Asian stock markets are mixed

June 23, 2016

FX News Today

European Outlook: Asian stock markets are mixed, with Japan outperforming and Nikkei and Topix posting solid gains. U.S. and U.K. stock futures are also moving higher, and oil prices are also higher, although the front end WTI future remains below USD 50 per barrel. The eyes of the world are on the U.K. today, although while the day of the U.K.’s EU referendum is finally here, polling stations won’t close until 21:00 GMT so the result won’t be known until the early hours of Friday. Brexit poll trackers suggest a very tight outcome that could either way, but it seems markets are running with bookmakers who are giving better odds for the “Bremain” camp. This makes a “Brexit” vote even more of a risk and while central banks have stressed that they stand ready to deal with any possible turbulence in markets, the longer term risks for the U.K., but also the rest of the EU are more difficult to predict. The data calendar focuses on preliminary PMI readings for the Eurozone, but will be overshadowed by the referendum datable. Meanwhile the ECB finally reinstated the waiver on Greek bonds once again last night, which means Greek banks will no longer have to rely on ELA funds.

Fed’s Yellen’s Testimony Day II: There were no fresh insights from yesterday’s testimony, which was largely centered on regulation and racial inequality issues rather than pure monetary policy. She remained cautiously optimistic on rising growth and inflation, but continued to note various headwinds too. The Fed is monitoring and assessing the recent loss of momentum in job growth and softness in business spending, as well as the weakness in productivity. On Brexit, the Fed is also monitoring and will act if necessary, but an emergency meeting has not been scheduled for Friday or Saturday. There’s been nothing in the two days of testimony, or last week’s FOMC to suggest the Fed will hike rates as soon as the July 26, 27 policy meeting. But if there are indications the recent slowdown in the economy and especially jobs has been an anomaly, we expect the Fed to tighten in September.

U.S. existing home sales rose 1.8% to a 5.530 mln in May: This was a third straight monthly gain, following April’s 1.3% increase to 5.430 mln (revised from 5.450 mln) and March’s 5.7% surge to 5.360 mln. And, it’s the fastest pace since February 2007. Single family sales were up 1.9%, with condo/coop sales rising 1.6%. The months’ supply of homes was steady at 4.7. It was as low as 3.9 in December. The median sales price climbed to a record high of $239,700 from $230,900 (revised down from $232,500), and is up 4.7% y/y.:

Canada retail sales grew 0.9% in April: As expected, after the revised 0.8% drop in March sales values (was -1.0%). The ex-autos sales aggregate expanded 1.3% in April, much better than projected (median +0.6%), after slipping a revised 0.1% in March (was -0.3%). Higher prices were the driver of nominal sales gains in April: total retail sales gained just 0.1% on a “real” (price adjusted) sales basis. But that is enough to not contradict our expectation for a modest growth resumption in April GDP. We expect April GDP to rise 0.1% after the 0.2% drop in March.

Main Macro Events Today

UK EU Referendum Polling Day; One side likely to reach 50% by 04:00 GMT Friday 23rd – Official results expected between 06:00-08:00 GMT

Eurozone Preliminary PMI’s No real change expected. French numbers, which continue to underperform, could improve slightly, but German readings continue to come off highs. This is expected to show the overall Eurozone manufacturing PMI falling to 51.5 (med 51.4) from 51.5 and the services reading steady at 53.2 (median same). Brexit concerns mean confidence indicators come with a wider error margin than usual and will in any case already been outdated, should the U.K. vote to leave the EU in today’s referendum.

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