CFD Markets News and Forecasts — 02-07-2018

Major US stock indices rose slightly on the first trading day of the second half of the year, helped by the rise in price of technology sector shares, and favorable statistics for the US.

The seasonally adjusted PMI in the industry from IHS Markit was 55.4 in June against 56.4 in May. The latter value was higher than the preliminary indicator of 54.6 and finished the strongest quarter since the third quarter of 2014. Analysts had expected the index to fall to 54.6 points. The drop in the index was due to the slowest growth in production and new orders since November. Meanwhile, purchase prices have risen due to tariffs, and delivery times have increased.

At the same time, the report published by the Institute for Supply Management (ISM) showed that activity in the US manufacturing sector increased in June, while economists predicted a slight decrease. The PMI index for the manufacturing sector grew in June to 60.2 points against 58.7 points in May. Analysts had expected that the figure would drop to 58.0 points.

Construction costs in the US increased as a result of May against the background of increased investment in private and public construction projects, while the figure for the previous month was revised downward. The Ministry of Trade reported that construction costs increased by 0.4% in May. Data for April were revised to show that construction costs increased by 0.9% instead of the previously announced increase of 1.8%. Economists predicted that construction costs in May will grow by 0.5%. Meanwhile, in annual terms, construction costs jumped 4.5%.

Most components of DOW finished trading in the red (18 out of 30). Outsider were shares of General Electric Company (GE, -2.18%). The leader of growth was shares of Microsoft Corporation (MSFT, + 1.10%).

S & P sectors demonstrated mixed dynamics. The largest decline was in the commodity sector (-1.4%). The technological sector grew most (+ 0.5%).

At closing:

Dow 24,305.37 +33.96 +0.14%

S&P 500 2,726.56 +8.19 +0.30%

Nasdaq 100 7,567.69 +57.38 +0.76%

Timothy. Fiore., Chair of the ISM: "The June PMI registered 60.2 percent, an increase of 1.5 percentage points from the May reading of 58.7 percent. The New Orders Index registered 63.5 percent, a decrease of 0.2 percentage point from the May reading of 63.7 percent. The Production Index registered 62.3 percent, a 0.8 percentage point increase compared to the May reading of 61.5 percent. The Employment Index registered 56 percent, a decrease of 0.3 percentage point from the May reading of 56.3 percent.

"Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index at 60 percent or above for the 14th straight month, and the Customers' Inventories Index remaining low. The Backlog of Orders Index continued to expand, reading at 60 percent of higher for the third consecutive month. Consumption, described as production and employment, continues to expand in spite of labor, skill and material shortages. Inputs, expressed as supplier deliveries, inventories and imports, had expansion increases, due primarily to negative supply chain issues, says Fiore

U.S. stock-index futures fell on Monday, on the back of lingering fears of a global trade war.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Facebook (FB) target raised to $250 from $230 at Wells Fargo

The euro area (EA19) seasonally-adjusted unemployment rate was 8.4% in May 2018, stable compared with April 2018 and down from 9.2% in May 2017. This remains the lowest rate recorded in the euro area since December 2008. The EU28 unemployment rate was 7.0% in May 2018, stable compared with April 2018 and down from 7.7% in May 2017. This is the lowest rate recorded in the EU28 since August 2008.

Eurostat estimates that 17.207 million men and women in the EU28, of whom 13.656 million in the euro area, were unemployed in May 2018. Compared with April 2018, the number of persons unemployed decreased by 154 000 in the EU28 and by 125 000 in the euro area. Compared with May 2017, unemployment fell by 1.828 million in the EU28 and by 1.252 million in the euro area.

At 54.4 in June, the seasonally adjusted IHS Markit/CIPS Purchasing Managers' Index was a tick above May's downwardly revised reading of 54.3 (originally 54.4) and stands almost four points below the 51-month high reached in November last year. The average reading over quarter two as a whole (54.2) is the weakest outcome since the final quarter of 2016.

• Final Eurozone Manufacturing PMI at 54.9 in June (Flash: 55.0, May Final: 55.5)

• Growth of output and new orders slow further as upturn in new export business remains subdued

• Supply chain pressure and rising oil prices take input cost inflation to four-month high

Chris Williamson, Chief Business Economist at IHS Markit said: "Eurozone manufacturing reported its weakest expansion for one-and-a-half years in June, with risks clearly tilted towards output growth waning further in coming months. "Production growth has weakened markedly since the end of last year, and new order inflows have slowed even more. Manufacturers may therefore need to rein-in their production further to adjust to the recent downturn in order book growth unless demand revives".

Tim Moore, Associate Director at IHS Markit, which compiles the France Manufacturing PMI survey, said: "June data revealed that manufacturing growth continued to lose momentum in France, with overall business conditions improving at the slowest pace for almost a year-and-a-half. It seems that the source of the slowdown in production growth has shifted from capacity constraints and supply chain bottlenecks to a general soft patch for new order books. Export sales increased only marginally in June, which contributed to the weakest upturn in total new work since the autumn of 2016".

The headline IHS Markit/BME Germany Manufacturing PMI - a single-figure snapshot of the performance of the manufacturing economy - fell to 55.9 in June from 56.9 in May. The index has now declined in each of the past six months from a survey-record high last December, with the latest reading the lowest seen for one-and-a-half years.

Phil Smith, Principal Economist at IHS Markit said: "The rate of growth of Germany's manufacturing sector has consistently slowed throughout the first half of 2018, with June's final headline PMI reading the lowest seen for one-and-a-half years".

Turnover in the retail sector rose by 0.2% in nominal terms in May 2018 compared with the previous year. Seasonally adjusted, nominal turnover fell by 1.2% compared with the previous month. These are provisional findings from the Federal Statistical Office (FSO).

Real turnover in the retail sector also adjusted for sales days and holidays fell by 0.1% in May 2018 compared with the previous year. Real growth takes inflation into consideration. Compared with the previous month, real, seasonally adjusted retail trade turnover registered a decline of 1.3%.

New rules banning Chinese property companies from using proceeds from offshore bond issuance to invest in new projects appear to formalise a policy that had already been in place since the start of the year, and are unlikely to add significantly to the elevated funding risks that developers are already facing, says Fitch Ratings.

After breaching $5,900, bitcoin jumped $500 in 4 hours to get back to $6,400, according to CoinDesk data.

Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference...Prices too high! He has agreed! @realDonaldTrump

The headline Nikkei Japan Manufacturing Purchasing Managers' Index - a composite single-figure indicator of manufacturing performance - posted 53.0 in June, up from 52.8 in May, to indicate a stronger improvement in the manufacturing sector.

Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said: "Japan manufacturing PMI data continue to signal that the sector's current expansion phase still has legs. Output growth edged up in June, supported by further inflows of new work and an accelerated rate of employment growth. "Concerns do remain however, as new order growth eased to a ten-month low and export sales decreased for the first time since August 2016. Moreover, with input price inflation jumping to a three-and-a-half year high, manufacturers may be forced to absorb higher cost burdens in order to remain competitive, particularly if the yen faces further safe haven demand."

Congratulations to Andres Manuel Lopez Obrador on becoming the next President of Mexico. I look very much forward to working with him. There is much to be done that will benefit both the United States and Mexico! @realDonaldTrump

That said, demand from overseas remained subdued, as new export sales fell for the third month running. At the same time, optimism towards the year ahead fell to a six-month low, while employment declined at the quickest pace since July 2017. Inflationary pressures picked up at the end of the second quarter, with input costs and output charges rising at the fastest rates in five and 11 months respectively.

The headline seasonally adjusted PMI fell fractionally from 51.1 in May to 51.0 in June, to signal a further marginal improvement in operating conditions. The health of the sector has now strengthened in each of the past 13 months, with the latest improvement broadly in line with the historical trend.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1790 (3449)

$1.1768 (1674)

$1.1746 (941)

Price at time of writing this review: $1.1651

Support levels (open interest**, contracts):

$1.1590 (2439)

$1.1545 (4570)

$1.1497 (2899)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date July, 9 is 100593 contracts (according to data from June, 29) with the maximum number of contracts with strike price $1,1550 (4570);

GBP/USD

Resistance levels (open interest**, contracts)

$1.3327 (675)

$1.3296 (906)

$1.3273 (492)

Price at time of writing this review: $1.3176

Support levels (open interest**, contracts):

$1.3128 (1773)

$1.3087 (2439)

$1.3042 (989)

Comments:

- Overall open interest on the CALL options with the expiration date July, 9 is 25055 contracts, with the maximum number of contracts with strike price $1,3650 (2456);

- Overall open interest on the PUT options with the expiration date July, 9 is 31551 contracts, with the maximum number of contracts with strike price $1,3250 (2604);

- The ratio of PUT/CALL was 1.26 versus 1.29 from the previous trading day according to data from June, 29.

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.