Markets Today: Still no result on Greece: Any surprise?

If you had come in this morning, looked at the news released on the US economy overnight and how the US bond and equity markets had traded, you would not be surprised at all with the prices on the screen this morning, irrespective of what has and has not been going on as far as Greece is concerned.

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If you had come in this morning, looked at the news released on the US economy overnight and how the US bond and equity markets had traded, you would not be surprised at all with the prices on the screen this morning, irrespective of what has and has not been going on as far as Greece is concerned.

There were two main pieces US economic readings released, the personal income and spending report for May (also with its key PCE deflators) and weekly jobless claims, ahead of non-farm payrolls due in a week.

Personal income rose another 0.5% in May as expected, with consumers stepping out and spending an additional 0.9% after a modest upwardly-revised 0.1% in April.  Take out inflation of 0.3% and real consumer spending rose a solid 0.6%, putting real consumer spending on track for a 3.0% gain in Q2 after Q1’s 2.1% rise.  Consumer spending growth is coming back though with still moderate core inflation.

The headline deflator rose 0.3, but the core PCE deflator by an additional tepid 0.1% for annual growth of 1.2%, still well below the Fed’s 2% medium term target.  So new PCE core inflation trigger for rate lift-off but renewed confidence on growth should deliver more confidence that spare capacity is diminishing that will lift inflation, given time.  Weekly jobless claims remained low and would not have deflected expectations of another solid payrolls report next week.

And there was Greece.  And still there is no deal.  Greece was given till 11am BST to come up with a revised deal.  None was forthcoming by that time though one did surface an hour later.  After discussion that counter proposal was not acceptable to the creditors with the meetings breaking up for another day. No doubt there will be yet more meetings tonight – and quite possibly into the weekend.  Tonight, the EU Leaders Summit continues with the second day of their two day meeting, the Leaders briefed by EuroGroup head Dijsselbloem.  Incidentally, the FT overnight published an article showing the Troika’s counter-proposals to Greece and what they were seeking.  This takes Word’s Tracking Changes to a new level; it’s worth seeing if you have a moment.  Read the FT article here and click on the document excerpt to see the Troika’s changes in their full glory.

Major currency markets have been strictly range-bound overnight with the EUR hardly budging from 1.12 trading in a 30-40 bps range around the figure and the AUD likewise in an even narrower range close to 0.7740, having risen to that level in yesterday afternoon’s trade.  European equities were flat, US equities closed down (Dow -0.4%; S&P –0.3%), while US 10 yr Treasury yields are up 4bps for the day.  German bunds were almost unchanged.  The National Bank of Greece did not seek ELA liquidity assistance from the ECB overnight, so likely reduced daily Greek bank deposit outflows.

Coming up today/tonight

Again, no market sensitive Australian data today. First up is NZ trade, and after that, it’s the Friday Japan data slug that’ll be the focus.  The most market sensitive of these is Japan’s CPI that’s out at 9.30 AEST.  With last year’s sales tax rise out of the annual growth calculations, it’s more representative of the underlying economy. Core CPI (ex fresh food and energy) was +0.4% y/y to April and that’s also the consensus for May.  Japan’s labour market (also 9.30) is expected to show a steady 3.3% unemployment rate.  The University of Michigan consumer sentiment for June is due tonight, this one the later month survey update.  The first half of June reading was 94.6, showing signs of stabilising.  Kansas City Fed President George (nv, hawk) is speaking to a Payments System conference.  EC money supply for May is out in the Europe session; probably won’t be right at the top of the market’s watch list right now.

And there’s Greece.

Overnight

No deal over Greece; markets yawn : Eurostoxx 600 -0.2%, Dax +0.0%, CAC -0.1%, FTSE -0.5%.  Dow -76 points to 17,890, -0.4%, S&P 500 -0.4%, Nasdaq -0.3%, VIX 14.01 +5.7%.  Mumbai -3.5%, Nikkei 225 -0.2% and ASX 200 +0.6%; ASX SPI futures this morning -0.1%.  US bond yields: 2s at 0.69% (1), 10s at 2.41% (+4).  WTI oil at $59.65 (-1.0%), Brent at $63.29 (-0.3%), Malaysian Tapis (yesterday) $65.00 (-1.3%).  Gold at $1172.40/oz (-0.0%). Base metals: LME copper +0.5%, nickel -0.5%, aluminium +0.4%. Iron ore $62.2/t -0.5% Chinese steel rebar futures +0.2%. Soft commodities spot futures: wheat +2.5%, sugar -1.2%, cotton +1.2%, coffee 0.0%.  Euro Dec 14 CO2 emissions at €7.61/t (1.3%). The AUD/USD’s range overnight 0.7696-0.7753; indicative range today 0.7700-0.7765; the AUD/USD is 0.7738 now

US personal income/spending (May) 0.5%/0.9% (L: 0.4%/0.0%; E: 0.5%/0.7%); PCE core deflator 0.1%/1.2% (L: 0.1%/1.2%; E: 0.1%/1.2%

US Jobless claims (w/e 20 June) 271K (L: 267K; E: 273K; Kansas City Fed manufacturing (Jun) -9 (L: -13; E: -9)

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