Andy Burnham took office as UK PM, gilts sold off, and sterling slipped. Canada and New Zealand CPI prints surprised. The focus turns to UK inflation Wednesday.
Andy Burnham took office as UK Prime Minister yesterday, replacing Sir Keir Starmer. The change, the seventh UK premier since the Brexit vote, pushed gilt yields higher and weighed on sterling, analysts said.
FP Markets chief market analyst Aaron Hill said Burnham's pick of John Healey as Chancellor signalled a bigger defence spending commitment. That hit the long end of the gilt curve. Sterling slipped. GBP/USD traded lower on the session.
Oil benchmarks swung Monday. The US struck Iranian targets for a tenth consecutive day. Houthi militants threatened to blockade Saudi shipping in the Red Sea. Brent crude traded near $90 a barrel, about 26% above its July low of $70.14. Buyers and sellers squared off near the underside of daily resistance at $90.12, Hill said.
Wall Street extended its slide. The Dow Jones fell for a third straight session, absorbing the 52,000 level. Hill saw scope for further underperformance to 50,600. The S&P 500 slipped 0.2%. Of its members, 331 ended lower, and eight of 11 sectors lost ground. The earnings calendar picks up Wednesday with Tesla and Alphabet. Microsoft, Meta, Apple, and Amazon report next week. Microsoft, which carries an AlphaScala Alpha Score of 62, closed at $402.29, up 2.15% on the session.
Canada's June CPI came in softer than expected. Headline inflation cooled to 2.8% from 3.2% in May. The Bank of Canada's preferred measures, CPI-trim and CPI-median, also eased, bringing the average to 1.85%. Hill said he was looking for a beat in the data given positioning that showed the Canadian dollar modestly bearish and the US dollar overstretched. USD/CAD barely budged on the print. The pair pushed higher later in the US session. The move was contained, Hill said.
New Zealand's Q2 CPI printed at 4.1% year-on-year, above the market median of 4% and the Reserve Bank of New Zealand's 3.9% forecast. The quarterly number came in at 1.5%. Hill said that held back a stronger NZD rally, along with the estimate distribution where a print above 4.1% would have packed more punch. Rate expectations shifted modestly. Markets now price 57 basis points of RBNZ tightening by year-end, up from 55 basis points a day earlier.
UK unemployment held at 4.9% in May, defying the median estimate of 5%. Employment rose by nearly 150,000, well ahead of the 50,000 forecast. Earnings data offered a less rosy picture. Three-month average earnings growth came in at 4.3%, the lower end of the forecast range. Hill called it a mixed release and a challenging print to trade. Sterling ticked higher on the headline numbers. It gave back some of the gain after the earnings miss registered with traders, he said.
The next UK data point is June CPI, due at 6 a.m. GMT Wednesday.
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