Macro Roundup (Jun 25)

SHANGHAI, Jun 25 (SMM) – This is a roundup of global macroeconomic news last weekend and what is expected today.

Last weekend

The US dollar index dipped and closed at 94.52 last Friday.

LME metals saw mixed trading while SHFE metals rose across the board last Friday. LME nickel outperformed with a gain of close to 2%. LME lead increased 0.75%, copper nudged up while aluminium, tin and zinc dipped. LME zinc touched the lowest level since August 2017 last Friday, down close to 5% over the week on inventory growth and anticipation of production increase at mines. SHFE nickel gained over 1%, lead inched up close to 1%.

The People’s Bank of China said it will cut the required reserve ratio (RRR) for some banks by 0.5 percentage point, effective July 5. This is said to unlock some 700 billion yuan of liquidity in a move to support small and micro enterprises.

German Markit manufacturing purchasing managers’ index (PMI) fell further to an 18-month low in June, at 55.9, while services PMI rebounded.

“The big disappoint was manufacturing, where the PMI fell further from last December’s record high to the lowest in one-and-a-half years. A worrying slide in export order growth seen since the start of the year continued into June, with the latest survey’s anecdotal evidence highlighting quieter client interest from the US and China,” according to Phil Smith, principal economist at IHS Markit.

“A clear divergence between manufacturing and services was also seen in the survey’s gauge of business confidence. Services firms are in buoyant mood towards the outlook over the next 12 months, but manufacturers see growth continuing to cool and are their least optimistic for over three years,” he added

The eurozone Markit manufacturing PMI remained stagnant at an 18-month low of 55 in June as increased trade war tariff tensions continued to weigh on the manufacturing sentiment, while services PMI rebounded to a four-month high.

“Price pressures are also on the rise again, running close to seven-year highs. Increased oil and raw material prices are driving up costs, but wages are also lifting higher, in part reflecting tighter labour markets in some parts of the region. Service sector jobs are being created at the fastest rate seen over the past decade, underscoring the extent to which the job market is tightening,” according to Chris Williamson, IHS Markit chief business economist.

The US Markit manufacturing PMI came in at 54.6 in June, the lowest in seven months, compared to the expected 56.1 and the 56.4 in May.

“The flash PMI surveys add to evidence that the US economy is enjoying a strong second quarter. Despite growth cooling slightly in June, the latest numbers round off the best quarter for three years and suggest economic growth has lifted markedly higher than the 2.3% rate of expansion seen in the first quarter to well over 3%,” Williamson said.

Data from Baker Hughes showed that the number of active US rigs for oil fell 1 unit to 862 units over the week ended June 22, the first decline in 12 weeks. Natural gas rigs fell 6 units to 188 units. This brought the overall active rigs down by 7 units, to 1,052 units.

Day ahead

Key factors to watch today include German IFO business climate index for June and the US new home sales for May.