US markets finished the month slightly lower last night trading cautiously, ending both the month and the quarter in positive territory.
Despite concerns expressed at the weekend by the BIS that market valuations are not being supported by similarly robust economic performance
, the S&P500 posted its sixth successive positive quarter in a row, its best run since the mid 1990’s when the index posted fourteen positive quarters in succession, from 1995.
With a big week of data coming up starting today, investors are looking for further evidence of an underpinning of recovery in China, the US, as well as the UK
, and hoping that the situation in Europe doesn't lose too much of its early momentum from the first part of this year.
This morning’s Chinese manufacturing PMI numbers
have got the day off to a fairly positive start, coming in at 51, in line with expectations for the official measure, and 50.7 for the HSBC measure, which missed expectations.
If you were to believe some EU politicians last month's decision by the ECB to cut interest rates to negative territory was a necessary step
in an attempt to prevent deflation and in the process weaken the euro. The truth is it has done neither, and to add insult to injury it probably won't have that much effect on the feeble economic recovery either.
Today's final manufacturing PMI's for June from Italy, Spain, France and Germany
are set to show that while Italy and Spain are starting to show some signs of optimism with rising PMI's, the economies of France and Germany are continuing to diverge, with French manufacturing PMI set to be confirmed at 47.8, while Germany is set to remain at 52.4.
On the unemployment front Germany remains well out in front
with the June numbers expected to remain at 6.7%, and a drop of 10k expected.
As far as Italy and the wider EU is concerned the unemployment numbers are set to remain eye-wateringly high,
at 12.6% and 11.7% respectively for May. Youth unemployment is not expected to improve either with Italy's numbers expected to remain at 43.3%.
In the UK recent PMI data have shown some signs of softness in recent months
, but only because they have been at fairly historically elevated levels.
Today's manufacturing PMI numbers have been the exception to the rule above
, and should close off the second quarter of 2014 in a fairly positive manner with a slight softening to 56.7 from 57 in May. When compared to Q1 the performance in Q2 is still on average, a higher reading for the quarter than we saw in Q1, and should assuage some recent concerns that the recent rise in the pound is hurting the manufacturing sector.
Moving on to the US the expectations surrounding the latest ISM manufacturing survey,
for June always have the potential to disappoint as markets look to the employment components for clues as to the latest official employment numbers, which are due out on Thursday.
On this occasion it is likely that there will be extra attention given to the prices paid component of the index for evidence of rising price and inflationary pressure
s, given recent strong CPI and PCE readings. The headline number is expected to come in at 55.4, with prices paid expected to come in at 60.
– the euro looks set for another push higher after breaking back through and closing above the 1.3675 area and the 200 day MA. The next resistance sits at 1.3740, the 100 day MA and behind that in the 1.3780 area. Support also comes in at 1.3560, while below that we also have key trend support from the 2012 lows at 1.2045, which now comes in just above 1.3465.
– yesterday's break out and monthly close above 1.7000 argues for further gains towards 1.7330, with initial resistance at 1.7180. 1.7330 is the 50% retracement of the decline from the 2007 highs at 2.1160 and the lows at 1.3500 in 2009. Only a move below 1.6910 support delays the scenario above. A drop below 1.6910 sees major support all the way back at the 100 day MA at 1.6725.
– the attempts to push through 0.8035 failed last week, and we could well see a drift back towards the recent lows at 0.7960. We need to push through 0.8035 to target 0.8085.The pressure remains on the downside while we remain below trend line resistance from the March highs sitting just below the 0.8110 level, with a longer term target at 0.7880.
– last week’s move below the 200 day MA support at 101.60 opens up the risk for further declines towards the 101.00 area initially. Resistance now sits at 101.80 as well as the range highs just below the 103.00 area and the June high at 102.75.
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