Written Commentary
- Flash PMIs dominate data run, as worse than expected UK PSNB and Singapore CPI are digested; US New Home Sales and regional Fed surveys, Canada PPI ahead; US debt ceiling talks still key, further busy run of central bank speakers and debt auctions
- PMIs: Manufacturing expected to remain largely in contraction, Services upbeat, but losing a little momentum?
- US New Home Sales expected to dip after March surge, NAHB hints at some upside risks
EVENTS PREVIEW
The flash PMIs for Japan, the Eurozone, UK and USA dominate the statistical schedule, with the worse than expected UK PSNB budget data to digest ahead of Canadian PPI and US New Home Sales and more regional Fed surveys, but all of these struggle to vie with the ongoing US Debt Ceiling theatrics, and Fed speakers continuing to push back on market rate expectations. The latter have already shifted to start to discount another rate hike in July, but still anticipate rates being cut in November, which in itself borders on the schizophrenic (see chart). In that vein, central bank speakers are again plentiful, while there are rate decisions in Hungary (no change) and Nigeria, with the CBN hiking rate by a further 50 bps to 18.50%. Govt bond supply is very plentiful with UK 29-yr I-L, Dutch 5-yr, and German and US 2-yr on offer.
Following improved readings in Japan, the remaining G7 flash PMIs are expected to show Manufacturing contracting in the Eurozone and UK, and flatlining in the US, while Services should continue to expand at a reasonable pace, but slowing vs April in all these major economies. A close eye needs to be kept on price indices, after some upticks were observed in April readings, particularly Services. In the US, New Home Sales are forecast to drop 2.0% m/m to a solid 663K SAAR pace after surging 9.6% m/m in March, with the ‘strength’ seen in the latest NAHB survey imparting some modest upside risks.
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