Market Update- 3 July 2012

 ·      Risk appetites are still hard to sustain with the US ISM numbers disappointing last night and market turned back to its bearish mood, the resuce in Europe still depends a lot on the specific details on how its going to work out

·     Markets overnight paused for thought following Friday’s euphoria and were left fearing for the health of the US economic recovery as the ISM Manufacturing Index showed contraction in the sector for the first time since 2009:

USISM Manufacturing PMI

·     The number came in at 49.7vs a survey of 52 and last month’s 53.5. Next up is payrolls on Friday, another round of disappointing numbers will push markets recovery further back.

·     Italian unemployment unexpectedly fell in May to 10.1%, the median survey was for a rise from 10.2 to 10.3%. An impressive 60k jobs were added to provide the first drop in the gauge since February 2011 and adding to the slightly better than forecast manufacturing PMI figures out across Europe, risk markets were well bid in early trade. (The Euro Zone unemployment rate rose to a record high of11.1%, but was in line with expectations)

·     Equity markets proved resilient to the slowing US data, with the S&P ending 0.25% higher and the DOW closing down only 0.07%.

·     US treasuries down 5.6 bps to 1.589%, bunds down 6bps to1.517% and Italy down 9bps to 5.71%.

·     Spain was the only loser, it’s yields rising 5bpsto 6.3%. Oil was slightly weaker, closing down $1 at $83.75 while gold was flat but off its lows at $1596.43

·      USDMYR opened where it closed yesterday at 3.1650-3.1700 and we continue to expect support at 3.1400 as we see more interest to buy at those levels, while sellers will come in closer to 3.2000 to complete the range trade of 3.1400-3.2000