Morning Wrap (03.07.2024)

Asian and Pacific indices are experiencing a bullish session. Chinese indices are up between 0.70-0.80%. The Japanese Nikkei 225 index is gaining 0.85%, and the Australian S&P/ASX200 is trading 0.10% higher. Contracts on the Singapore SG20cash index are up 1.20%.

The gains in the Asian session are being driven by Jerome Powell's speech yesterday, which was received by the market in a relatively dovish manner, and Tesla's good report ahead of yesterday's cash session opening. 

Futures on European indices indicate a higher opening session on the Old Continent after yesterday's declines. The UK100 and DAX are both up approximately 0.10%.

In the first part of the day, the forex market is relatively calm. The New Zealand and Australian dollars stand out with gains, averaging around 0.10-0.20% against other G10 currencies.

Gains in the Australian dollar are driven by strong macro reports today. The Judo Bank PMI for services in Australia improved in June, rising to 51.2 compared to 51.0 in the previous month and expectations of a decline to 50.6.

Australian retail sales also rose more than expected in May, up 0.6% m/m, higher than the expected 0.3% increase and compared to 0.1% in the previous month. Year-over-year, retail sales increased by 1.7%, still well below the 4%-5% pace observed at the beginning of 2023.

Retail sales could be an important factor for the Reserve Bank of Australia (RBA) when making decisions, given that consumption accounts for more than half of the gross domestic product. Therefore, higher-than-expected data may prompt the RBA to maintain a more restrictive monetary policy for longer.

The Chinese services PMI fell from 54.0 points in May to 51.2 in June, compared to expectations of 53.4, according to the latest data published by Caixin on Wednesday. Export activity growth remains solid in June, even though it is slowing along with the overall number of new transactions. This is the worst result in eight months, and confidence reached its lowest level in four years in June.

In contrast to Australia and China, the services PMI report from India stands out as exceptionally positive. Growth in India's dominant services sector accelerated last month, driven by strong demand and record growth in export orders. The report also showed that companies are hiring at the fastest pace in nearly two years. The HSBC services PMI in India rose to 60.5 in June from 60.2 in May, close to the preliminary reading of 60.4.

Japan's service sector PMI fell to 49.4 in June from 53.8 in May, breaking 21 months of consecutive expansion. So far, the services sector has driven Japan's economic growth, offsetting the weak performance of manufacturing sector.

The cryptocurrency market is down almost 2.00%. Bitcoin is back below US$61,000, while Ethereum is down to US$3350. Investor sentiment is weak following further reports of the sale of BTC holdings by the German government and impending distribution from the collapsed Mt. Gox exchange that is scheduled to start from the beginning of July.