📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

Marketmind: Business brakes in June swoon, dollar jumps

Published 2023-06-23, 06:03 a/m
© Reuters. U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/Illustration
USD/CAD
-
LCO
-
VIX
-

A look at the day ahead in U.S. and global markets from Mike Dolan

Just as world stock prices raced ahead this month, broader business activity appeared to be stalling again.

Surprisingly soft readings from flash business surveys for June show that in the euro zone at least overall factory and service sector growth almost ground to halt during the month, with another big contraction in manufacturing.

Equivalent Japanese and British surveys also showed sub-forecast growth and markets nervously await the U.S. version later on Friday. The dollar was the big market mover - surging into the weekend against Asia and European currencies.

With central bankers around the world this week still focused on squeezing the last vestiges of inflation from the system, questions will inevitably be raised about the remarkable resilience of economies to date in the face of tighter credit.

While Federal Reserve boss Jerome Powell slightly softened his tone at the second day of his semi-annual congressional hearings on Thursday - talking of a "careful pace" in any further hikes - he continued to point to two more tightening notches this year even though markets still only see one.

But the hawkishness was more pronounced in Europe where inflation looks slower to retreat. The Bank of England and Norway's central bank both executed stiff half-point rate rises on Thursday, with the Swiss National Bank hiking rates too.

For stock and commodity markets, the latest brush strokes to the combined picture provided another reason to reverse some of June's ebullience, with European stocks on course for their worst week in three months.

Even though Shanghai was closed for a holiday, other Asia bourses were also lower by more than 1% on Friday.

Brent crude oil prices, which are still falling at a rate of more than 30% year-on-year, dropped to a 10-day low.

After a late rally by Wall Street's main stock indexes on Thursday after Powell's comments, U.S. stock futures were back in the red early today.

Compared with Europe, the picture appears more benign stateside - even if still complicated. Inflation is falling faster, real wage growth is back positive, the jobs market is loosening slightly and housing is rebounding somewhat.

So even as stock prices have come off the year's highs, the VIX implied volatility gauge continues to fall away - closing below 13 on Thursday for the first time since January 2020.

Two-year Treasury yields did pop higher to 4.80% on Thursday for the first time in a week, but have slipped back a bit since.

And the Treasury yield curve inversion between 2- and 10-years, often seen as a harbinger of slowdown and recession, deepened below 100 basis points for the first time since the banking stress of early March.

The dollar was the big mover however - hitting its highest for the year against Japan's yen and China's yuan and surging also against the euro, sterling and Swiss franc.

Events to watch for later on Friday:

* Flash June business surveys from the United States and around the world

© Reuters. U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/Illustration

* Atlanta Federal Reserve President Raphael Bostic, St Louis Fed President James Bullard and Cleveland Fed chief Loretta Mester all speak

* U.S. Corporate earnings: Carmax

(By Mike Dolan, editing by Jane Merriman mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.