Moderate Gains In US And Asian Markets Bring Some Calm

Some calm seems to have returned to global markets overnight with moderate gains in both US and Asian stocks markets. However, there is certainly no feeling that things have fundamentally improved and the euro crisis continues to be firmly on top of the agenda for global markets.

This morning the Reserve Bank of Australia (RBA) has once again moved to cut its key policy rate by another 25bp to 3.50%. There is no doubt that the RBA is worried about the effect on the Australian economy of the cooling of Chinese economy and more rate cuts could certainly be in the pipeline for the RBA going forward.

It has been relatively calm on the global FX and fixed income markets overnight. The euro has seen some moderate gains against the other major currencies, but again it does not look like a "determined" strengthening of the euro.

Global Daily
Focus in the markets will continue to be on the European situation and there is no doubt that market participants await a policy response from global central banks in particular –  but for now it is just waiting. Finance ministers and central bank governors from the G7 countries will today participate in a conference call to discuss the European crisis.

On the macroeconomic front, focus will be on PMI (ISM) numbers for the nonmanufacturing sector in both Europe and the US.   

Scandi Daily
Swedish services PMI probably dropped further in May from the already sub-par 48.6 recorded for April. Other data suggests this is the case: service production dropped sharply in April according to Statistics Sweden, down 2% m/m, and private services confidence showed a significant decline in May according to the monthly NIER business survey. Hence, a further decline should come as no surprise. Riksbank Governor Ingves is due to speak about financial stability and banking regulation at the International Monetary Conference in Stockholm, 09:00 local time.