Powell’s Positive Push – Markets flourish

Asia

Equity markets are in a jubilant mood after China’s Ministry of Commerce yesterday reiterated its belief in continuing negotiations with the US – this after the nation’s Foreign Ministry issued a travel alert for the US, citing “shootings, robbery and theft”.

People’s Bank of China Governor Yi Gang and U.S. Treasury Secretary Steven Mnuchin are scheduled to meet Friday at the G20 meeting in Japan.

After yesterday’s satisfying manufacturing data, this morning’s Caixin Services PMI disappointed with a 2-point drop to 52.7 in May. And, after yesterday’s rate cut, this morning we see the screaming justification in the nation’s Q1 GDP prediction – 1.8%, down a half percent YoY, and it’s worst performance in a decade.

Earlier data has shown that wage growth is down, housing approvals in a slump, and consumer spending in the dumps; and so this morning’s readings had already been priced into a relatively indifferent dollar.

Europe

With an interest rate decision expected tomorrow, the EU yesterday delivered yet another tenth percent drop in unemployment – 7.6% in April – but a further ½% weakening in consumer inflation to 1.2% YoY in May.

In Italy, unemployment remained steady at 10.2%. With Markit’s construction PMI yesterday showing a contraction to 48.5 in May, the pound remains resilient in its week-long rise.

The chairman of the Commodity Futures Trading Commission (CFTC), Christopher Giancarlo, yesterday told an audience at the London Stock Exchange that the UK should avoid isolating itself from Europe’s financial sector in order to become an off-shore financial centre. He said this was also against the interests of the EU.

Meanwhile, across the Channel, Italy’s two deputy prime ministers (Salvini et Maio) discussed breaching the EU’s 3% GDP-Deficit limit with Corriere della Sera.

The EU today will decide whether to fine Italy €3.5 bn for the breach, this as it also readies to bring Athens back to the news for cutting taxes and instituting pre-election fiscal handouts.

US

Data from the US yesterday shows a less-than-expected contraction in April’s Factory orders (-0.8%) and a tenth point increase in last week’s Redbook Index to 1.4% MoM.

ISM’s NY Business Conditions Index is down to 48.6 from April’s 77.3, and the dollar continues trending downward.

All 3 major indexes yesterday closed in recovery mode, their best 1-day performance in 6 months, with the Nasdaq leading at 2.65% on hopes of an upcoming FED rate cut. Chairman Jerome Powell yesterday said that he “act as appropriate” if the administration feels the current trade conflicts are threatening the economy.

Commodities

Oil today continues its 5-day sideways trend after the API yesterday reported a 3.54mB inventories rise, while gold is taking a well-earned rest at 1331.

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