two years.
Still, jobs are expected to rise slightly to 150000 in June, above the 110000 per month that the Atlanta Fed believes will be enough to absorb new entrants to the labour market and keep the unemployment rate stable for a long time.
Guard against the peak of oil prices
Huitong warned that the Organization of Petroleum Exporting countries (OPEC) extended the production cut to March 2020 at a meeting in Vienna, pushing oil prices above the $60 mark at one point, refreshing a five-week high. But it then fell back as concerns about oversupply persisted as the poor performance of manufacturing PMI in various countries continued.
From a technical point of view, the 60 barrier is still the strong resistance level of the recent oil price rise, and the short-term crude oil has the demand of falling back to adjust and make up the gap. On the four-hour chart, there are signs of a short-term pullback after the oil price rose on track, the Boleyn belt is in a state of contraction, and the oil price is weak in the day, now at 58.74 US dollars per barrel, down 0.60% for the day, and further weakening to pay attention to the 58.50-58.20 range, which is also the closing position on Friday.
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