US Equities Are Advancing
US equity futures are advancing, with upbeat reads on eurozone manufacturing wiping out negative sentiment from a disappointing manufacturing survey out of China, as investors look ahead to a plethora of economic data to be released throughout the week including today’s release of manufacturing and construction-spending data. Treasuries are lower ahead of the reports. In earnings news, shares of Cracker Barrel are higher after the company released earnings that bested the Street’s forecast. Overseas, Japanese stocks tumbled, as weak Chinese manufacturing data and a drop in corporate capital spending underpinned the uneasiness. Finally, European stocks pared morning losses and are in positive territory following the better-than-expected eurozone manufacturing data. Crude oil is increasing $0.75 to $92.72 per barrel, Brent crude oil is up $1.32 at $101.71 per barrel, and the Bloomberg gold spot price is moving $8.50 higher at $1,396.30 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.3% at 83.12.
Treasuries are lower ahead of the reports on construction spending and manufacturing, with the yield on the 2-year note unchanged at 0.3%, while the yields on the 10-year note and the 30-year bond rate gaining 4 bps to 2.17% and 3.31%, respectively.
Later this morning, the US economic calendar will bring the releases of construction spending, forecasted to rise 0.9% month-over-month (m/m) in April, following a contraction of 1.7% m/m in March as well as the ISM Manufacturing Index, expected to remain in expansion territory, as determined with readings above 50, at 50.7 for the month of May, mirroring Aprils 50.7 figure.
Today’s data kicks off a heavy week for the US economic calendar, packed with the headline releases later in the week of the ISM Non-Manufacturing Index, the ADP Employment Change, the Federal Reserve’s Beige Book, which summarizes anecdotal economic data from all twelve Federal Reserve Districts in preparation for the next Federal Open Market Committee (FOMC) meeting scheduled for June 18-19, and ending with nonfarm payrolls.
Equities in Europe are mixed following positive manufacturing data throughout the region despite Chinese manufacturing indexes signaling small businesses are struggling. The UK FTSE 100 index is lower by 0.4%, following the release of manufacturing data for May for several eurozone countries which exceeded estimates while still remaining in contraction territory, as determined by figures below the 50-point mark, for the majority of the member countries. Specifically, the figure for Spain showed a rise to 48.1 in comparison to 45.5 projected, while France’s figured jumped to 46.4, against the 45.5 estimate, and Germany’s figure came in at 49.4, against the 49.0 estimate. The manufacturing index in the UK was the lone country to come in above 50, with the index rising to 51.3 for May, above expectations of a 50.2 rise.
Elsewhere, Mario Draghi, head of the European Central Bank (ECB), said, “the eurozone economy is on track for a recovery driven by ECB’s loose monetary policy and demand from abroad.” Draghi added, “the ECB would act again if necessary but its hand may be in part stayed this month and going forward by a rebound in inflation, which rose back to 1.4% in May from 1.2% in April.”
The UK FTSE 100 Index is down 0.4%, France’s CAC-40 Index is rising 0.1%, Germany’s DAX Index is nearly unchanged, Italy’s FTSE MIB Index is gaining 0.1%, Spain’s IBEX 35 Index is advancing 0.2%, and Switzerland’s Swiss Market Index is declining 1.0%.
Stocks in Asia closed sharply lower, led by Japan’s Nikkei 225 Index declining 3.7%, a new six-week low, following weaker-than-expected diverging manufacturing data out of China and a 4% drop in corporate capital spending in the first quarter. The official Purchasing Managers’ Index for smaller companies, released by the Chinese government, fell to 47.3 in May from 47.6 in April, while the overall index, which is geared towards larger companies, rose to 50.8. Another PMI index, the HSBC Services Purchasing Manufacturing Index, which focuses on smaller private sector firms, fell more than forecasts to 49.2, below the estimates of 49.6, marking the first contraction in seven months. China’s Shanghai Composite Index fell 0.1% and the Hong Kong Hang Seng Index dropped 0.5%.
Adding to the pressure on stocks in Japan was news of a sharp drop in corporate capital spending in the first quarter which has exacerbated skepticism at the overall effectiveness of structural reforms by the central bank of Japan, known as the “third arrow”, expected to be outlined as early as next week by Prime Minister Shinzo Abe. South Korea’s Kospi Index contracted 0.6%, reported inflation for the month of May eased to a 14-year low. Elsewhere, Australia’s S&P/ASX 200 Index declined 0.8%, despite many banking stocks ending higher as speculation of a rate cut continues to grow ahead of the central bank’s policy meeting on Tuesday. Finally, India’s S&P BSE Sensex 30 Index decreased 0.7%, led by shares of automaker Maruti Suzuki India Ltd, which lost 3.1%, after reporting sales in May slid 14% from a year ago, leading other automakers lower.
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Source: Growth Financial http://growthfinancial.net/us-equities-are-advancing/
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