Stocks and resource currencies hammered heading into service PMI and ADP payrolls

Global markets went into risk-off mode today with capital flowing out of risk markets like stocks, commodities and resource currencies and into traditional defensive plays like USD, JPY and CHF.

European indices finished the day significantly lower with the FTSE down 0.9%, the Dax down 1.9% and the IBEX down 2.9% as Spain called a new election for June 26 to try and resolve a political impasse.

US indices started the day lower as well but managed to rebound and claw back some of their losses in the afternoon before fading into the close to finish down about 1%. On both sides of the border Energy, Materials and Financials were hit the hardest which could leave Australian stocks vulnerable to a correction of yesterday’s gains.

Selloffs in energy and copper also impacted resource stocks plus resource currencies. AUD continued to lead the way down the drain as the commodity impact compounded the interest rate impact with NZD following suit, while CAD and NOK turned downward along with crude oil. Oil could be active around the upcoming API and DOE inventory reports.

The selloff sparked by yesterday’s surprise RBA interest rate cut and Australia GDP forecast downgrade was followed by other signs of a weakening world economy including UK manufacturing PMI diving under 50 into contraction territory and the EC cutting both its GDP and inflation forecasts for this year.

Two US Fed speakers Atlanta Fed President Lockhart and SF Fed President Williams, came out hawkish today with Lockhart calling June a live meeting and suggesting the street is underestimating the potential for a rate increase while Williams said a June increase could be appropriate if the data holds up. While these comments may have provided a headwind early on, in the afternoon they appear to have provided some solace to skittish traders as a US rate hike can also be seen as a vote of confidence in the US economy.

Because a June decision still hinges on data this week’s flurry of US economic announcements could move the markets including tomorrow’s ADP payrolls, factory orders and PMI figures plus nonfarm payrolls. Service PMI reports from around the world may also be closely scrutinized with traders looking for confirmation or rejection of weak manufacturing PMI reports.

NZD could be active today with a number of New Zealand economic reports on the way that could further highlight the divide between weak commodity markets and a strong housing market. Singapore may also attract attention on a better than expected manufacturing PMI report.  


Corporate News

There have been no major announcements after the US close today.


Economic News

Significant announcements released overnight include:

Singapore PMI                49.8 vs street 49.5
Singapore electronics sector        49.5 vs street 49.0

US ISM New York            57.0 vs previous 50.4

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


Upcoming significant economic announcements include:

(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)  

TBA            US Indiana primary results

8:45 am AEST        NZ employment change            street 1.3%
8:45 am AEST        NZ unemployment rate            street 5.5% vs previous 5.3%
8:45 am AEST        NZ average hourly earnings        street 0.5% vs previous 0.2%
10:00 am AEST        NZ QV house prices            previous 11.4%
11:00 am AEST        NZ ANZ commodity prices        previous (1.3%)


12:00 am BST        UK BRC shop prices            street (1.7%)
8:00 am BST        Spain employment change        street (81K) vs previous (57K)
10:00 am BST        Eurozone retail sales            street 2.6%

8:15 am EDT        US ADP payrolls            street 195K

8:30 am EDT        US trade balance            street ($41.1B)
8:30 am EDT        Canada trade balance            street ($1.4B)

10:00 am EDT        US factory orders            street 0.6%
10:00 am EDT        US final durable goods orders        street 0.8%
10:00 am EDT        US final durables ex transport        street (0.1%)

10:30 am EDT        US DOE crude oil inventories        street 0.75 mmbbls
10:30 am EDT        US DOE gasoline inventories        street (0.25 mmbbls)


Service PMI reports:

9:30 am AEST        Australia        previous 49.5
3:00 pm AEST        India            previous 54.3

7:30 am BST        Sweden        street 56.0
8:15 am BST        Spain            street 55.0
8:45 am BST        Italy            street 51.9
8:50 am BST        France            street 50.8
8:55 am BST        Germany        street 54.6

9:00 am BST        Greece manufacturing    previous 49.0
9:30 am BST        UK construction        street 54.0

9:45 am EDT        US Markit        street 52.1
10:00 am EDT        US ISM            street 54.7