A number of developments have occurred overnight providing more evidence of a slowing world economy. Manufacturing PMI reports for the UK and China came in below expectations and below 50 in contraction territory. Australia’s central bank announced a surprise interest rate cut while its government announced a bigger budget deficit in a bit to get its struggling economy going. In Europe, the EC cut its GDP and inflation forecasts for the year, indicating monetary stimulus to date isn’t really working. Finally Spain called new elections for June 26 to try and break a political stalemate, to be held just days after the June 23 Brexit referendum.
It’s a light day for economic news in north America, but another busy one for earnings reports. Two reports out of Canada this morning reflect what we would expect to see in a lower energy price environment with energy producers like EnCana struggling but energy consumers like WestJet doing really well. Pfizer and Molson Coors have put up big numbers today.
Crude oil is trading down 1.5% in what still looks like an orderly correction of recent gains. RUB is down a similar amount but CAD and NOK are still refusing to participate in the slide indicating traders still see this as normal trading and not a significant change in trend so far.
To no surprise given the news, the worst performer in currency markets overnight has been AUD which has plunged 1.3% on the rate cut, a development that would be welcomed by the RBA who had been concerned about their dollar’s recent rise. Interestingly the money flowing out of there hasn’t gone into USD, other defensives have been the main beneficiaries have been JPY and CHF so far. Gold took another run at $1,300 but once again failed to get through. GBP is steady while EUR continues to climb a particularly strong performance given gloomy fundamental news on the continent today.
In addition to more earnings reports we may also see traders position ahead of service PMI reports and US ADP payrolls due overnight and tomorrow morning.
WestJet Airlines $0.71 vs street $0.65
EnCana $0.12 vs street $0.18
Molson Coors $0.54 vs street $0.42, sales $657M vs street $624M
Pfizer $0.67 vs street $0.55, raises 2016 guidance to $2.38-$2.48 from $2.20-$2.30
Halliburton $0.07 vs street $0.04
Significant announcements released overnight include:
Australia RBA interest rate Surprise 0.25% cut to 1.75%, no change had been expected
Australia budget GDP forecast cut to 2.50% from 2.75%
Australia budget CPI forecast cut to 2.00% from 2.25%
EC EU GDP growth forecast   cut to 1.6% from 1.8%
EC EU inflation forecast cut to 0.2% from 1.0%
UK manufacturing PMI 49.2 vs street 51.2
China Caixin manufacturing PMI 49.4 vs street 49.8
Sweden industrial production 5.5% vs street 3.4%
Eurozone producer prices (4.2%) vs street (4.3%)
Australia building approvals (6.5%) vs street (14.0%)
Upcoming significant announcements include:
10:30 am EDT FOMC Mester speaking
12:30 pm EDT Bank of Canada Poloz speaking