It has been a quiet start to the week in what could be a quiet week overall. Market movements have been well-contained. The S&P500 is down slightly, US Treasury yields show little net change and the USD is broadly weaker, with the NZD slightly higher around 0.6130. Oil prices continue to push higher.
Newsflow has been light and the economic calendar for the entire week looks light. US PCE deflator data and the first US Presidential election debate, both near the end of the week, look to be the highlights.
Germany’s IFO business climate index fell, driven by the expectations component which was lower for the first time in five months to 89.0, while the current conditions component was steady. The IFO President noted particular weakness in the manufacturing sector, noting automotive companies are concerned about the prospect of a tariff war with China, but also noting domestic problems, with a reluctance to invest.
Marine Le Pen’s likely choice for Prime Minister if her RN party does well in the forthcoming French election, Jordan Bardella, played to the markets and batted away concerns about fiscal recklessness, pledging to stick to “reasonable” budgets if voted in. He said he aimed to repair the country’s “degraded public finances”. Markets continue to pare French political risk premia that have been priced since President Macron called a snap election. The France-Germany 10-year bond spread fell another 3bps, while France’s benchmark index continues to recover previous losses, with the CAC-40 closing up 1%. The Euro Stoxx 600 index rose 0.7%.
Currency market moves have been modest, but the euro heads the leaderboard, with a 0.4% gain from the end of last week to 1.0740. The USD is broadly weaker, and the NZD is slightly higher at 0.6130, but it is a touch weaker on most crosses. NZD/AUD is trading close to 92, while NZD/EUR has edged down towards 0.57.
Yesterday, Japan stepped up verbal intervention on the yen, with vice Finance Minister Kanda warning that authorities stand ready to intervene in currency markets 24 hours a day if necessary and “in the event of excessive moves based on speculation, we are prepared to take appropriate action”. The market ignored his comments as well as the daily warning from Finance Minister Suzuki. USD/JPY met some resistance just under 160 and NZD/JPY is currently 97.8 after trading a fresh 17-year high just below 98.
US Treasury yields show little net movement. The 10-year rate has traded in a tight 4bps range of 4.235-4.275 since the Asian open and currently sits mid-range.
US equity market benchmarks show a mixed performance, with the IT sector underperforming, dragging down the tech-heavy Nasdaq index, while most other sectors are trading positively, seeing the S&P500 barely lower. Nvidia is down over 5%, extending its fall over the past three trading sessions to over 11%.
Oil prices continue to push higher, with Brent crude up 1% to USD86 per barrel, extending its gain for the month to date to 8%. Traders report fresh speculative longs entering the market to add to the short-covering rally after its USD77 low in early June.
Bitcoin is down over 5% and traded below USD60k overnight. This follows a poor run with back-to-back losses of over 4% over the past couple of weeks. The market is currently being buffeted by outflows from exchange-traded products that hold the cryptocurrency.
The domestic rates market was quiet yesterday, with NZGB and swap rates marked down 3-4bps across the curve on global forces.
On the calendar today, Australian and US consumer confidence and Canadian CPI figures are released.
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