Markets in Details: 03 July 2019

3 July, 2019

Lagarde nominated for ECB President role

Yesterday, the head of the IMF, Christine Lagarde, received near-unanimous backing to lead the European Central Bank in Brussels, replacing current president Mario Draghi. Opponents of the nomination cited Ms. Lagarde lack monetary policy and central bank experience, and non-economist background (she is a lawyer) could negatively impact the ECB’s reputation and independence.

Bond yields which had slumped on the news went deeper into negative territory on early trading Wednesday. The yield on Germany’s 10-year bond, the regional benchmark, plunged to -0.397 as traders expect Ms. Lagarde to extend Draghi’s era of loose monetary policy.

Traders expect the UK to cut rates

After a gloomy economic assessment earlier in the week by BOE Governor, Mark Carney, the UK released its Services PMI reading which had slumped to 50.2 in June compared to 51 in May.

The results show yet more evidence that the UK is suffering due to Brexit, and ongoing trade tensions. The composite index which includes construction and manufacturing fell to 49.2, suggesting contraction due to the decline in overall private sector activity.

China service sector weakens

China’s Caixin Services PMI also disappointed, falling to 52 in June from 52.7 in May. Observers say income growth and consumer confidence have been dented by the trade conflict with the U.S. contributing to the weakness in consumption.

China’s Politburo is anticipating for the country’s first-half macroeconomic data, scheduled for release on July 15, to fine-tune economic policies for the remainder of 2019.

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