After a whopping re-rating on Friday last week, global markets posted tiny gains on Monday, suppressed by the weakish US economic data as the ISM manufacturing index dropped below the recession-recovery line of 50 to 49.7 in June (from 53.5 the month before). New orders slumped to 47.8, from 60.1, though employment only slipped a little, to 56.6 from 56.9. Overall, the global economic picture shows little signs of relief. Over the weekend, the Chinese PMI manufacturing index weakened to 50.2 in June, its lowest level in seven months. Last week’s US data did point to some recovery in the housing market, but personal consumer spending increased only 0.1% in real terms. This Friday’s jobs report is expected to repeat the findings of the previous two soft jobs reports…and thus increase the prospect of QE3…the next FOMC meeting is scheduled for 31 July. Meanwhile, watch the ECB meeting this Thursday; we expect a 25bp rate cut.
As we go to print, Asia is trading in the black on expectations that the lower than consensus macro data could spur more monetary easing from global regulators in the near future. Oil (dated Brent) extended gains, reaching USD 98/bbl. EUR is at 1.25; Gold is at USD 1,602/oz.