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Pre-market briefing: ECB "nowhere near" ending stimulus policies

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UK Market Snapshot 

UK markets finished higher yesterday, after the Chinese government assured the markets of addressing the cash crunch in the country and following upbeat US durable goods and housing data. The FTSE 100 advanced 1.2%, to close at 6,101.9, while the FTSE 250 rose 1.4%, to settle at 13,458.6. 

US Market Snapshot 

US markets closed higher yesterday, as better than expected US durable goods orders and housing data lifted investment sentiment. The DJIA rose 0.7%, to settle at 14,760.3, while the NASDAQ advanced 0.8%, to close at 3,347.9. The S&P 500 gained 0.9%, to settle at 1,588.0. 

Europe Market Snapshot 

Other European markets finished higher yesterday, following assuring comments from Chinese Central Bank over the nation’s liquidity crunch and amid positive US housing and durable goods orders data. The German DAX Xetra 30 rose 1.5%, to close at 7,811.3, while the French CAC-40 advanced 1.5%, to settle at 3,649.8. 

Asia Market Snapshot 

The Nikkei 225 index is trading 0.9% lower, at 12,857.7. Hang Seng index is trading 0.8% up, at 20,018.9, while the Kospi index is trading 0.1% lower, at 1,779.5. 

Commodity, Currency and Fixed Income Snapshots 

Crude Oil 

At 0330GMT today, Brent Crude Oil one month futures contract was trading 0.19% or $0.19 lower at $101.07 per barrel. Yesterday, the contract advanced 0.1% or $0.1, to settle at $101.26 per barrel, following encouraging US macroeconomic data. Additionally, the American Petroleum Institute reported that the US crude oil inventories fell 28,000 barrels for the week ended 21st June. 

Gold 

At 0330GMT today, gold futures contract was trading 1.6% or $20.4 lower at $1254.7 per ounce. Yesterday, the contract fell 0.16% or $2, to settle at $1275.1 per ounce, as better than expected US macroeconomic data reduced the demand for gold’s safe haven appeal. 

Currency 

At 0330GMT today, the EUR was trading at $1.3064 against the USD, marginally losing 0.08%, ahead of German consumer confidence and French gross domestic product data to be released later today. Yesterday, the EUR weakened 0.46% versus the USD, to close at $1.3075, after the ECB Chief, Mario Draghi indicated that the euro area still requires an accommodative monetary policy. 

At 0330GMT today, the GBP weakened against the USD, slightly losing 0.01%, to trade at $1.5407, ahead of the UK’s financial stability report to be released later today. Yesterday, the GBP weakened against the USD by 0.29%, to close at $1.5409. The BBA mortgage approval in the UK rose at the fastest pace in 16 months in May. 

Fixed Income 

In the US, long term treasury prices fell, pushing the yields higher, following a tepid auction of 2 year notes and as positive US macroeconomic data reduced the demand for safe haven assets. Yesterday, yield on 10-year notes rose 3 basis points to 2.60%, while yield on 2-year notes gained 1 basis point to 0.43%. Meanwhile, 30-year bond yield increased 4 basis points to 3.60%.  

Key Economic News 

Mortgage approvals in the UK rose more-than-expected in May 

The British Bankers' Association (BBA) reported that the number of mortgage approvals for house purchases in the UK increased to 36,102 in May from an upwardly revised 32,952 approvals in April. Market had expected mortgage approvals for house purchases to rise to 33,200 for May. 

UK retail sales surged in June, indicates CBI 

The latest Distributive Trades Survey from Confederation of British Industry (CBI) reported that, retail sales balance in the UK rose to 1.0% in June, compared to -11.0% recorded in the previous month. Market had expected the retail sales balance to rise to -1.0% in June. 

ECB “Nowhere Near” exiting from accommodative monetary policy, says Mario Draghi 

The ECB President Mario Draghi stated that the ECB is nowhere near exiting from its accommodative monetary policy. Speaking to a gathering in Berlin, Draghi said, “In terms of monetary policy, price stability is assured, and the overall economic outlook still warrants an accommodative stance, the exit from which by the way is still distant since inflation is low and unemployment (is) high.” 

US durable goods orders rose more-than-expected in May 

On a seasonally adjusted monthly basis, the durable goods orders in the US rose 3.6% in May, following a same rate of revised rise recorded in April. Market had expected durable goods orders to increase 3.0% in May. Durable goods orders excluding transportation rose 0.7% in May, following a revised rise of 1.7% recorded 

US home prices rose more-than-expected in April, S&P/Case-Shiller 

The Standard & Poor’s with Case-Shiller reported that, on a seasonally adjusted monthly basis, 20-city composite House Price Index (HPI) in the US, rose 1.7% in April, following a 1.9% increase recorded in the previous month. Market had expected the index to rise 1.2% in April. 

US consumer confidence unexpectedly rose to a five-year high in June, indicates CB 

The Conference Board (CB) reported that, its Consumer Confidence Index in the US jumped to a reading of 81.4 in June, marking its third consecutive monthly rise and its highest level since January 2008 and from a downwardly revised reading of 74.3 in May. Market had expected the index to drop to a reading of 75.0 in June, from 76.2 originally reported for the previous month. 

US new home sales rose to a five-year high in May 

On a seasonally adjusted monthly basis, new home sales in the US rose 2.1% to annual rate of 476,000 in May, marking its highest rate since July 2008 and from an upwardly revised rate of 466,000 recorded in March. Market had expected new home sales to edge up to an annual rate of 460,000 in May, compared to the 454,000 originally reported for the previous month. 

US Richmond Fed manufacturing activity rebounded in June 

The Federal Reserve Bank of Richmond reported that, its Manufacturing Index in the area improved sharply to a reading of 8.0 in June, marking its highest reading since November 2012 and from a reading of -2.0 recorded in the previous month. Market had expected the index to improve to a reading of just 2.0 in June. 


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