Markets Overview

HIGHLIGHTS AHEAD

    News from the Greek referendum on Sunday (3 Jul) will likely reverberatethrough the financial markets on Monday (4 Jul) as Greek votershave comprehensively rejected the creditors’ latest proposal (Asof 7:46am Singapore time, 99.89% of the Greece referendum vote iscounted and the result is a clear win for the “NO” camp at more than61%). The key event for Greece now will be the ECB GoverningCouncil’s decision later today (6 Jul) on its Emergency Lending Assistance(ELA) for Greek banks. The next scheduled meeting of theEurogroup is on 13 July but European Council President Donald Tuskcalled for an earlier Eurozone summit for this Tuesday (7 Jul) while aspokesman for Eurogroup President Jeroen Dijsselbloem said that Eurozonefinance ministers will meet on Tuesday. So the expectation nowis that the ECB may choose to hold off any decision & keep the ELAto Greece banks at current levels and let the Eurozone politicians takethe lead to deal with the referendum result. German Chancellor AngelaMerkel will travel to Paris on Monday (6 Jul) to discuss referendum resultwith French President Francois Hollande.

    Meanwhile, the upcoming week (6-10 July) will likely see a lessprominent US data docket and instead, market attention will beon the US Fed Chair Janet Yellen’s speech in Cleveland (10 Jul),the Reserve Bank of Australia (RBA) (7 Jul) & the Bank of England(BoE) (9 Jul), and the start of the US corporate earnings reportingseason. While both the RBA and the BOE are unlikely to change theirrespective monetary policy stances in July, attention will be paid toBOE comments on Greece and any adjustment to BOE’s forward guidanceon interest rate normalization while RBA may hint on further rateeasing in the near future. Note that the BOE will publish the policy decisionwith its minutes simultaneously starting in August, in an effort toboost the transparency of its decisions.

    The US data docket is pretty lightweight this week in comparison tothe preceding week. The key data that may generate most marketattention are the June ISM non-manufacturing survey (6 Jul) andthe May trade balance data (7 Jul). Other US data over the course ofthe week include the final print for the June Markit services and compositePMI survey (6 Jul), the June labor market conditions index (6 Jul),the June NFIB Small Business Optimism survey (7 Jul), the May JOLTsjobs openings survey (8 Jul), the May consumer credit (8 Jul), the usualweekly initial jobless claims (9 Jul), the Bloomberg consumer comfortsurvey (9 Jul), and the May wholesale inventories & trade sales data(10 Jul). The US corporate earnings report season “unofficially” kicks offwith aluminum producer Alcoa announcing its results for the secondquarter on Wednesday (8 Jul) after US markets close, followed by PepsiCo & Walgreens the next day (9 Jul). The big names to watch will onlybe due the week after.

    In comparison, the economic docket is more substantial in the rest ofthe developed economies. On Monday (6 Jul), we have Japan’s Mayleading and coincident indices, German May factory orders, GermanJune construction PMI, June Markit retail PMI surveys for Eu-rozone and its constituent economies, and Eurozone July Sentix investor confidence. OnTuesday (7 Jul), Japan will release the June official reserves assets data while we will get Maytrade balance from France, and May IP from Germany and UK and June NIESR GDP from UK. OnWednesday (8 Jul), we have a significant Japan data docket including May BOP current accountbalance and trade balance, June bank lending, June bankruptcies, and the June Eco watcherssurvey. Other data include the Bank of France business sentiment survey for June, and UK JuneBRC shop price index. On Thursday (9 Jul), we have Japan’s June prelim machine tool orders, Maymachine orders, Jun M2 and M3 data & June Tokyo average office vacancies, German May tradebalance and UK June RICS house price balance. Finally on Friday (10 Jul), we have Japan’s June PPIand Japan June consumer confidence survey, French June current account balance & May IP data,Italian May IP data, UK May trade balance data, and UK May construction output. The key Australiandata this week will be the June employment report on 9 July while we will also keep an eye onthe New Zealand June house sales data due 10-14 July.

    On Tuesday, June CPI data for Taiwan and the Philippines will be coming due. Taiwan is expectedto remain in deflation at -0.7% y/y, similar to the -0.73% in May while inflation in the Philippineslikely moderated to 1.5% y/y in June from 1.6% in May. Taiwan’s trade data for June will also be announcedand the contraction in both export and import growth are forecast to deepen. The weakexports pose downside risks to Taiwan’s growth in 2Q15.

    The Ministry of Trade and Industry will release the advance estimates of Singapore’s 2Q 2015 GDPanytime between 7 and 14 July. With the still weak manufacturing performance (over Apr-May),we are forecasting 2Q GDP to grow only 1.8% y/y, compared to the 2.6% y/y achieved in 1Q. Assuch, strength will continue to come from the services sectors (a combined share of 67% of GDP)as we are predicting a growth of 3.0% y/y (although this is lower than 1Q’s 3.8% y/y).

    China’s June CPI and PPI are scheduled on Thursday. Headline CPI is forecast to edge marginallyhigher to 1.3% y/y from 1.2% in May while PPI is expected to remain at -4.6% y/y, reflecting thedrop in commodity prices and lack of producer pricing power.

    On Friday, Malaysia’s industrial production for May is expected at 3.0% y/y compared to 4.0% inApril. China’s June new CNY loans, aggregate financing and money supply will be released anytimefrom Friday onwards. Credit growth and money supply could continue to benefit from themonetary easing measures in China.