Greece Headlines, ECB Press Conference & US NFP Keep Traders On Edge
This morning’s big market news came early in the morning from China. China’s manufacturing sector remained in contraction in May according to a private survey, contradicting an earlier official report which showed it had expanded. The HSBC China Manufacturing PMI improved slightly to 49.2 up from 48.9 previously. A number under 50 signals contraction, while anything above indicates growth. The survey found that new export business had declined at its sharpest rate in nearly two years and that employment had fallen for the nineteenth month in a row. Lower numbers stoked hopes of additional stimulus from the Chinese government, which seemed to support the commodity currencies with the Aussie gaining 11 points to 0.7659 and the kiwi is up by 6 points at 0.7112. The Reserve Bank board meets on Tuesday and is widely expected to keep the cash rate unchanged. The US dollar is trading in the green which seemed to have little effect this morning. The greenback climbed to 97.08.
The weakness on Wall Street late last week reflected continued concerns about the outlook for the ongoing debt negotiations for Greece. Economic activity in the U.S. contracted in the first quarter of 2015, according to revised data released by the Commerce Department on Friday. The report said GDP fell by 0.7% in the first quarter compared to the previously reported 0.2% uptick. The majority of the European markets finished in negative territory. International Monetary Fund Managing Director Christine Lagarde told a German newspaper it is “very unlikely” a comprehensive solution will be reached in the coming days on Greece. The Dow Jones closed at 18126 was down 37 points while the S&P 500 lost 3 points to close at 2121 points and the NASDAQ declined 9 points to 5098. European markets were also negative, London’s FTSE was up 8 points at 7041, Paris’s CAC lost 45 points to close at to 5138 and DAX declined eased 0.8% to 11678.
Today focus will once again return to the euro and the Greek headlines. The euro declined 27 points to trade at 1.0962 head of Eurozone inflation on Tuesday and the ECB rate decision and press conference on Wednesday. Traders are also watching a batch of possible market-moving events later this week, including U.S. manufacturing data due out later in the day and a U.S. jobs report due Friday. The euro was on the defensive on Monday after Greece missed a self-imposed Sunday deadline for reaching an agreement with its lenders to unlock aid, keeping alive fears of a debt default. Without a deal, Greece risks default or bankruptcy in weeks. Sources close to the talks said Greece and its European creditors agreed on the need to reach a cash-for-reforms deal quickly.
It’s difficult to quantify how much the currency market has factored in the possibility of Greece missing the June 5 repayment deadline to the IMF. June 5th will also bring the US Nonfarm Payroll Report along with the OPEC meeting.
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