OPEC+ Showdown, Services PMI's

“It’s the whole group versus one country, which is sad to me but this is the reality.”

Australia's building approvals fell 7.1% m/m in May but are still far above pre-pandemic levels. Despite 2 straight monthly losses, approvals were above 20k for the 3rd month in a row, for only the 2nd time since records began in 1983.

Australian Job Ads rose 3.0% m/m in June making it a record streak of thirteen consecutive monthly gains. Job Ads is up 39.1% on its pre-pandemic level and is consistent with an unemployment rate of 5%, just below the 5.1% recorded in May.

Real money accounts on CME extended A$ net shorts slightly in week to 29 Jun (spot close 0.7512), from -27.0k to -27.3k contracts, their most bearish stance since Mar 2020. Leveraged funds were little changed, +24.0k vs +25.4k previous week, though open interest fell noticeably

“Business activity continued to increase at a strong rate in June according to the latest IHS Markit Australia Services PMI. While the extension of the Victoria lockdown into June affected some demand and output for the service sector, the overall level of optimism was not significantly diminished.

“Pressure points across prices and labour were however noticeable through the latest survey. The Prices Charged sub-index soared to a fresh survey high to signal record selling price inflation. This was attributed in part to wage inflation and anecdotal evidence pointed to difficulty in hiring by some firms.

“Overall service sector performance remained robust in June. This however comes ahead of the Sydney lockdown update, which is expected to affect the performance of the service sector into July.”

"The Caixin China General Composite PMI came in at 50.6 in June, down from 53.8 the previous month, showing a weakening expansion.

Both the gauges of output and new orders were still in expansionary territory in June, but fell to the lowest in 14 months.

Employment in the manufacturing sector was strong, while that in the services sector was weak. The labor market was stable overall.

The gauges for input prices and output prices largely fell, indicating easing inflationary pressure. "Overall, activity in both the manufacturing and services sector continued to expand.

However, impacted by the resurgence of the virus in some regions in China, the services sector was weaker than the manufacturing sector, both in terms of market supply and demand or employment.

Costs and factory-gate prices in the manufacturing sector still rose, while those in the services sector were basically stable.

The gauges for input prices and output prices in the manufacturing and services sectors fell in June from the previous month’s high, indicating inflationary pressure eased temporarily.

The manufacturing industry has returned to normal in the wake of the epidemic, while the services industry is still sensitive to regional resurgences.

In addition, the low base effect from last year will continue to weaken in the second half of this year. Inflationary pressure, intertwined with the economic slowdown, will still be a serious challenge.”