While US market was closed for Independence Day holiday yesterday, European stocks dipped modestly due to soft economic indicators. Crude oil also fell as market sentiment remained fragile with both WTI and Brent crude oil prices breaking below 72. Gold, however, traded relatively firm with a near-term support around 1200.
Investors' risk appetite remained weak as services sector in China and European countries gave further signals that the recovery is slowing down. UK's services PMI fell 1 point to 54.4 in June while the market had anticipated a milder drop to 55. Meanwhile, China's services PMI plunged for a third month to 55.6, the lowest level in 15 months, from 56.4. Although Eurozone's services PMI data was revised up slightly to 55.5 (from 55.4) during the month, the market was weighed down by disappointing retail sales which grew +0.2% m/m in May following a contraction of -1.2% in the prior month. Consensus reading was +0.5%.
The US will report June's ISM non-manufacturing index later today. While the majority of analysts anticipate a dip to 55 from 55.4, there's risk of a downside surprise given the weaker-than-expected ISM manufacturing reading released last week.
Decline in PGMs stabilized and platinum and palladium seemed to have found footings around 1500 and 425 respectively. However, given the likelihood of global economic slowdown, demand for PGMs may be affected and that should be reflected in prices.
Auto sales from both the US and China dropped in June. In the US, light vehicle sales slipped -4.73% m/m to 11.08M saar in May. On annual basis, the growth rate was +14.2%, dropping from 17.9%, +21.5% and +21.2% in May, April and March respectively. China's passenger-car sales rose +10.9% in June from the same period last year, down from the +25% gain in May.
As expected, the RBA announced to leave the cash rate unchanged at 4.5% as the current setting of monetary policy is resulting in 'interest rates to borrowers around their average levels of the past decade'. While the central bank acknowledged expansion in global economic growth with expansion particularly strong in Latin America and Asia, prospects in Europe is more uncertain. Australian dollar slid after the report. Recent plunges in commodity prices also weighed on the currency.