U.S. Jobs In Focus, Greece On Standby Until Sunday

As Greece walks to July 5th referendum to decide whether or not to accept a third bailout package from the EU, we do not expect any significant development until Monday and shift our attention to the US.

US added 256K nonfarm jobs in average over the past 15 months

Good news came out of the US yesterday. The US economy added 237K new private jobs in June according to the ADP report. Due today (at 1330 BST), the nonfarm payrolls are also expected to secure a sound 230K in June. The 12-month rolling correlation between the ADP and NFP reads is a considerable 57%. Based on this statistic and given that the private jobs improved from 201K to 237K over the past month, there is little reason for a significant deterioration in the NFPs from past month’s 280K.

In average, the US economy added 256K jobs each month since March 2014, which marked the beginning of a long strike of NFP reads exceeding 200K (except March 2015). The consensus of 230K is, in this context, a reasonable and even a half-hearted anticipation. There is room for a positive surprise, in which case, the Fed hawks will encourage the US dollar higher against its G10 and EM peers before the weekly closing bell.

Surprise cut by Riksbank

Swedish krona spiked to a month high against the US dollar and the euro amid Riksbank unexpectedly cut its benchmark rate by an additional 10 basis points to -0.350%. ‘Uncertainty abroad has increased and it is difficult to assess the consequences of the situation in Greece. Since the repo-rate decision in April, the krona has also become stronger then the Riksbank had forecast and the development of the exchange rate remains a risk to the upturn in inflation’ said the bank as justification.

The ECB’s aggressive monetary expansion constraints its European peers to actively or pro-actively loosen their own policy, keeping the entire continent stuck within a depressed monetary loophole.

Across the Channel, the UK’s construction activity expanded more than expected in June. The improvement in UK’s macro data is expected to push at least two of nine MPC members to the hawkish camp at next week’s meeting. Given that the G10 central banks are back to an unorthodox policy bias, the BoE has certainly no need to rush toward normalisation. However, the divergence between the BoE and ECB policy outlooks suggest that it is just a matter of time before the 0.70p is reached.

LCG Head Analyst Brenda Kelly comments on equity movers:

Persimmon (LONDON:PSN) (-1%): First half revenues increased by some 12% with higher volumes and selling prices in the housing sector. The Tory led government seems to have aided consumer confidence with the average selling price increasing by 4%. The share price has seen a lift of 42% since January and given that the company have acquired 11,500 new land plots across the UK, the outlook seems upbeat. Average broker rating is a hold however, with an average price target of 1869p.

Dixons Carphone (LONDON:DC) (+3.12%) : the FTSE's top climber today has surged by 3.12% on news that it is to partner with Sprint and open a number of Sprint branded stores across America. It’s said to begin with 20 stores and if successful will roll out up to 500 stores.

Intertek Group (LONDON:ITRK) (-2.97%) a broker downgrade from Jeffries and a reinstatement to neutral from Bank of America (NYSE:BAC) has sent the stock down to the bottom rung of the UK benchmark. Lots of brokers have been weighing in on this stock lately. The provider of quality and safety solutions is on a consensus hold rating now.