Sentiment towards risky assets improved further after the ECB meeting and some US economic data. The ECB hiked its policy rate by 25bp to 1.50% and signalled another hike is possible within the next few months, The former outcome was widely expected, while the latter was only slightly surprising. What did surprise markets was the ECB’s announcement it would accept even junk-rated Portuguese debt as collateral for ECB loans. US private employment data also sprung a bullish surprise, and helped push the S&P500 1.2% higher to a fresh twomonth high. The CRB commodities index is up 1.8%, oil +1.9%, and copper +2.3% to a threemonth high. US 10yr treasury yields rose 6bp to 3.17 after the above news, and then settled in NY at 3.15.
The US dollar index spiked after the US data but fell on the ECB collateral news for little net change on the day. E
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A 1.1 percent decline in Eurozone retail sales is the latest indicator to suggest the Eurozone economy is likely entering a weak period – the fact that Germany led the way in taking retail sales lower is cause for outright concern. If the Eurozone’s dominant economy is indeed weakening, this could lead to a shift in tone from the region’s central bank.
For the past two months European Central Bank officials have raised expectations of a rate hike with President Jean-Claude Trichet all but committing to a rate hike later this month with more to follow. This
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The number of new claims for US unemployment benefits declined by a seasonally-adjusted 14,000 to 418,000 new applications. This was a better result than expected and is expected to give markets a lift today. Tomorrow’s Non-Farm Payroll report is expected to show 90,000 new jobs were created in June compared to 54,000 in May.
The number of people on emergency unemployment benefits declined 44,183 to 3.26 million in the week ended June 18, the latest week for which data is available. A total of 7.46 million people were claiming unemployment benefits during that period under all programs, down 61,327 from the prior week.
– The total number of building approvals in Australia plummeted a seasonally adjusted 7.9 percent in May compared to the previous month, the Australian Bureau of Statistics said on Monday, standing at 12,290. That missed by a mile forecasts for a decline of 0.5 percent on month following the 1.3 percent contraction in April.
The news was even worse on an annual basis as approvals plunged 14.4 percent versus expectations for a 5.6 percent fall following the 11.5 percent contraction in the previous month.
The seasonally adjusted estimate for private sector houses approved rose 0.7 percent in May following a fall of 2.3 percent in the previous month.
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The Bank for International Settlements (BIS) warned yesterday that ultra-low interest rate policies represent a threat to the global financial system. According to the BIS, low borrowing costs have promoted asset bubbles that are now verging on the unsustainable and are eerily reminiscent of the property price collapse that ushered in the recession in 2007.
During the recession many central banks resorted to an “easy money” policy to promote financial activity. As growth has slowly returned to the afflicted economies, central banks are easing interest rates higher but they remain for the most part well below the pre-recession norm.
There are hold-outs to the trend however with the U.S. Federal Reserve refusing to budge from its record low rate capped at just 0.25 percent. Eve
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Oil N’ Gold
More Analysis and Technicals on Crude Oil, Natural Gas, Gold & Silver
Investors remain thrilled by approval of the Greek austerity plan which is a must for getting funding from the EU/IMF. Stocks in Asia climb for a 5th consecutive day with the MSCI Asia Pacific Index gaining more than +1%. Commodities move sideways after volatile trading last Friday and it will likely be the case for today as the US market is closed for Independence Day holiday.
Oil prices initially plunged last Friday as manufacturing PMIs in various countries disappointed. China reported the latest PMI data today. Both the official data and the one complied by HSBC indicated the country’s manufacturing sector has slowed down in June.
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