In a quiet session US and UK equity indices edged a little bit higher buoyed by technology and financial shares while European indices drifted lower weighted down by energy shares following a sharp drop in oil prices. The lack of major data releases has kept G10 currencies contained within recent ranges and in EM, the Turkish Lira recovered some ground after sliding 4.6% on Friday following news of the attempted coupe.

News of SoftBank Group agreement to buy ARM Holdings boosted technology stocks while bank shares got a lift following better than expected earnings results from Bank of America. Meanwhile the fall in oil prices weighted down on energy stocks. WTI and Brent fell 3.1% and 2.9% respectively amid concerns of a growing glut in product markets, particularly gasoline, suggesting a decline in demand for oil by refineries.

As for currencies, GBP has made a rare appearance at the top of the G10 leader board, gaining 0.54% against the USD. The GBP 24bln takeover of ARM by Japanese tech giant Softbank gave the Pound an initial boost while hawkish comments from BoE’s Weale also boosted the currency. Weale said that he wanted to see concrete evidence of a Brexit inspired economic slowdown before considering cutting rates, noting that “I do not have any sense that either consumer or businesses are panic-struck”.

JPY is the weakest G10 currencies in the past 24 hrs despite the fact that markets in Japan were closed for a public holiday. A reversal of safe haven bid post the fail attempted coup in Turkey as well as comments from Suga (chief cabinet secretary) suggesting that the government has no plans to issue deficits bonds for stimulus package appear to have been the main drives for the JPY weakness. Meanwhile the AUD traded sideways overnight and after having a little pop above 76c and it is currently trading at 0.7594.

Core global yields also had a relatively steady overnight session. 10y USTs drifted a little higher to 1.58%, 10y Bunds ended the day 2bps lower at -0.018% and 10y UK Gilts closed practically unchanged at 0.82%.

Coming Up

Australia’s weekly consumer confidence reading kicks off the data/events for the day, followed by the RBA July Meeting Minutes at 11:30 AEST.

As for the minutes, we know from the Statement, early in July, that the Board was waiting for further information that should allow it to “refine its assessment of the outlook for growth and inflation and make any adjustment to the stance of policy that may be appropriate”. Since then key data releases, such as the solid NAB survey and moderate employment growth revealed in the June labour force report suggest the RBA should be comfortably on hold over the near term. However, we also know the RBA is an inflation targeter and following the low Q1 print, the Q2 inflation report due for release next week will be important for the Bank’s assessment of its policy setting.

Later in Europe the ECB releases its Bank lending survey and the German ZEW survey is also due out. The ZEW report is a survey of opinion among finance professionals and given the Brexit outcome from the UK referendum, the current situation indicator is expected to have slipped from 54.5 to 51.8.

Across the Channel, the UK publishes its CPI inflation report for June. The market is looking for a Core CPI print of 1.3% yoy, up from 1.2% previously, so no major inflationary pressures are expected as of yet. However, the sharp drop in the Pound seen post the UK decision to leave the EU suggest the UK inflationary pressures are likely to accelerate as we head towards the end of the year.

The US gets housing starts and building permits for June and the IMF releases its global growth update. Lastly and for New Zealand in particular a GDT dairy auction is due to take place in the early hours of tomorrow morning.

Overnight

On global stock markets, the S&P 500 was +0.24%. Bond markets saw US 10-years +3.78bp to 1.58%. In commodities, Brent crude oil -2.35% to $46.96, gold-0.6% to $1,329, iron ore -2.7% to $56.86. AUD is at 0.7591 and the range since yesterday 5pm Sydney time is 0.7576 to 0.7606.

For full analysis, download report:

•  Markets Today: 19 July 2016 (PDF, 121kb)

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