Overseas stock markets have resumed their downward course overnight. In Europe this morning, the Dax has fallen 1.75% while the FTSE is down 1.4% on its return to trading from a holiday. US index futures for the Dow and S&P are down about 0.7%. Japanese stocks remain closed for holidays. Australia stocks jumped 1.2% on stimulus news.
A number of developments have occurred overnight providing more evidence of a slowing world economy. Manufacturing PMI reports for the UK and China came in below expectations and below 50 in contraction territory. Australia’s central bank announced a surprise interest rate cut while its government announced a bigger budget deficit in a bit to get its struggling economy going. In Europe, the EC cut its GDP and inflation forecasts for the year, indicating monetary stimulus to date isn’t really working. Finally Spain called new elections for June 26 to try and break a political stalemate, to be held just days after the June 23 Brexit referendum.
It’s a light day for economic news in north America, but another busy one for earnings reports. Two reports out of Canada this morning reflect what we would expect to see in a lower energy price environment with energy producers like Encana (TO:ECA) struggling but energy consumers like WestJet (TO:WJA) doing really well. Pfizer (NYSE:PFE) and Molson Coors (NYSE:TAP) have put up big numbers today.
Crude oil is trading down 1.5% in what still looks like an orderly correction of recent gains. RUB is down a similar amount but CAD and NOK are still refusing to participate in the slide indicating traders still see this as normal trading and not a significant change in trend so far.
To no surprise given the news, the worst performer in currency markets overnight has been AUD which has plunged 1.3% on the rate cut, a development that would be welcomed by the RBA who had been concerned about their dollar’s recent rise. Interestingly the money flowing out of there hasn’t gone into USD, other defensives have been the main beneficiaries have been JPY and CHF so far. Gold took another run at $1,300 but once again failed to get through. GBP is steady while EUR continues to climb a particularly strong performance given gloomy fundamental news on the continent today.
In addition to more earnings reports we may also see traders position ahead of service PMI reports and US ADP payrolls due overnight and tomorrow morning.