Market Brief
In China, the long weekend did not calm down the bears. Mainland Chinese shares are being sold out during the Asian morning despite China’s June flash PMI improved marginally to 49.6 from 49.2 in May and 49.4 consensus. The Shanghai Composite was down as much as -4.9% before moving back to positive territory in European pre-session, up 1.53%. In Japan, the Nikkei 225 extended gains, up 1.87%, for the third straight day while Japan’s June preliminary Markit/JMMA manufacturing PMI drop unexpectedly to 49.9 while analysts were looking for a higher read of 50.5. In Hong Kong, the Hang Seng gained 0.87%, in Australia the S&P/ASX was up 1.32% while in South Korea the KOSPI index climbed 1.30%.
The overall upbeat mood in the stock markets this morning also pulls European equity futures higher with the FTSE up 0.31%, the DAX up 0.80%, the SMI up 0.63% and the S&P 500 up 0.30%. Traders are getting increasingly optimist about the potential agreement between Greece and its creditors after European leaders gave 48 hours to the Greek government to present a final package. After having played for time for the last couple of months, Alexis Tsipras is finally ready to make concessions that would unlock the remaining €7.2bn bailout funds. It’s hard to guess the details of the ongoing negotiations but it likely that Tsipras’ last move toward Russia, coupled with unhoped-for last minute concessions, increased considerably the odds of a mutual agreement before the end of the week.
Yesterday in the US, May existing home sales printed above expectations at 5.1%m/m versus 4.4%, prior revised higher to -2.3%. However, it wasn’t enough to resume the long-awaited dollar rally as Greek negotiations and persistent lacklustre data from the US made traders reluctant to build substantial long USD positions. A new batch of US economic data are due today and we therefore may see the dollar on the rise if indicators hit the bull’s-eye. May durable goods orders are expected at -1%, June preliminary Markit manufacturing PMI is expected at 54.1, May new home sales at 523k while analysts see June Richmond Fed manufacturing index at 4. The dollar is dollar extended gains overnight against most currencies. EUR/USD reached 1.1241 in late Asian session and is now back above the 1.1250 threshold. On the downside, a strong support stands at 1.1220 (previous low) while on the upside, the 1.1467 level still acts as a resistance.
In Brazil, the weekly central survey shows that economists continue to see inflation higher. Markets see the IPCA at 8.97% by the end of the year compared to 8.79% a week earlier. Consequently economists also revised their interest rates projections, median forecast for the Selic rate climbed 25bps to 14.25% while the economy is expected to contract -1.45% in 2015 (-1.35% previous survey). USD/BRL moved sideways yesterday after a two days rally that allowed the dollar to test the 3.10 resistance.
Currency Tech
EUR/USD
R 2: 1.1679
R 1: 1.1459
CURRENT: 1.1268
S 1: 1.1151
S 2: 1.0868
GBP/USD
R 2: 1.6525
R 1: 1.6183
CURRENT: 1.5804
S 1: 1.5681
S 2: 1.5422
USD/JPY
R 2: 125.86
R 1: 124.68
CURRENT: 123.63
S 1: 122.46
S 2: 118.33
USD/CHF
R 2: 0.9503
R 1: 0.9408
CURRENT: 0.9262
S 1: 0.9072
S 2: 0.8986