Russell Shuffle Day, Brexit Anniversary, & Crude Carnage

It’s Russell reshuffle day, which means equities will likely be jarred out of any summer lull, if only for a moment.

As Bloomberg notes, “in four of the last five years, reconstitution day ranked in the 10 busiest trading sessions, [but] at the same time, it rarely triggers big price swings in the market.”

It’s also the one-year anniversary of the Brexit referendum, and needless to say, that’s gone exceptionally well politically for the UK (there’s some sarcasm in there).

As a reminder, that’s what happens when a whole bunch of people get roped into voting for something they don’t understand:

“After sliding 15 percent, the pound’s performance is the worst among major currencies versus the dollar over the past year,” Bloomberg reminds you, before observing that “while equities have basked in the global stock euphoria in dollar terms, the FTSE hovers near levels seen just before the referendum results”:

Speaking of the dollar, it’s is set for its first weekly advance since last month, but things have reversed course towards the end of the week and overnight things accelerated notably (if not dramatically) around the time the eurozone PMI prints started to come in. Here are some of the highlights from those numbers:

France June Flash Manufacturing PMI 55; Est 54
Forecast range from 53 to 54.5 from 20 economists
Index rises to 55 from 53.8 in May; Year ago 48.3
Ninth consecutive month of expansion]
New Orders rise to 56 vs 53.5 in May
Ninth consecutive month of expansion
France June Flash Composite PMI 55.3 Vs 56.9; Est 56.7
Forecast range from 55.5 to 57.1 from 13 economists
Index falls to 55.3 from 56.9 in May; Year ago 49.6
Lowest reading since Jan. 2017
12th consecutive month of expansion
New Orders rise to 55.2 vs 54.7 in May
12th consecutive month of expansion
Germany June Flash Manufacturing PMI 59.3; Est 59
Forecast range from 58 to 60.5 from 38 economists
Index falls to 59.3 from 59.5 in May; Year ago 54.5
New Orders rise to 61.5 vs 60.7 in May
Highest reading since March 2011
Eurozone June Flash Manufacturing PMI 57.3; Est. 56.8
Forecast range from 55 to 57.5 from 43 economists
Index rises to 57.3 from 57 in May; Year ago 52.8
Highest reading since April 2011
New Orders rise to 58.5 vs 57.8 in May
Highest reading since Feb. 2011

Basically, the data wasn’t blowout great, but was good enough to underscore the apparent resiliency of the recovery.

“Consumer confidence is back at levels last seen when people still had francs, marks and pesetas in their wallets, which is supportive of faster consumption growth,” Bert Colijn at ING said. “At the same time, businesses continue to hire new staff near the fastest pace in decades. This should underpin continued strength in the service sector for the coming months.”

As those numbers hit the wires, the greenback drifted lower. Traders saw investors trimming their short-term long positions ahead of the weekend as “lower-than-average volumes were characterized by constant selling pressure on the dollar.”

“The release of stronger-than-forecast manufacturing PMI data out of the euro area helped the shared currency re-test its day high at $1.1180 [and] the pound rallied hard above 1.2700 amid broad dollar weakness, only to get further boost from interbank names; stops above 1.2720 were filled and the pair hit 1.2744 high,” Bloomberg notes.

Of course the focus remains on crude as WTI is heading for a 5th week of declines three days after sinking into a bear market as concerns over rising supply from the U.S. to Libya outweigh optimism around the production cuts from OPEC and its allies.

Some folks are keeping the faith. “A sudden increase in floating crude storage despite being an uneconomic venture at present suggests traders expect oil prices to rally,” RBC ‘s Helima Croft said earlier this week, adding that “anecdotally, physical energy traders have been willing to pay the ~10c/bbl differential between the front contango and the cost of floating storage for the regional optionality in hopes that the cost of carry becomes negligible if spot prices rally.”

But the story remains the same. “It’s all about U.S. production and the fact it’s increasing in the face of lower oil prices,” Michael McCarthy, chief market strategist at CMC Markets in Sydney noted this morning. “If we don’t start to see it drop off in the weekly numbers, there’s a real danger of testing the floor that’s around $40 for West Texas.”

Here’s a snapshot of global equities: