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Renewed concerns over Italy’s political turmoil and uncertainty surrounding Uncle Sam’s trade deals with China kept high-yielding bets on the defensive during the session.

  • U.K.’s BRC shop price index (y/y) dips by 1.1% vs. 1.0% decline in April
  • Japan’s retail sales (y/y) up by 1.6% vs. 0.9% expected, 1.0% previous
  • Australia’s building approvals plummets by 5.0% vs. 2.9% decline expected, 3.5% gain in March
  • BOJ’s Kuroda: “Urgent” to understand decoupling of growth and higher wages and inflation

Major Events/Reports:

BOJ to investigate why inflation is still sluggish?

In a speech earlier today Bank of Japan (BOJ) Governor Haruhiko Kuroda shared the central bank’s concern over what they labelled is the “missing inflation” or “missing wage inflation puzzle.”

The head honcho said that it’s “urgent” for the BOJ to understand the global decoupling of improved economic growth and higher wages and inflation.

RBNZ takes cautious approach to unwinding restrictions

In its bi-annual financial stability report, the Reserve Bank of New Zealand (RBNZ) named three key vulnerabilities to the financial sector: household indebtedness, dairy sector indebtedness, and exposure to international risks.

While Governor Orr and his team are confident that the financial sector can withstand some volatility, they’re also unlikely to loosen up their loan restrictions for at least six months as they look for more evidence that lending and house price growth have cooled.

The central bank shared that:

“Ultimately, continued stabilisation, or a further reduction, in the growth rates of household debt and house prices, will be required before the risk to the financial system is normalised.”

High-yielding bets still weighed by global concerns

Another day, another chance to stay away from higher-yielding assets?

Asian session traders caught up to their European and U.S. counterparts and priced in a possible re-election in Italy as early as late July.

While a re-election has been somewhat priced in, analysts are beginning to wonder if it would become a de-facto referendum on Italian membership of the European Monetary Union.

Meanwhile, market geeks aren’t too happy with the mixed signals from the White House.

See, the office confirmed the June 12 meeting between Donald Trump and Kim Jong-Un, but also clarified that it would continue pursuing its World Trade Organization case against China as well as release a list of goods that would be subject to a 25% tariff.

The Asian bourses didn’t appreciate the uncertainty cocktail:

  • Nikkei is down by 1.45% to 22,034.3
  • ASX 200 is up by 0.31% to 5.985.8
  • Shanghai index is down by 1.77% to 3,065.082
  • Hang Seng is down by 1.41% to 30,054.5

Commodity prices also took hits as gold failed to capitalize on overall risk aversion while the Black Crack continued to slide on prospects of more oil production from Russia and some OPEC members.

  • Gold is down by 0.05% to $1,298.08
  • Brent crude oil is down by 0.66% to $74.93
  • U.S. WTI is down by 0.48% to $66.53

Major Market Mover(s):

JPY
The yen climbed higher across the board as Asian traders priced in even more uncertainty in the global markets.

USD/JPY is down by 31 pips (-0.28%) to 109.10
EUR/JPY is down by 32 pips (-0.25%) to 126.87
GBP/JPY Is down by 27 pips (-0.19%) to 145.33
AUD/JPY is down by 36 pips (-0.43%) to 82.18

AUD and NZD
Overall risk aversion got mixed in with a huge miss in Australia’s building approvals report and a not-so-hawkish financial stability report from the RBNZ.

AUD/CAD is down by 21 pips (-0.22%) to .9779
EUR/AUD is up by 34 pips (+0.22%) to 1.5437
GBP/AUD is up by 49 pips (+0.28%) to 1.7683

NZD/USD is down by 6 pips (-0.08%) to .6936
NZD/JPY is down by 28 pips (-0.36%) to 75.67
NZD/CHF is down by13 pips (-0.18%) to .6885

Watch Out For:

  • 5:00 am GMT: Japan’s consumer confidence (43.9 expected, 43.6 previous)
  • 6:00 am GMT: Germany’s retail sales (0.5% expected, -0.6% previous)
  • 6:00 am GMT: Germany’s import prices (0.7% expected, 0.0% previous)
  • 6:45 am GMT: France’s consumer spending (0.2% expected, 0.1% previous)
  • 6:45 am GMT: France’s preliminary GDP (y/y) to remain at 0.3%?
  • 7:00 am GMT: Switzerland’s KOF economic barometer (104.6 expected, 105.3 previous)
  • 7:00 am GMT: Spain’s flash CPI (y/y) (1.7% expected, 1.1% previous)
  • 7:55 am GMT: Germany’s unemployment change (-10K expected, -7K previous)