- Economic data out of the US was mixed overnight, with disappointing new homes sales data partly offset by a stronger services PMI for May. New home sales fell -11.4% m/m in April to 569k (annualised) against expectations of a -1.8% decline. However, the March figure was revised up by 21k to 642k. Today's release of existing home sales data is also forecast to show a fall of -1.1% m/m from the 10-year high reached in March. Separately, the IHS Market PMI showed a faster than expected rate of growth in the US services sector this month, with the flash PMI rising to 54.0 from 53.1 in April. However, the manufacturing PMI was marginally lower than forecast at 52.5.
- European data released on Tuesday was more upbeat, with Germany's IFO Business Climate Indicator rising to 114.6 in May, the highest level since April 2011, and the manufacturing PMI rising to 59.4 as exporters continued to benefit from EUR weakness. Q1 GDP for Germany was confirmed at 0.6% q/q as expected, with investment and net exports being the key drivers of growth. France's services PMI ready also beat expectations in May, rising to 58.0, while the manufacturing PMI was only a touch softer than April at 54.0.
- Moody's downgraded China's long-term local currency and foreign currency issuer ratings to A1 from Aa3 and changed the outlook to stable from negative citing concerns about rising debt levels, falling reserves and slow pace of reforms. However, GDP growth is likely to stay strong compared to other sovereigns as there is still considerable scope for policy to adapt to support the economy, and a largely closed capital account.
- While much of the market's attention today will be on tomorrow's meeting of OPEC member countries in Vienna, the Bank of Canada is holding a policy meeting, where the benchmark rate is expected to be kept on hold at 0.5%. In the US, the minutes of the May FOMC meeting will also be released this evening.
Click here to Download Full article
Emirates NBD Research