02:50 EST French June consumer confidence rose to -37 from -40 in the previous month. This is the highest reading since March last year, that is before the escalation of the financial crisis. The readings for the future personal financial situation as well as the future standard of living improved, despite the fact that the reading for unemployment jumped to 96 from 89. The readings for current sentiment improved less than the future readings, but the improvement is nevertheless adds to the view that growth is starting to stabilize and that the -1.2% q/q contraction in Q1 was the trough in the quarterly rate cycle.
02:07 EST German May import prices were unchanged over the month and dropped 10.4% y/y. This was weaker than our forecast and median for readings of 0.3% m/m and -10.1% y/y. The annual rate remains heavily impacted by positive base effects from lower energy prices compared to last year and excluding energy prices dropped just 4.7% y/y. However, short term dynamics show that the most recent pick up in oil prices has dampened the monthly decline and excluding energy prices would have dropped 0.8% m/m. So oil prices are not the only factor that are dragging overall import prices lower and the dampening effect will keep consumer price inflation in negative territory for the coming months at least. So far we agree with the centralo bank, that the risk of full blown deflation is limited, but the central bank needs to keep a close eye on inflation expectations.
01:48 EST U.K. May pay growth was the lowest since 1971 according to a survey by Industrial Relations Services, with pay growth of 1.3% 3m y/y in May, same as in April after the figures were revised. Private sector deals hit a record low of 0.9% 3m y/y in May and around 40% of pay private pay deals in May were freezes or cuts, according to IRS. Meanwhile, public sector pay deals were 2.5% 3m y/y in May. Growing spare capacity in the U.K. labour market, combined with negative y/y growth to the RPI inflation measure (on which many pay deals are based) are keeping pay growth subdued, which will add downward pressure to inflation in the medium-term.
01:25 EST Japan April all-industry index rebounded +2.6% m/m SA after -2.4% in Mar, consistent with earlier reports of tertiary index gauge of service sector activity +2.2% after -4.0% m/m SA was steepest drop in 12 years, along with 5.9% m/m jump in industrial output. The data are an encouraging indication that the recession in the Japanese economy, is bottoming out, consistent with expectations for positive q/q growth in Q2 GDP after the contraction by 3.8% q/q SA (-14.2% q/q SAAR) in Q1, the sharpest on record.
00:58 EST Asian stock markets are mixed on Friday with the Nikkei up +0.53% aided by gains on the DJIA but with traders seeing a lack of direction with sellers eyed on rallies. DJIA futures are down 35 pts this session, also hampering gains. Australian stocks are up 1.21% on the back of higher financial and mining stocks. Shares in Singapore are up 0.89% while in New Zealand, stocks posted slight losses of -0.09% after a worse-than-expected -1.0% fall in GDP. Shares in Taiwan are up 0.26% with financial share rising after the central bank kept rates at record low levels of 1.25%. Shares in Seoul were flat at -0.01% with initial gains on the U.S. rise then stymied by the news of the drop in the May current account surplus to $3.12 bln.Stocks in Shanghai were down by -0.24% while shares in Hong Kong were up 1.14%
00:21 EST U.S. Treasury yields are mixed in Asian trading, with the two-year yield easing slightly from late NY levels of 1.14% to current levels of 1.129%. Ten-year yields rose however, edging up to 3.57% from late NY levels of 3.54%. The push up in yields is seen linked to profit-taking after bonds rallied on Thursday after the rise in jobless claims and the strong demand that emerged in the 7-year auction and final auction for the week. Dollar weakness in Asia, tied to sovereign selling of USD and buying of EUR may have also weighed on bonds. DJIA futures are down 35 pts during the current session. Looking ahead, data due in the U.S. later today includes personal income, PCE and Michigan sentiment with Michigan sentiment expected to remain unchanged at 69.0.
23:38 EST The BOE says that banks are still vulnerable to shocks, in the Financial Stability Report released Friday, with the vulnerability linked to leverage and funding.
