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Morning Update

China’s June PMI reading came in at 50.1, showing narrow expansion in the manufacturing sector. The HSBC manufacturing PMI was reported at 49.3, up 1.1 M/M. This report is widely watched and suggests that the Chinese economy might be at or near a bottom. In Europe Spanish and Italian PMIs came in better than expected, while French, German, and British PMIs missed expectations, confirming that even Europe’s core is slowing.

The Bundsbank last night published an internal interview with President Jens Weidmann in which he was quoted as saying that the ECB must not overstep its mandate, governments overestimate the banks, that the Bundsbank has more influence in the ECB than other central banks, and that a political union is hard to imagine in the future (Benzinga). This momentarily moved European markets upon its release but became muted when traders realized that the interview was a month old.

In the US the ADP jobs report was published this morning coming in at 163,000 versus 120,000 consensuses. This afternoon the FOMC policy meeting will wrap up with an announcement on interest rates. This announcement will be closely watched for language signaling further quantitative easing should economic indicators continue to deteriorate. Heading into this announcement the EUR/USD exchange rate is up modestly to 1.2310 and gold is down 0.4% to 1608. Should the Fed announce further easing the dollar would likely lose value, boosting stock and commodity prices and especially gold, which is seen as an inflation hedge.

MasterCard released earnings this morning of $5.55 per share on revenue of $1.8 billion and took a $13 million pre-tax charge to cover legal costs. The company’s net income rose 15% Q/Q. MasterCard also took a 20% share in the debit card market, stealing from Visa who reported a 9% decline in debit transactions in Q2.

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