Morning Report – Wednesday July 1st

Main Headlines

Germany takes over the EU’s rotating six-month presidency today as the bloc’s economy is forecast to contract 7.4%. The region’s recovery plan will dominate the near-term agenda, and will be made all the more complicated by the financial hole left by Britain’s departure. It is suggested that this could increase the probability of a Brexit deal being agreed by persons familiar with the matter.

Anthony Fauci warned lawmakers that coronavirus cases in the U.S. could rise to 100,000 a day if action is not taken. The infectious disease specialist said he’s hopeful a vaccine will be ready by early 2021, but for now the nation is “going in the wrong direction.” Goldman estimated 40% of the U.S. has reversed or halted reopening and said nationally mandating face-mask usage might allow economies to stay open.

Stocks in Asia started the new quarter in mixed trajectory, with Japanese shares falling after terrible Tankan data and a rally in the yen. Chinese equities rose. Hong Kong is closed for a holiday. S&P 500 futures slipped after the gauge rounded out a 20% Q2 surge. Treasuries fell. Oil rose with gold and base metals.

GBP

Sterling rebounded yesterday from one month lows exacerbated by worse than expected UK GDP data, although analysts said its recovery was due to some quarterly rebalancing rather than any improvement in sentiment. Boris Johnson announced a plan to fast track £5 billion of infrastructure investment and slash property planning rules to revive the UK economy but that had been expected and had little impact.

EUR

The euro is trading in a narrow range as the market awaits data on Germany’s manufacturing sector, retail sales, and the jobless rate to gauge the health of the eurozone economy. The euro looks stable, but there are questions about Brexit and the pace of economic reopening, which means the euro could soon be seen as overvalued.

USD

The dollar is firm this morning ahead of data expected to show U.S. manufacturing activity and hiring continued to recover from the economic shock caused by the coronavirus pandemic. Investors also await the closely watched U.S. nonfarm payrolls report tomorrow, which is expected to show the economy added 3 million jobs in June.

Main Economic Data/Central Banks/Government (All Times BST)

7:00 a.m.: Germany May retail sales
7:00 a.m.: U.K. June nationwide house prices
8:00 a.m.: Turkey June manufacturing PMI
8:15 a.m.: Spain June manufacturing PMI
8:30 a.m.: Riksbank rate decision
8:45 a.m.: ECB’s Panetta speaks
8:45 a.m.: Italy June manufacturing PMI
8:50 a.m.: France June manufacturing PMI
8:55 a.m.: Germany June manufacturing PMI, unemployment
9:00 a.m.: Euro-Area June manufacturing PMI
9:30 a.m.: U.K. June manufacturing PMI
10:00 a.m.: Riksbank press conference
12:00 p.m.: BOE’s Haskel speaks
13:15 p.m.: ADP Employment
3:00 p.m.: ISM Manufacturing PMI
3:00 p.m.: ISM Prices Paid
3:30 p.m.: EIA oil inventories report
7:00 p.m.: FOMC minutes