Big Week Starts Slowly

The US dollar is mostly confined to the pre-weekend trading ranges as participants prepare for this week's big events which include the BOE meeting, minutes and new forecasts, and the US jobs report.  The main exception is the Canadian dollar, which remains under pressure following the unexpected contraction in May, and the weekend call for national elections in October.   The Canadian dollar is off nearly 0.5%, with the US dollar at new multi-year highs.  Oil prices are at new six month  lows and also are taking a toll.  

Investors are particularly interested in two equity markets today:  Greece and China.  The Athens Stock Exchange re-opened today for the first time since late-June.  The losses were in line with what the ETFs that were trading in the UK and US showed, off about 20%.  Banks and utilities were hit the hardest with 25% and 27% losses respectively.   Volume reportedly was less than 1% of the daily turnover prior to the closure.  Separately, the Greek manufacturing PMI collapsed to 30.2 in July from 46.9 in June.  New orders plunged to 17.9 from 43.2.  Although manufacturing is a small part of the Greek economy (which is part of its economic challenge) the sheer magnitude of the decline is breathtaking.  

Chinese stocks fell again, with the Shanghai Composite off 1.1% and Shenzhen off 2.7%.  Although the Shanghai market briefly slipped through the 200-day moving average (~3560), it managed to close above it, and  it held above the 3500 level, which it has not closed below since mid-March, and has not traded below since early July. Margin use fell for the sixth session before the weekend, and at CNY860 bln (~$138 bln) is the lowest in four-months.  Shares in an estimated 517 companies are still not trading.  

The economic highlight from the European morning is the new manufacturing PMI readings.  The EMU PMI increased to 52.4 from the 52.2 flash reading, leaving it almost unchanged from 52.5 in June.  The improvement stems from a small upward revision for Germany (51.8 from 51.5 flash) and a stronger Italian report (55.3 from 54.1 in June, vs 53.9 consensus).  France was unchanged from the 49.6 flash.  This follows the 50.7 reading in June.  Spain's PMI slipped to 53.6 from 54.5 in June.  This was a larger pullback than had been expected, but strong Q2 GDP reportedly last week (1.0% quarter-over-quarter) mitigates the disappointment,  

For its part, the UK reported its manufacturing PMI improved to 51.9 from 5.14 in June.  The consensus was for 51.6.  New orders were at 10-month lows, while employment rose. Sterling hardly responded to the news, with the focus on the BOE later in the week.  Sterling has been confined to a third of a cent range today, straddling the pre-weekend close  Dips early in the week are expected to be bought ahead of Thursday.  

The euro too has been confined to narrow ranges, only slightly larger than sterling's range.  Nearby support is seen near $1.0950.  Selling interest is seen near $1.10.   European shares are mostly firmer, whereas bond markets are slightly heavier.  

The dollar has straddled the JPY124 level.  It had fallen to almost JPY123.50 in response to the disappointing US ECI before the weekend.  The Nikkei slipped marginally, less than 0.2%.   More than 70 companies in TOPIX reported earnings today and the story stocks were the main features Japan's manufacturing PMI, which tends not to receive the attention that China, Europe, or US purchasing managers reports do, slipped to 51.2 from 51.4.  

There are several US economic reports today.  The June personal income and consumption data are of little interest as they are also contained in the preliminary Q2 GDP report.  On the other hand, June construction spending is not, and  it could prompt a revision in GDP estimates, which would not likely be announced by economists until more trade and inventory data is made available.  US auto sales trickle in over the course of the session, and while not a market mover, will set help set the tone for other data, including retail sales.  The final reading July manufacturing PMI reading from Markit will be reported, but the real new news comes from the ISM, which is the longer running time series and one in which the market is more familiar.  

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