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    Positive sentiment fades away

    Global stocks headed lower open on Thursday morning as traders eyed the morning’s release of data as well as comments from Mario Draghi, President of the European Central Bank.

    One of the highlights of the Asian session on the data front was CPI and PPI from China for May. CPI started accelerating in October, from 1,3% YoY to 2,3% in April, but this new reading brought it back to 2%, while consensus expected it to scale back by only a notch. However the surprised came from food prices, so is not that important. PPI rebounded from -6% YoY in late 2015 to -3,4 in April and when it comes to May we saw step up the pace of moving out of deflation. It went straight to -2.8% (consensu was -3.2%) and already has three highly positive MoM readings in a row.

    RBNZ did what the consensus expected, that is nothing. The main rate is still 2,25%. There could be further easing on one of the next meetings, but hot real estate market threatening the financial stability, is an important obstacle. The bank indicated that NZD went above it fair value (strongest in a year), but the reference to fx being just a statement of facts sounds different than before, when depreciation was ’required’ to see a better CPI outlook. 

    The machine tool orders published a couple hours later showed -25% YoY in preliminary May reading, somewhat better than -26.3% for April, but this does not change the fact that the results are ugly for a year now. But yen is not exactly a currency that could suffer from very weak domestic data. While Nikkei 225 lost almost 1%, USDJPY started to trend lower two days ago just below 108 and continued to do so with this data flow.

    YouGov poll prepared for Times had 43% supporting the status quo and 42% for Brexit. This particular data provider showed an advantage of the Brexit option of late so this result should have given some relief to GBP.  GBP tries to discount every single new peek at the preferences of Britons, which in these circumstances makes it zigzag today. 

    Any person acting on this information does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.


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