ON DECK FOR MONDAY, JUNE 23
KEY POINTS:
- Markets resilient, largely unfazed after US attacks on Iran
- More Qs than As after the US bombed Iran
- Resilient global PMIs may be helping the market tone…
- …but cast a wary eye toward exuberant interpretations
- Global Week Ahead — This Fed Week May Matter More (reminder here)
Global markets barely batted an eye at the attacks by the US on Iran. Perhaps that’s because they settled nothing. There are more questions than answers concerning the scope of damage against Iran’s nuclear enrichment facilities and potential retaliation, plus whether the US has slipped into another costly and high risk forever war that inflames its deficits once more (chart 1). Resilient PMIs may also be helping, while expectations surrounding other developments over the coming week like heavy Fed communications especially around the SLR and eSLR moves may be leaving markets guarded.
Oil prices are up a handful of dimes. Equities are mixed with small gains in N.A. versus small losses in Europe. The dollar is broadly firmer. Sovereign bonds are little changed with a slight cheapening bias.
GLOBAL PMI UPDATES WERE RESILIENT, BUT CAREFUL WITH INTERPRETATIONS
Most of the global readings were better than expected (charts 2–4) and so were most of the key price gauges but be careful with interpreting why. It’s feasible that the rolling tariff deadlines are driving opportunistic waves of tariff front-running before the next salvos like Trump’s two-week deadline to impose tariffs on countries that haven’t agreed to deals, or the July 9th deadline for Europe, or the mid-August expiration of the 90-day deal that postponed tariffs. That argument was a focus in my weekly a few issues ago (here). Export and production surges with little price inflation in those intervening periods before tariff risk rises could well give way to oscillating bouts of activity. Expect a lot of summertime volatility in the measures.
- Eurozone: The composite held unchanged at 50.2, thus signalling little to no growth. Services (50.0) and manufacturing (49.4) were basically unchanged.
- UK: The composite PMI edged slightly higher (50.7, 50.3 prior) due to slight gains in both services (51.3 from 50.9) and manufacturing (47.7 from 46.4).
- Australia: Growth picked up a bit with the overall reading rising by 0.7 to 51.2. That was entirely fed by a pick-up in services (51.3, 50.6 prior) as manufacturing continued at the same pace (51.0).
- Japan: Here too growth picked up with the total composite PMI rising 0.8 points to 51.4 and driven by both services (51.5, 51 prior) and manufacturing’s full point gain to 50.4.
- India: The largest gain of all was posted by India’s overall gauge (61.0 from 59.3) that was mostly driven by services (60.7, 58.8 prior) with manufacturing also up (58.4, 57.6 prior).
The US S&P PMI measures are due out later this morning (9:45amET) along with other light data like US existing home sales for May (10amET) and Mexico’s monthly GDP proxy for April (8amET).
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