Traders’ Diary: Everything you need to get ready for the week ahead
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After staggering around no-man’s land for a few weeks, the economic blood flowed rich and thick last week, just as the global economy caught a break right in the ribs with the debt ceiling deal in Washington.
The smell of that led to wins in Australia on Friday, but on Wall Street the final session was jubilant.
Unless something typically American happens in politics over the weekend, we’ll be in line for a little of that manna on Monday.
Flak continued to fly about everywhere last week over the US debt debacle, and traders cowered then cavorted on either side of the eventual deal. Its dominance of market sentiment everywhere ended spectacularly with the vote on Thursday evening US time, where the Senate approved a meek measure to suspend the nation al debt limit until New Year’s Day, 2025.
US President Joe Biden (Friday our time) is expected to run like an ageing madman to sign the bill into law and thus avert the first-ever US gov’t default on its various obligations.
It’s such a bloody mess, I don’t really want to get back into it… but I will mention the less discussed fact that Treasury Boss, Janet Yellen and her flogged and (surely) flabbergasted Treasury Dept have been hectic in their efforts to stay liquid since mid-January, about 6 months ago,
Mid-January 2023 – was actually when the ceiling was breached for the first time. Once that happened the Treasury Department was out of options.
No more borrowing, no more money.
So without so much as a murmur, Janet’s team began selling off stuff and dipping into things that a good treasury just doesn’t dip into – like siphoning cash from the US Civil Service Retirement and Disability Fund and from the US Postal Service Retiree Health Benefits Fund – to pay bills it should never ever be hard-up to pay.
All the while guarding a decent stiff upper lip, meeting its daily obligations and trying to stay calm that some kind of political deal is done.
Long story, short: the Treasury found it’s billions and billions of dollars and avoided the default.
But now it needs cash and is raising it any old how.
Instantly, Thursday night in New York, a quiet and yet extraordinary Treasury auction of circa US$25 billion of something called ‘3-day cash management bills’ took place.
The name is silly and so is the yield.
At 6.15%, that’s a better buy than anything outside of Nvidia and easily exceeds the yields at which almost all other Treasury bills are traded.
And my goodness were they snapped up.
One can say investors have the Family Yellen over a barrel and are demanding some fine-smelling, high-quality Triple-A Rated Cheese to dig this government out of the hole that’s been described in daily headlines for months and months – it’s the best debt money can buy.
Attention was also shared with economic releases including worldwide manufacturing PMI figures released for May.
While flash data preluded the persistent divergence between manufacturing and service sector performances, the latest final manufacturing PMI numbers have told of the continued weakness in the goods producing sector, in turn driving lower goods inflation.
Various Asia Pacific nations also saw the weakness prevail as a result of sustained soft demand conditions.
The upcoming services release will therefore be of interest to examine whether the divergence continued across the global in May.
This is especially important to provide a better sense of the inflation trajectory as service-led inflation remains a lingering issue for central bankers still in the pursuit of taming prices and who generally remain “data dependent”.
The Bureau of Stats gave us our Aussie April monthly CPI indicator last week. It was a mixed affair as most of this inflation data is.
While the annual bleeding rate pulsed higher and faster than expected – up from 6.3% in March to 6.8% in April – flow of seasonally adjusted month‑on‑month inflation slowed off. I do not know what that means. I do not know that anyone knows what that means.
The Reserve Bank Board of Australia is scheduled to meet Tuesday, the 6th of June, at 2.30 pm.
City Index expects the RBA will lift rates by 25bp to 4.10% “in what will be another line ball decision.”
Following the release of manufacturing PMI data, services, composite and sector PMI releases will be a key highlight in the coming week for the complete picture on economic conditions in May.
The Bank of Canada will roll the rates dice this week, while what S&P calls various tier-1 data, such as Euro GDP, and from an on-fire Japan, will be right up there in the headlights. Japan’s final Q1 GDP will drop, Thursday.
In our neck of the woods, the key data in the coming week will be China’s trade and inflation figures. The latest Caixin China General Manufacturing PMI revealed faster new exports growth, suggesting more robust figures for May, while manufacturing input costs fell solidly which may suggest further abating of factory gate inflation. Pick one, as inflation figures from mainland China drop as well.
All sources from Commsec, Trading Economics, S&P Global Research
Australia RBA Interest Rate Decision
Australia Building Permits (Apr, final)
Australia Current Account (Q1)
Australia GDP (Q1)
Trade data (Apr)
New Zealand, Thailand, Malaysia Market Holiday
Worldwide Services, Composite PMIs, inc. global PMI (May)
Indonesia Inflation (May)
Singapore Retail Sales (Apr)
Germany Trade (Apr)
Switzerland CPI (May)
Eurozone PPI (Apr)
United States Factory Orders (Apr)
United States ISM Non-manufacturing PMI (May)
South Korea Market Holiday
Japan Household Spending (Apr)
Singapore S&P Global PMI* (May)
Thailand Inflation (May)
Eurozone HCOB Construction PMI* (May)
Eurozone Retail Sales (Apr)
United Kingdom S&P Global/CIPS UK Construction PMI*
S&P Global Sector PMI* (May)
China (Mainland) Trade (May)
Japan Leading Economic Index (Apr, prelim)
Taiwan Trade (May)
United Kingdom Halifax House Price Index* (May)
United Kingdom KPMG / REC UK Report on Jobs* (May)
France Trade (Apr)
Canada Trade (Apr)
Canada BoC Interest Rate Decision
United States Trade (Apr)
Japan GDP (Q1, final)
Japan Current Account (Apr)
India RBI Interest Rate Decision
Eurozone Employment Change (Q1)
Eurozone GDP (Q1)
United States Initial Jobless Claims
United States Wholesale Inventories (Apr)
China (Mainland) CPI, PPI (May)
Malaysia Industrial Production (Apr)
India Industrial Production (Apr)
Canada Unemployment Rate (May)
DY6 Metals (ASX:DY6)
Expected listing date: 8 June, 2023
IPO: $7.0m at $0.20 per share
DY6 Metals non-executive chairman, Dan Smith, says Malawi holds promise as a potential REE hub given the cluster of high-grade rare earth projects already in the region, the stable political environment, government support, and infrastructure.
“It’s a jurisdiction where there’s a push for foreign investment and we’ve seen that with a number of our peers operating in the country,” he says.
With $2.5m secured from two Hong Kong-based cornerstone investors – Zhenshi Group and Zhung Nam New Material Company – DY6 Metals is looking to raise up to $7m at $0.20 per share by the time the offer closes in early June.
“We were able to negotiate a great deal with the vendor of the projects and come on with a relatively low enterprise value of $3.4 million compared to our peers,” Smith adds.
“Outside of Australia, China and Brazil, Africa is really the place to be for these types of rare earth projects and we can’t wait to get on the ground and start exploring.”