Global Markets Overview – July 1, 2014

Global markets wrapped up the second quarter of the year on a mixed note on the back of some mixed economic data. In US trade, Chicago PMI missed estimates, while pending home sales came in well ahead of estimates. The housing market certainly continues to show some strong signs of improvement and this is helping lift confidence. Despite some encouraging data, the US dollar broadly lost ground, with the dollar index slipping below 80 for the first time since May. GBP/USD finally managed to break June highs which resulted in a breakout, with the pair rallying to 1.712. The pair is now trading at its highest sinceOctober 2008 and looks poised for further near-term gains. Data out of the UK showed a better-than-expected reading in net lending to individuals, but this doesn't seem to have been the catalysts for the gains as the big move occurred in US trade. Perhaps comments by Fed member Williams saying he still believes the first rate hike will be in the second half of 2015 contributed to see USD weakness.

Japan Tankan report in focus

The only currency pair the USD didn't lose too much ground to was actually the yen, as USD/JPY just maintained a tight range around 101.30. This will not do the Nikkei many favours today, as it is set to start the session flat. The Tankan report at 9.50 AEST will be key for Japan today as most analysts feel it will show some weakness following the sales tax hike. There will also be average cash earnings and manufacturing PMI data out of Japan.

RBA and China PMI could trigger AUD

AUD/USD continues to have a solid run and is holding its ground above 0.943. The pair will be one to watch today with the RBA decision due out at 14.30 AEST. Before we even get to that we have another round of China data starting with manufacturing PMI at 11.00 AEST and HSBC's final manufacturing PMI at 11.45 AEST. Activity is expected to show further signs of improvement with a rise to 51 (from 50.8).

Should this come to fruition then we could see AUD/USD test April highs in the 0.946 region ahead of the RBA decision. Should this data miss estimates then a pullback could be on the cards, but there is an uptrend support in the 0.936 region, which could see buyers come in. The RBA is expected to remain on hold, but there have been contrasting opinions on the statement front. Some analysts feel the statement will turn a bit more dovish, particularly given the strength of the AUD. However, should the 'period of stability in interest rates' line be maintained, then this is unlikely to make too much of a difference.

ASX 200 could bounce after yesterday's weakness

Ahead of the open we are calling the ASX 200 up just 0.1% at 5403. Following yesterday's losses, the ASX 200 finished the first half of 2014 up just 0.9%. As a result, we need a stellar second half if we are to match annual returns seen in the past. The local market was a significant underperformer yesterday, which puts it in prime position to bounce today.

There were mixed moves in the commodities space with iron ore and oil weaker while gold firmed. Broad USD weakness would have been expected to drive some strength in the commodities space. Perhaps this will filter through in today's Asian session, but the biggest lead for commodities is likely to be from China data.

On the company news front, Ansell will be in focus after announcing a write-down, restructure and intention to drop non-core brands. The restructure will cost ANN around $124.7 million pre-tax. While the company announced a slight downgrade to guidance along with the write-down, the restructure might be enough to encourage buying and could see the stock challenge $20.

[Kick off your trading day with our newsletter]

More from IBT Markets:

Follow us on Facebook

Follow us on Twitter

Subscribe to get this delivered to your inbox daily