Friday’s US stock market rally which saw the Dow climb 0.5% and the NASDAQ soar 1.5% on a Goldilocks employment report (strong enough to indicate the recovery continues but not strong enough to force the Fed to cut stimulus) appears to have run out of gas over the weekend. US index futures are essentially flat this morning, while in Europe, the Dax is up 0.2% and the FTSE is up 0.4%.
The loss of momentum this morning could be chalked up to a number of factors. In particular, China’s trade balance ($45.5B vs street $50.5B) and export growth (27.9% vs street 41.6% and previous 32.3%) both came in short of expectations. Also, G-7 finance ministers agreed to a US-led 15% global minimum tax for corporations which may be seen as the beginning of the end of multinationals being able to shop around between major developed countries for the lowest tax rate ahead of this coming weekend’s annual G-7 leaders’ summit.
Copper is in retreat this morning, down 0.8% on the China trade disappointment. WTI and Brent Crude oil are down marginally ahead of the next round of talks with Iran. Although these negotiations could eventually lead to the easing of sanctions and increased Iranian oil exports, press reports suggest a deal appears unlikely ahead of Iran’s Presidential Election which is being held on June 18th.
As is common in the second week of the month, its pretty quiet for economic data with the main event being Thursday’s US inflation report. There are two central bank meetings of note, the Bank of Canada on Wednesday and the European Central Bank on Thursday. While no changes in policy are expected, investors may look for commentary on the states of their economies, particularly the impact of continuing lockdowns in Canada after Friday’s deeper than expected job losses. On the corporate side, there are a few retailers of interest reporting including Gamestop on Tuesday, Dollarama on Wednesday and Roots on Friday.
