Macro Roundup (Jun 2)

SHANGHAI, Jun 2 (SMM) – This is a roundup of global macroeconomic news last night and what is expected in the day ahead.

The US dollar fell against a basket of rivals for a fifth straight trading day on Monday as risk sentiment improved on optimism that the worst of the economic downturn caused by the global spread of the coronavirus may be in the past.

US manufacturing activity eased off an 11-year low in May, the strongest sign yet that the worst of the economic downturn was behind as businesses reopen, though the recovery from the COVID-19 crisis could take years because of high unemployment.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity rose to a reading of 43.1 last month from 41.5 in April, which was the lowest level since April 2009. A reading below 50 indicates contraction in manufacturing, which accounts for 11% of the U.S. economy.

It comes after China’s Caixin/Markit Purchasing Managers Index (PMI) showed a marginal but unexpected improvement in factory activity last month.

The Caixin/Markit PMI for China’s manufacturing sector came in at 50.7 for May, up from the April reading of 49.4. PMI readings above 50 indicate expansion, while those below that level signal contraction.

In the eurozone, the manufacturing PMI recovered somewhat in May from April’s record low, although factory activity still contracted heavily. Japan and South Korea, however, saw the sharpest falls in activity in more than a decade.

According to IHS Markit, the eurozone’s manufacturing PMI, which dropped to 33.4 in April, rose to 39.4 in May

Chris Williamson, a chief business economist at IHS Markit, said with the lifting of pandemic restrictions in the coming months, manufacturing sector will boost.

US stocks rose on Monday, continuing to draw support from optimism surrounding economic reopenings, while rising US-China tensions and civil unrest around the US are headwinds against risk appetite.

It was reported that China has told state-owned firms to halt purchases of soybeans and pork from the US, raising concerns that the trade deal between the two powerhouses could be in jeopardy. The move comes after US President Donald Trump said on Friday he was directing his administration to begin the process of eliminating special treatment for Hong Kong, in response to China’s plans to impose new security legislation in the territory.

As for protests in the US over police brutality, Trump said in a last-minute address from the White House Monday evening that he will deploy the military if states and cities failed to quell the demonstrations.

Reports that OPEC and Russia were close to a deal extending output cuts shielded oil prices against pressure from rising US-China tensions on Monday.

It was reported that the Organization of the Petroleum Exporting Countries and Russia, known as OPEC+, were moving closer to a compromise on extending oil output cuts and were discussing rolling over the curbs one to two months.

LME nonferrous metals, except for aluminium, closed higher on Monday. Copper and zinc surged 1.9%, tin jumped 1.8%, nickel rose 1.7% and lead climbed 1%.

SHFE nonferrous metals performed similarly in overnight trading. Lead rose 1.5%, copper climbed 1.1%, nickel advanced 1%, zinc crept up 0.9% and tin gained 0.3%, while aluminium edged down nearly 0.1%.

The Reserve Bank of Australia is set to announce its interest rate decision at 12:30 p.m. HK/SIN.