News
China doesn’t support and France scores an own goal
A day-ahead look at European and global markets from Wayne Cole.
A subdued start to the week in Asia, with Chinese data too mixed to provide any impetus as political uncertainty in Europe lurks in the background.
At least Chinese retail sales exceeded forecasts, up 3.7% for the year, likely driven by the May holidays, but industrial production and fixed asset investment disappointed.
Also worrying was data showing that house prices fell at the fastest rate in a decade in May, highlighting continued tensions in the property sector.
The People’s Bank of China (PBOC) kept its one-year rate unchanged, dashing some speculation of a cut following surprisingly weak data on bank loans. China’s official Financial News reported on Monday that there was still room to cut rates, but there were internal and external policy constraints.
EUROSTOXX 50 futures jumped 0.5% after last week’s defeat, but fallout from early elections in France kept the euro stuck at $1.0700.
It was notable that no fewer than five European Central Bank sources stressed to Reuters that the institution was not planning any emergency purchases of French bonds, knowing that the market will push for exactly that.
The cries for help will only increase if the spread of French bond yields versus bunds widens to 100 basis points, which seems inevitable.
Pressure was also acute against the safe-haven Swiss franc, where the euro was near a four-month low of 0.9528 francs.
It has now fallen 4% in just three weeks and there are investors betting that the Swiss National Bank (SNB) will be forced to cut rates at its meeting on Thursday. Futures imply a 74% chance of a cut to 1.25%, up from 40% the previous week.
At least there’s football to offer a distraction.
Key developments that could influence markets on Monday:
– The President of the ECB, Christine Lagarde, visits the company Pasqal in France. ECB Vice President Luis de Guindos speaks, along with ECB Chief Economist Lane
– June Fed Empire State Survey
– New York Fed President John Williams speaks, as do the Fed’s Harker and Cook
(Reporting by Wayne Cole; Editing by Jacqueline Wong)