· Euro rises on upbeat data, Trump says China trade deal still intact
The euro jumped to one-week highs following positive economic data on Tuesday, while the Australian dollar and other higher-risk currencies strengthened after U.S. officials confirmed that the U.S.-China trade deal remained intact.
The euro bounced following a sign of recovery this month in the euro zone economy’s downturn caused by the coronavirus pandemic. IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, recovered to 47.5 from May’s 31.9, moving closer to the 50 mark separating growth from contraction. In April it hit a record low 13.6.
Investors are weighing better-than-expected economic data against increases in new cases of the coronavirus in certain areas across the globe.
The greenback had briefly gained overnight on safety buying after White House trade adviser Peter Navarro said the U.S.-China trade pact was “over.”
The euro was last up 0.46% on the day at $1.1310, after getting as high as $1.1337, the highest since June 16.
The dollar slipped 0.37% against the yen to 106.4700 yen, after getting as low as 106.06 yen, the weakest since May 7.
U.S. data on Tuesday showed that U.S. business activity contracted for a fifth straight month in June, while sales of new U.S. single-family homes increased more than expected in May.
Better-than-expected U.S. macroeconomics reports have elevated Citi’s U.S. economic surprise index to record highs and emboldened expectations that a recovery from the slump caused by the coronavirus pandemic may not take as long as some analysts feared.
· Mnuchin says U.S.-China decoupling will occur if firms cannot compete fairly
U.S. Treasury Secretary Steven Mnuchin said on Tuesday that a decoupling of the U.S. and Chinese economies will result if U.S. companies are not allowed to compete on a fair and level basis in China’s economy.
Speaking at a virtual event sponsored by Bloomberg and Invesco, Mnuchin said he also had “every expectation” that China would live up to the terms of the Phase 1 trade agreement calling for a massive increase in Chinese purchases of U.S. goods, energy and services.
“If we can compete with China on a fair and level playing field, it is a great opportunity for U.S. businesses and U.S. workers, as China has a large, growing middle class,” he said. “But if we can’t participate and compete on a fair basis, then you are going to see a de-coupling going forward.”
· U.S.-China trade deal will hold for now, former Trump trade negotiator says
The trade deal inked by Washington and Beijing is likely to hold for now, according to former top White House trade negotiator Clete Willems.
“I think the reason the deal is gonna hold for the time being is that China’s actually doing a good job at implementation,” Willems, a former deputy director at the National Economic Council, told CNBC’s “Street Signs Asia” on Tuesday.
The two economic powerhouses signed a phase one trade deal in January following a protracted period of tensions that saw both parties slapping punitive tariffs on each other’s goods.
· U.S. business sector contraction eases in June
U.S. business activity contracted for a fifth straight month in June, but the pace of decline eased, supporting views that the recession caused by the COVID-19 crisis was drawing to an end.
Data firm IHS Markit said on Tuesday its flash U.S. Composite Output Index, which tracks the manufacturing and services sectors, rose to a reading of 46.8 last month from 37 in May. A reading below 50 indicates contraction in private sector output. The economy slipped into recession in February.
The improvement this month came as businesses reopened after shuttering in mid-March to control the spread of the respiratory illness. Still, layoffs continued this month and businesses put a freeze on hiring to deal with weak demand and to cut costs.
The IHS Markit survey’s flash Purchasing Managers Index for the services sector rose to 46.7 in June from 37.5 in the prior month. Economists polled by Reuters had forecast a reading of 46.0 in June for the services sector, which accounts for roughly two-thirds of the U.S. economy.
· As U.S. coronavirus cases surge, Texas, Arizona and Nevada hit new records
For a second consecutive week, Texas, Arizona and Nevada set records in their coronavirus outbreaks, and 10 other states from Florida to California were grappling with a surge in infections.
Texas reported over 5,000 new infections on Monday, a single-day record for the state. It has also seen COVID-19 hospitalizations hit record highs for 11 days in a row.
The Texas Children’s Hospital is admitting adult coronavirus patients due to a spike in serious COVID-19 cases in the Houston area.
· Wall Street likely to cut bonuses 15-20%, make significant layoffs: report
Wall Street is likely to cut bonuses this year by 15-20% and make significant layoffs, according to a report published Tuesday by compensation consulting firm Johnson Associates Inc.
The estimates in the report by Alan Johnson, closely watched by financial professionals, are less severe than Johnson projected earlier this year.
But layoffs could be significant. Companies were forced to make quick decisions and cut red tape during the pandemic, and they have recognized fewer employees are needed to do certain jobs, Johnson said.
· Oil drops nearly 1% as demand concerns weigh
Oil prices fell on Tuesday as a rising number of Covid-19 cases sparked demand fears, although losses were capped after U.S. President Donald Trump soothed jangled nerves over U.S.-China trade.
Trump wrote in a tweet late Monday that the trade agreement was “fully intact.” Markets had been unsettled by surprise comments from White House trade adviser Peter Navarro who said the hard-won deal with China was “over”.
Brent futures fell 45 cents, or 1%, to settle at $42.63 per barrel. West Texas Intermediate crude settled 36 cents, or 0.88%, lower at $40.37 per barrel. On Monday, the contract settled at its highest level since early March.
Prices pared early gains after the U.S. Purchasing Managers’ Index (PMI) showed the country’s rebound from coronavirus depressed levels was not as sharp as in Europe.
Bank of America (BofA) Global Research has lifted its oil price forecast for this year. It now expects Brent crude to average $43.70 a barrel in 2020, up from a previous estimate of $37.
Reference: CNBC, Reuters
Thai
Eng