Markets Overview

The US economic data docket finally gets a mention for the first timethis week on Wednesday (22 Jul) and the focus is on the US housingmarket with the May FHFA house price index and the June existinghomes sales on the tap. But the key focus for the financial marketswill likely remain on the flood US corporate earnings reports thisweek where more than 100 S&P 500 companies are reporting andthe busiest days are Wednesday (22 Jul) and Thursday (23 Jul).

    As for central bank action, the focus will be on the Reserve Bank ofNew Zealand which will have their monetary decision on early Thursdaymorning (23 July, 5am Singapore time) and we (together with themarket consensus) expect the RBNZ to most likely cut policy rate by25bps to 3% (from 3.25% presently) especially in light of the collapse inmilk prices dampening the already slower growth outlook for the NewZealand economy. For the rest of the developed economies, the Julymeeting minutes from the Bank of England due on Wednesday (22Jul) will bear close watching especially after the recent comments fromBOE governor Mark Carney and BOE senior official, David Miles, alludingto the closer timeline for BOE to start hiking rates. And accordingto a Bloomberg survey (reported on 21 Jul), 65% of the 26 economistssurvey think that at least one of the Monetary Policy Committee’s ninemembers will vote in August to raise the BOE key rate from a recordlow, creating the first split vote of 2015.

    The G7 data docket is fairly filled on Wednesday as well but they areprobably of secondary importance including Japan May All Industryactivity index, Japan June supermarket sales & final print for June machinetool orders, French July manufacturing & business confidencesurveys, Italy May industrial sales and orders, Euro-zone 1Q governmentdebt and Italy May retail sales, The key data during early AsiaThursday morning (23 Jul) is Japan’s June trade balance data.

    Greece will still have a place in Wednesday’s (22 Jul) spotlight afterGreek PM Tsipras submitted a second bill of reforms tied to its 3rdbailout agreement to the parliament yesterday (21 Jul) and willface another challenge to get this approved today. The Greek governmentwants to hammer out a final deal on its international bailoutby 20 August. Recall that the first bill was passed by a slim margin largelythanks to strong support from the opposition parties while Tsipras’own Syriza party saw 39 out of 149 Syriza’s lawmakers not supportingthe bill, leading to PM Tsipras re-shuffling his cabinet and purging thedissenters within his party. If Tsipras continues to need opposition supportto pass the 2nd bill then that will lead to renewed questions onthe political survivability of PM Tsipras.

    The US stock markets ended lower on Tuesday (21 Jul) with the Dowbeing the worst performing major index on the back of disappointingearnings reports from IBM and United Technologies. The US stock marketdecline could continue on Wednesday as Apple’s quarterly profit(reported after Tuesday’s market close) fell short of expectations andled to a more than 6% decline in Apple shares in after-hours tradingwhile Microsoft also disappointed with its largest- ever net loss afterwriting down the value of Nokia’s handset unit and led to a more than3% decline in Microsoft shares in after-hours trading. In the absenceof any key economic data releases, investors took the opportunity to take profit and lock in the gains from the recent USD rally. AS a result, the USD was broadly weakenedagainst the major currencies overnight with the US dollar index (DXY) declining 0.71% onTuesday. Meanwhile, the disappointment in the US stock markets sent investors back into theUS treasury market, pulling UST prices higher with yields declining across the yield curve. Whilethe commodities rout continued to wear down gold price for the ninth straight session, crude oilprices got a brief reprieve on the back of a broadly weaker US dollar and some expectations of afall in US crude inventories by some 1.6 million barrels in Wednesday’s (22 Jul) US Departmentof Energy’s weekly petroleum report.

    Today will be a light day for Asian data and we are expecting June unemployment from Taiwanwhere consensus expects a rate of 3.75%, similar to the previous month.