Good morning,
Asian shares rose on Monday following Friday’s solid session
on Wall Street, while the dollar moved away from recent highs though remained
supported as investors bet that the U.S. Federal Reserve was on track to raise
rates sooner rather than later. However, the Nikkei extended losses,
slipping 0.6% on worrying economic data and reports that Japan's sales tax
increase would proceed as planned. Data released before the open showed Japan's
exports tumbled 10.% in April from a year earlier, in line with expectations
but down for a seventh straight month, reflecting sluggish demand from China
and emerging markets. Imports also fell sharply, which in turn boosted the country's
trade surplus above expectations. On top of this Japan’s Flash
Manufacturing PMI showed activity contracted at the fastest pace in more than
three years in May as new orders slumped. China’s Shanghai is up
0.5%, The Hang Seng 0.66%, whilst the ASX trades 0.19% lower.
In FX Space the US dollar fell against the safe haven yen
after Tokyo's threat to intervene to tame its resurgent currency faced
criticism at the G7 ministers' meeting. Japan last intervened in currency
markets around November 2011, when it tried to stem the yen's rise against the
greenback to keep an economic recovery on track after the quake-tsunami
disaster earlier that year. In a statement which presented a clear rebuff to
Tokyo, the G7 group "underscored the importance of all countries
refraining from competitive devaluation". A stronger yen hurts Japanese
exporters, a key driver of the world's third largest economy, by making their
products relatively more expensive overseas. Elsewhere the start of the week
brought a session of consolidation for currencies with pairs trading within
tight ranges as the market awaits fresh inspiration.
Gold has halted a 3 day slide and trades higher at $1255
whilst Oil slipped on both sides of the Atlantic as investors locked in profits
after a second week of gains. WTI currently sits at $48.15 and Brent $48.53.
So to the day ahead and the week kicks off with a host of
PMI reading from the Eurozone. Manufacturing and Services PMIs (0900 BST)
Sentiment data for manufacturing has been firming in recent months while the
comparable numbers for services remains steady, albeit modestly below levels in
2015. Taken together, these results suggest that Europe will hold on to a
growth bias in the second quarter. The trend may tick lower relative to the first
quarter's relatively robust 0.5% rise in GDP (quarter over quarter rate). But
for the moment, the economic outlook for Europe in the second quarter remains
in the plus column. Yet there’s also hints that the trend is slowing so today’s
flash data on PMIs for May will provide fresh guidance on Europe’s macro trend
at the mid-point for the second quarter.
US Manufacturing PMI (1445 BST) Manufacturing activity in
the US expanded in April, but just barely, according to two national sentiment
benchmarks. In a rare case of unity, both the ISM Manufacturing Index and
Markit’s PMI settled at 50.8 in April — just above the neutral 50 mark that
separates growth from contraction. Two early clues for May, via last week’s
releases from regional Fed banks, point to weakness for this month. The New
York Fed’s Empire State index fell sharply for the May reading, sliding to
negative 9 — a dramatic reversal after April’s positive 9 value. The Philly
Fed’s regional benchmark for manufacturing in May was also in negative
territory. The market consensus calls for a rise in the Manufacturing PMI to
51.0 for May vs. 50.8 in the previous month. Better, but a reminder that the
manufacturing trend remains shaky at best.
Anish S. Lal – VP Sales
FX & Precious Metals, Atom8
Financial Services LLP
2nd Floor, Centenary House, Palliser
Road, London W14 9EQ, UK
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carries a high level of risk and may not be suitable for all investors.
The high degree of leverage can work against you as well as for you.
Before deciding to trade your live account, you should carefully consider your
investment objectives, level of experience and risk appetite. You could
lose more than your initial investment and should not trade with funds you
cannot afford to lose. You should be aware of all the risks associated
with foreign exchange trading, and seek advice from an independent financial
advisor if you have any doubts.
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