Danske Research Team
Danske Bank A/S
In focus today
Overnight China releases industrial profits for May. Profits grew 4% y/y in April, and we expect it to be roughly the same in May. Stronger export growth and higher commodity prices compared to last year should support profits, but tough competition weighs on profit margins. The next big market mover in China will be PMIs on Sunday 30 June.
In Sweden, markets are eagerly awaiting tomorrow's Riksbank decision. However, markets will have to settle with May PPI numbers released today. The print should be negatively affected by the sharp drop in electricity prices, as also evident in the CPIF. However, we do not expect any significant change to the domestic supply price component of the PPI concerning consumer goods, which is the relevant index for assessing the PPI's impact on CPIF goods prices.
Economic and market news
What happened overnight
In the US, the tech-heavy equity index Nasdaq had a comeback after a Monday marked by widespread losses led by chip maker Nvidia. The Nasdaq rose 1.3%, recovering what had been lost Monday. Asian tech stocks are significantly higher this morning after yesterday's rebound in the US.
What happened yesterday
In the US, Conference Board consumer confidence numbers for June came in at 100.4, thus slightly above consensus expectations of 100.0. This compares to a revised 101.3 in May. Unlike the comparable University of Michigan survey, the Conference Board's measure has consistently exceeded its historical average over the past few years. This is due to the greater emphasis on labour market conditions relative to personal finances (including inflation).
In the EU, sources confirmed to Reuters yesterday that Ursula Von der Leyen would be nominated for another term as Commission President. Former Portuguese Prime Minister Costa would be nominated as European Council President, and Estonian Prime Minister Kallas would be nominated as EU Foreign Policy Chief. All three nominations were widely expected after the four pro-EU factions (S&D, EPP, Renew, and Greens) held on to their majority at the European Parliamentary elections earlier this month. If the trio officially secures the top jobs it will provide some calm to the political uncertainty in the EU that has risen especially on the back of the French election. A second term for VDL means continuity of EU politics while Kallas as high representative means continued support for Ukraine.
The European Union charged Microsoft with breaching anti-trust laws. The EU's executive vice-president in charge of competition policy Margrethe Vestager stated the Commission is concerned 'Microsoft has given Teams an unfair advantage over other video conferencing applications' by bundling Teams together with its Office applications. The charges against Microsoft follow charges brought against fellow tech giant Apple on Monday, which stand accused of stifling competition on its App Store.
ECB will launch interim emission targets for its corporate debt holdings in the APP and PEPP according to a climate disclosure released yesterday. The new targets will be guided by the EU Benchmarks Regulation, including mandatory emission reductions. The targets will be used internally to identify deviations from the desired trajectory, which could lead to 'remedial actions' on a 'case-by-case' basis.
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Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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