Daily Brief

Daily Brief

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An economy of two halves

There are no tariffs on services

Two days after Monday's broadly weak manufacturing sector purchasing managers' indices, yesterday's readings from the services sector were all in the growth zone above 50. America's protectionist duties are throttling global trade in goods but have no direct impact on burgers or haircuts.

Except for Italy (50.5) and Britain (50.2) all of the services PMIs from the Far East, Europe and the United States were above 51. Germany's 55.8, a nine-month high and strongest of them all, was in stark contrast to the dismal 45.0 put in by the country's manufacturers two days earlier. There is more to it than Trump's tariffs (for example, diesel engine angst, waning demand for up-to-the-minute mobile phones, Brexit fatigue) but it is hard to avoid the suspicion that the world's economy would be in a better place were it not for the US administration's caprice.

The US dollar was just about unchanged on the day against the euro, Japanese yen, Swiss franc and sterling. It was 0.2% lower against the Chinese yuan. Compared with a month ago the dollar is 0.3% softer against the euro and down by 0.5% against the renminbi. That did not deter the US president from launching another of his attacks on China and Europe for "playing [a] big currency manipulation game" and the Federal Reserve for failing to "MATCH, or continue being the dummies who sit back and politely watch".  

Yield

Among the big currencies, the main theme yesterday - though it was not much of a theme -  was yield. The yen and the franc, both of which have negative benchmark interest rates, were fractionally behind the big guys while the Commonwealth dollars led the way.

There were no real surprises among the economic data. Britain's 50.2 services PMI was softer than forecast but not sufficiently so to qualify as a disappointment. Markit's observation that the sector was "close to stagnation" amazed nobody.  

ADP's report that US employment increased by 102k jobs in June undershot the expectation of a 140k rise but not by as much as the previous month's 41k.  

North American jobs

Between now and the weekend the main ecostat focus will be on the US and Canadian employment reports tomorrow. The only UK statistic on the list is the Halifax house price index, which is also due out tomorrow.

This morning Australia reported a 0.1% monthly increase in retail sales for May and Switzerland said inflation was unchanged at 0.6%. Euroland retail sales are expected to have risen 0.3% in May.  

Analysts reckon that that US nonfarm payrolls went up by 160k in June. The lower-than-expected ADP employment change number suggests that payrolls might fall short of that but it is not a reliable indicator. In Canada 10k new jobs are predicted for June after a 27.7k increase the previous month. They might not be enough to prevent the rate of unemployment ticking up to 5.5%. The United States will be taking the day off today so it could be a quiet afternoon.

GBP: Flat despite weak services PMI

GBP: Flat despite weak services PMI

USD: Trump moans at the Fed again

USD: Trump moans at the Fed again

JPY: In last place with the CHF, hampered by yields

JPY: In last place with the CHF, hampered by yields

CAD: Among the leaders thanks to 1.75% benchmark

CAD: Among the leaders thanks to 1.75% benchmark

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