Greece news and chatter continues to permeate markets as Greece gets closer to the first payment to the IMF due June 5.  Reports of continued losses at Greek banks and deposit outflows continues to weigh on sentiment as liquidity remains at a premium.  Christine Lagarde, Managing Director of the IMF, has weighed in with her comments telling a German newspaper that a Greek exit from the euro zone was possible but that this would probably not herald the end of the euro currency. She said such a step would “not be a walk in the park” but would “probably not” mean the end of the euro.  US Treasury Secretary Lew has also offered his two cents worth, saying in a speech in London to the London School of Economics that “it’s a mistake to think that a failure is of no consequence outside of Greece …… we don’t know the exact scope”.  The Euro has been choppy but remains in the mid 1.09s.

Equities eased back both in Europe and in the US also against the background of no particularly compelling data.  The Euro-zone Business Climate Indicator was somewhat softer but US weekly jobless claims popped a little higher, countering to better-then-expected pending home sales in April.

There have also been more Fed speakers, and from both ends of the policy spectrum.  Fed President Kocherlakota, from the dovish end said that lower inflationary expectations were a drag on growth and that a 2015 Fed rate rise would imperil the Fed’s inflation credibility.  James Bullard, more to the hawkish end spoke of the “fantastic” improvement in the labour market and that the Fed’s base case is for rates to rise this year.  He said that unemployment below its natural rate could boost wages and he expects growth to pick up to 3% in the second half, helped by lower gas prices.  Neither of these views is a surprise.

Major currency pairs did not break new ground.  The US$ has been trying to rally further but with little net progress.  After yesterday’s dour Capex report scuttled the AUD, it’s been sold lower overnight, trading this morning at around 0.7650, toward its overnight low.  It would be susceptible should today’s RBA credit and HIA home sales show any unexpected weakness.

Coming up today/tonight

Fist up this morning is NZ building consents for April at 08.45, followed by a slate of reports on the Japanese economy for April, covering the labour market, household spending, and inflation, all at 9.30 and then industrial production at 9.50.  For the inflation figures especially, the y/y comparisons are now longer flattered by the boost to prices from last year’s sales tax rise.  Japan also has less-watched vehicle production, housing starts and construction orders this afternoon, again, all April data.

Locally, we have HIA new home sales for April at 11.00 (apartment sales have been soaring), then RBA credit for April at 11.30, NAB picking a point rise in credit growth from 0.5% to 0.6%.  There’s also the NZ ANZ Business Survey for May at 11.00.

In the European session, there is Swiss Q1 GDP, German retail sales, French consumer spending, a later vintage of Q1 Italian GDP (Prelim: 0.3%/0.0%) and Greek GDP (Prelim -0.2%/+0.1%). India also releases its Q1 GDP report, growth tipped to ease back to 7.2% from Q4’s 7.5%.

Canada has its March month/Q1 GDP, then Q1 US GDP is expected to be revised down to -0.8% from the preliminary +0.2%.  The Chicago PMI is also due along with the late month revised estimate of UoM Consumer Sentiment for May.

The G7 Finance Ministers/ Central Bank meeting in Dresden concludes tonight.

Overnight

Euro periphery bond yields rise: Eurostoxx 600 -0.5%, Dax -0.8%, CAC -0.9%, FTSE +0.1%.  Dow -37 points to 18,126, -0.2%, S&P 500 -0.2%, Nasdaq -0.1%, VIX 13.31 +0.3%.  Mumbai -6.5%, Nikkei 225 -0.2% and ASX 200 -0.2%; ASX SPI futures this morning +0.1%.  US bond yields: 2s at 0.63% (-2), 10s at 2.14% (+1).  WTI oil at $57.99 (+0.8%), Brent at $62.87 (+1.3%), Malaysian Tapis (yesterday) $63.46 (-3.4%).  Gold at $1188.30/oz (+0.2%). Base metals: LME copper +0.2%, nickel -0.1%, aluminium +2.2%. Iron ore $62.3/t -1.2% Chinese steel rebar futures -0.6%. Soft commodities spot futures: wheat +0.4%, sugar +0.6%, cotton +2.0%, coffee 0.5%.  Euro Dec 14 CO2 emissions at €7.22/t (0.1%). The AUD/USD’s range overnight 0.7618-0.7696; indicative range today 0.7700-0.7775; the AUD/USD is 0.7648 now

Euro-zone Business Climate Indicator (May) 0.28 (L: 0.33; E: 0.35)

US weekly Jobless Claims (w/e 23 May) 282K (L: 274K: E: 270K); Pending Home Sales (Apr) +3.4% (L: 1.1%; E: 0.9%)

For full analysis, download report:

• Markets Today: 29 May 2015 (PDF, 321KB)

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