The post-EU summit rally was limited by weaker-than-expected macroeconomic data released in the US and the Eurozone. Moreover, investors began to concern that the lack of details in the many proposals in the summit statement would suggest problems in terms of implementation. The euro rose in early sessions but pared gains later in the day. Stock markets ended the day higher but trading was choppy. In the Wall Street, the DJIA dropped -0.07% while the S&P 500 index added +0.25%. In the commodity sector, the front-month contract for WTI crude oil fell to as low as 82.10 before ending the day at 83.75, down -1.42%, while the equivalent Brent crude contract plunged to 95.3 before recovering to 97.34, down -0.47%, at close. Gold price also fell -0.41% during the day.
The EU/IMF/ECB troika will begin a 3-day visit to Athens on Thursday to examine the country's progress on fiscal adjustment. As there are news that the Greek government has planned to renegotiate terms of fiscal consolidation, the ECB reiterated that 1005 compliance is required to access to later tranches of the bailout plan. The central bank stated that the first priority for the new Greek government has to be getting the program back on track and the new government should not lose precious time looking to avoid or loosen the program. The debt-ridden country has been given the 1B euro of funding withheld from May.
While the market was buoyed by the outcome of the EU summit, the lack of details of the proposals remained a problem. Finland stated that it would block ESM secondary market bond buying. According to Prime Minister Jyrki Katainen, the country was among the Member States to oppose bond buying from the secondary market. Meanwhile, the finance ministry of the Netherlands stated its opposition of buying up bonds as using the existing instruments to buy up bonds will be expensive and can only be done if there is unanimity (between member states). Finland and the Netherlands together are responsible for about 7.5% of the ESM's capital.
On the dataflow, the Eurozone reported that the final manufacturing PMI was revised higher to 45.1 in June. Concerning individual countries, Italy's PMI fell -0.2 points to 446 while Spain's data dropped -0.9 points to 41.1, a new 37-month low. In the US, the ISM manufacturing index slipped -3.8 points to 49.7, the lowest level seen since July 2009. The New orders component plummeted -12.3 points to 47.8 while the export orders index dropped -6 points to 47.5. The set of data might raise speculations for QE3. Today, the RBA would meet but we expect no change in the monetary stance, i.e. policymakers would leave the cash rate at 3.5%.