Archives of “June 2019” month

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IMF raises 2019 US growth to 2.6% from 2.3%

  
Analysis, Economy

IMF out with annual US economic review

  • raises US economic growth forecast in 2019 to 2.6% from 2.3%
  • deepening of ongoing trade disputes or abrupt reversal of recent everyone’s financial conditions pose material risks to US economy
  • says it is especially important trade tensions between US and China are quickly resolved
  • medium-term risks to financial stability are rising
  • abrupt reversal of financial accommodation could 8 US economy
  • Fed should defer further interest rate hikes until there are greater signs of wager price inflation
  • Fed should consider publishing quarterly report was central economic scenario endorsed by Federal open market committee
  • Inflation remains very subdued
  • Sees 2% growth in 2020

The IMF will have a press briefing on the results of their report shortly. You can watch it HERE.

Nikkei 225 closes at flat levels amid mixed mood in Asian markets

  
Analysis, Global Indices

Tokyo’s main index closes lower by 0.01% at 20,745.84

Nikkei 06-06

Equities are having to weigh up Fed rate cuts and global trade tensions – immediate focus being US-Mexico – and that’s causing for a bit of a mixed tone in Asian trading. Gains have been fleeting over the past hour and we’re seeing stocks reverse early gains as trade sentiment sours hopes of a Fed rate cut later in the year.
It’s hard to really make anything of this so perhaps it’s best to look towards US futures, which are down by 0.1%, as that would be more telling of the way things will play out in the European morning.
USD/JPY continues to hold lower at 108.10 currently as the yen extends gains amid more cautious risk sentiment after US-Mexico talks failed to reach a deal overnight.

Reuters polling – most expect USD strength to continue for 6 months

  
Analysis, Forex

Via Reuters :

  • USD dollar strength to continue for more than six months, say majority of analysts

and then, further out:

  • Euro to gain about 4% vs dollar to $1.17 in a year ($1.18 in the previous, May, poll)
Some of the remarks from analysts:
“For now the Fed may refrain – to the benefit of the dollar – from signaling it is preparing to cut interest rates if U.S. economic data continues to hold up over the summer,” said Mansoor Mohi-uddin, senior macro strategist at NatWest Markets. “Beyond the summer, however, the prospects of the Fed staying on hold to the benefit of the dollar may be receding.” 
“We think some developments are now starting to move against the dollar … with expectations that the Fed may need to deliver rate cuts over the next six to 12 months,” said Lee Hardman, currency economist at MUFG. “Yield spreads are now starting to move against the dollar and we just think that kind of dynamic, if sustained going forward, should start to erode some of the appeal of the dollar”. 
“So far, the change in both Fed rhetoric and – even more strikingly – in market expectations, really hasn’t done that much to undermine the dollar,” noted Kit Juckes, chief global FX strategist at Societe Generale. “If the equity bounce and mood improvement in markets lasts, maybe that can continue, but I think the improvement is short-lived, the currency will come under more and more scrutiny.” 
“I think it is the dollar that is the going to be the asset of choice for many investors now in terms of safe haven,” said Jane Foley, head of FX strategy at Rabobank. “The yen will remain the safe haven when things turn really sour, particularly when there is geopolitical risk, but investors have an issue with the yen, and that is there is no yield … I think that factor throws many people back into the dollar.”

Trump: China and Mexico both want to make a deal with the US

  
  Analysis

Comments from Trump:

  • If Mexico doesn’t take steps to control migrants, the tariffs will take place
  • I think they want to make a deal
  • Mexico can stop the migrants
  • We will see what happens today on Mexico talks
“I think Mexico has to step up and if they don’t, tariffs will go on and if they go high, companies are going to move back into the United States,” he said.
Almost everyone assumes it’s a bluff at this point but it will be interesting to see how the market reacts if/when a deal is made.

European stocks rise modestly on the day

  
Analysis, Global Indices

US stocks back higher after dipping into the red

The European major stock indices are ending the day with modest gains.
The provisional closes are showing:
  • German DAX, +0.1%
  • France’s CAC, +0.46%
  • UK’s FTSE, +0.08%
  • Spain’s Ibex, +0.4%
  • Italy’s FTSE MIB bucked the trend and is closing down -0.4%
The benchmark 10 year yields in Europe are lower. Italy, which was higher earlier, reversed the flows and also fell on the day.  German yields remain around the -0.20%.
10 year benchmark yields in Europe are lowerin the US stock market, the markets have been whipping around. Both the S&P and NASDAQ gave up solid early gains, and moved into the red (negative), but are now both higher again.  The snapshot as London/European traders look to exit show
  • the S&P index of 12.72 points or 0.45% at 2816.0
  • The NASDAQ index of 25 points or 0.34% at 7552
  • The Dow is up 148 points or 0.59% at 25480
In the US debt market, the 2 year was down nearly 10 basis points earlier in the day but are currently only down about 4 bps.  The 30 year is higher as the yield curve steepens a bit.
The US yield curve steepens with 2 year yields lower and 30 year yields higher
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