Financial markets review – July 8 2016

Monday 4 July

• ECB released their latest CSPP holdings data which showed the Bank was continuing its strong run rate of purchases and is so far surprisingly on the upside. Total purchases settled by July 1st were €6.8 bn. The average daily run rate since the program started is €425m.
• Euro area PPI printed at +0.6% MoM for May which was higher than expected (+0.3% mom). The other release was the July Sentix investor confidence reading which printed at a below market +1.7 for the headline (vs. +5.0 expected) and down 8.2pts from June. That was the lowest print since January 2015 and the first bit of evidence of the impact of the Brexit vote.

Tuesday 5 July

• In the US The IBD/TIPP economic optimism reading for July fell 2.7pts from June to 45.5 (expectations were for no change) which is the lowest level since November 2015, and further evidence of the drop off in confidence post Brexit. Meanwhile factory orders declined a little more than expected in May.
• Over in Europe the final PMI revisions for June show that the Euro area services reading was nudged up 0.4pts to 52.8 which, when taken with the manufacturing reading, saw the composite print revised up to 53.1 from 52.8 and so making it unchanged from May. Regionally speaking, Germany, France and Italy’s composite prints all gained, but the UK’s have declined marginally.

Wednesday 6 July

• In the US the ISM non- manufacturing (+3.6pts to 56.5 vs. 53.3 expected) surprised to the upside after coming in at the highest level since November last year. In terms of the details the new orders component surged an impressive 5.7pts to 59.9 and business activity was up to 59.5 from 55.1. There was much focus on the employment component too, ahead of payrolls which after tumbling to 49.7 in May, recovered to 52.7 in June.

• The latest trade balance reading for May revealed some further widening in the deficit to $41.4bn from $37.4bn in April, reflecting an increase in imports during the month. Meanwhile the services PMI was revised up slightly in the final June revision to 51.4 (from 51.3) The Atlanta Fed downgraded their Q2 GDP forecast to 2.4% from 2.6% following that trade report.

• In Europe the only data of note came from Germany where factory orders disappointed in May (0.0% MoM vs. +1.0% expected).

Thursday 7 July

• In the US ADP employment change report came in a little better than expected at 172k (vs. 160k expected), whilst Initial jobless claims (254k vs. 269k expected) continue to remain supportive too with the four-week average of 265k now the lowest since April.
• In Europe, as expected that soft German factory orders data on Wednesday resulted in a negative read through to the May industrial production data released yesterday (-1.3% MoM vs. +0.1% expected). That took the YoY rate down to -0.4% from +0.8%. Over in the UK, industrial production printed a little better than expected, albeit still negative in May (-0.5% MoM vs. -1.0% expected).

Friday 8 July

• The US non-farm payroll for Jun 2016 came in strongly at 287k, beating market expectation of 175k and is the largest monthly gain for 8 months, whilst the unemployment rate for US is in line with expectation at 4.9%.
• In the UK the trade balance for May showed a smaller than expected deficit of £9.9bn, compare to a forecast of £10.7bn, in details the trade deficit from non-EU members was at £2.57bn for Jun, below the expectation of £2.9bn.