Weekly Market Highlights June (3)

Source: Amp Capital (here for full market update) & iCapital biz (subscription required)

United States
Economic data continues to provide evidence growth is picking up. Retail sales up strongly in May, consumer confidence up, small business optimism up, jobless claims remaining low, job openings up strongly in April even

though the hiring and quits rate was down fractionally and mortgage applications to purchase up strongly. The Federal Reserve Bank (the Fed) will be the big focus in the week ahead. Recent improvement in US economic

indicators have come too late, and the labour market improvement is not yet strong enough, to bring on a rate hike at Wednesday's Fed meeting, but the Fed is likely to signal that it remains on track to hike rates later this year (my bets on September) providing economic data continues to improve giving confidence that inflation will rise back to target (I think it's a 2% target).

Eurozone

Greece nearing the end game. Ball is now in Greece's court to accept offer at end of June or face dire consequences for not avoiding a default. The June 18 Eurozone finance ministers’ meeting is the next deadline to watch. The pressure on Greece is now immense as recent turmoil has helped plunge it back into recession.  So Greece is likely to remain a source of volatility. But even if Greece does end up leaving the Euro, the threat of contagion to other peripheral countries is low compared to the 2010-12 period as they are now in better shape and the ECB is now providing stronger support.

Asia

Chinese shares’ inclusion in MSCI benchmark indices on hold but inevitable. Foreign investors still bit convoluted, will need time to make foreign access easier and when that occurs global demand for Chinese shares will be boosted. This will in turn inject a more significant and much needed foreign institutional element into the Chinese share market helping to balance out speculative retail investors and making for a more stable market.

Chinese economic data for May provided signs of a stabilization in growth after the soft patch early this year. Imports and fixed asset investment were weaker than expected, but growth in industrial production, consumer spending, exports, property sales and money supply improved and credit came in stronger than expected. At the same time though inflation was weaker than expected and producer prices are continuing to fall highlighting that monetary policy still remains way too tight, so further PBOC easing is still likely. 

Japanese economic data was good with March quarter GDP growth revised up to a strong 1% quarter on quarter driven by strong investment, strong machinery orders in April indicating that the strength in investment may be continuing and further falls in bankruptcies and Tokyo office vacancy rates.

Over in Malaysia, the stock market has of late been hit by heavy foreign funds selling. With US economic growth expected to make up for seasonally weak Q1, more foreign funds selling is to be expected. I've said before when putting my comment on Kenanga Growth Fund (change from BUY to HOLD rating) a week ago because there is lack of any catalyst in the Malaysian market.