- APAC stocks began the new trading month on the front foot with momentum from last Friday's rally on Wall Street; European equity futures are indicative of a marginally higher open.
- DXY was contained ahead of the thinned conditions stateside where markets will close early owing to tomorrow’s Independence Day celebrations.
- Chinese Caixin Manufacturing PMI topped forecasts for its second consecutive monthly expansion.
- US confirmed that Treasury Secretary Yellen will visit China on July 6th-9th for meetings with senior Chinese officials although a Treasury official already tempered expectations.
- Looking ahead, highlights include Swiss CPI, EZ/UK/US Final Manufacturing PMI, US ISM Manufacturing PMI.
- Holidays: Canada Observes Canada Day, US Early Closure ahead of Independence Day.
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US TRADE
EQUITIES
- US stocks rallied on Friday amid buying into quarter-end and as participants digested a slew of data releases including a softer-than-expected Core PCE report which was accompanied by a cooling in housing prices and core services ex-housing components, although goods prices accelerated. Furthermore, the final UoM sentiment was revised higher for June but inflation expectations were unchanged, while the Chicago PMI disappointed expectations amid soft aircraft orders from Boeing.
- SPX +1.22% at 4,450, NDX +1.60% at 15,179, DJIA +0.83% at 34,406, RUT +0.38% at 1,888.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Goolsbee (voter) said on Friday that he is trying to figure out if they have raised rates enough or need more, while he has not made up his mind on rates and will get a lot of data in weeks before the next FOMC, according to a Fox Business News interview.
- US President Biden is to travel to the UK, Finland and the NATO summit in Lithuania from July 9th, according to the White House.
- US President Biden tweeted that his administration will deliver high-speed internet to all Americans, while he also noted that his administration beat big pharma to cap the cost of insulin for seniors on Medicare but their work isn’t done until they extend the cap for everyone.
- Unconfirmed rumours are circulating on Twitter that SEC Chairman Gensler submitted his resignation following an internal investigation, according to Twitter sources.
- Tesla (TSLA) delivered a record number of vehicles in Q2 following price cuts earlier this year with deliveries up 10.4% Q/Q and 83.5% Y/Y to over 466k units, while production reached nearly 480k units, according to FT. It was also reported that Tesla China is to offer discounts on inventory cars of Model S and Model X, according to Reuters.
APAC TRADE
EQUITIES
- APAC stocks began the new trading month on the front foot with momentum from last Friday's rally on Wall Street and as participants digested key data releases including an improved Tankan survey and better-than-expected Chinese Caixin Manufacturing PMI.
- ASX 200 was positive as gains in the commodity-related sectors offset the losses in tech stocks and with encouragement from a surge in Building Approvals, although further upside was capped ahead of tomorrow’s RBA meeting with analysts near-evenly split regarding forecasts for a hike or a pause.
- Nikkei 225 was underpinned following the BoJ’s quarterly Tankan survey which mostly topped estimates and showed Japanese large manufacturers' sentiment improved for the first time in seven quarters.
- Hang Seng and Shanghai Comp conformed to the positive mood after Chinese Caixin Manufacturing PMI topped forecasts for its second consecutive monthly expansion and the PBoC recently pledged that China will continue to provide inclusive loan support for small and micro businesses. In addition, the US confirmed that Treasury Secretary Yellen will visit China on July 6th-9th for meetings with senior Chinese officials although a Treasury official already tempered expectations and noted that no significant breakthrough was anticipated.
- US equity futures traded sideways as last week's rally lost steam ahead of the US holiday and key events.
- European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.4% after the cash market closed up 1.0% on Friday.
FX
- DXY was contained ahead of the thinned conditions stateside where markets will close early owing to tomorrow’s Independence Day celebrations and with Canada also shut today for a holiday, while the FOMC minutes mid-week and Friday’s NFP report also contribute to the early non-committal mood.
- EUR/USD traded rangebound and hovered near support at the 1.0900 level amid relatively quiet newsflow from the bloc aside from the riots in France which forced French President Macron to postpone a state visit to Germany.
- GBP/USD lacked direction and oscillated around 1.2700 as it took a breather after Friday’s advances.
- USD/JPY was underpinned as the broad positive risk appetite dampened haven demand.
- Antipodeans swung between gains and losses with AUD/USD indecisive amid positioning heading into tomorrow’s RBA meeting with analysts’ forecasts suggesting a near coin-flip regarding the decision in rates.
- PBoC set USD/CNY mid-point at 7.2157 vs exp. 7.2464 (prev. 7.2258)
- Czech Central Bank Governor Michl said they are not considering cutting rates and will likely get inflation to below 10% in the next two months, while he added that inflation can be more persistent than they think and they would have to raise rates if demand was to revive, according to Pravo.
FIXED INCOME
- 10yr UST futures remained subdued following Friday’s choppy performance and with a lack of demand heading into the Independence Day holiday closure and this week’s key events.
- Bund futures traded rangebound overnight in the absence of any major macro catalysts from Europe.
- 10yr JGB futures were lacklustre amid improved Tankan data and after BoJ largely stuck to its purchase amounts and frequencies in its quarterly schedule of outright purchases.
COMMODITIES
- Crude futures were flat after the latest Chinese Caixin Manufacturing PMI data pared early losses.
- Iraq’s June oil exports averaged 3.3mln bpd, according to the Oil Ministry, cited by Reuters.
- Spot gold was rangebound amid an uneventful dollar heading into US Independence Day.
- Copper futures gained amid the positive risk appetite and encouraging data releases from Asia.
CRYPTO
- Bitcoin notched mild gains overnight after edging above the USD 30,500 level over the weekend.
NOTABLE ASIA-PAC HEADLINES
- PBoC Deputy Governor Pan Gongsheng was named as the PBoC’s Party Secretary which was suggested to likely be a prelude to becoming Governor, while PBoC Governor Yi and former Party Secretary Guo stepped down from their party roles, according to WSJ and FT.
- PBoC survey found that China’s urban residents were more willing to raise consumption in Q2 compared with Q1 and residents are hoping to increase their spending mostly on education, medical care and tourism in Q3.
- China’s MOFCOM expressed dissatisfaction regarding export controls of semiconductor products imposed by the Netherlands, while it urged the Netherlands to not hinder bilateral cooperation in the semiconductor industry and to not abuse export controls, according to Reuters.
- US Treasury said Treasury Secretary Yellen will visit China on July 6th-9th for meetings with senior Chinese officials and will underscore that targeted US actions are not intended to gain economic advantage. US senior Treasury official said the US is not seeking to decouple US and Chinese economies, while the US is looking for open communication and cooperation on global challenges. Furthermore, the official is not expecting significant breakthroughs from Yellen's visit and noted they are seeking to expand communications at a sub-cabinet level, while US concerns about Chinese actions on Micron are expected to come up broadly during Yellen's meetings, according to Reuters.
- US National Counterintelligence and Security Center warned about the risk of engaging in business with China after Beijing implemented a revised counterespionage law on July 1st.
- CIA Director Burns said the answer is not to decouple from an economy like China’s which would be foolish, while he added the answer is to sensibly de-risk and diversify by securing resilient supply chains, protecting US’s technological edge and investing in industrial capacity, according to Reuters.
- More than 50,000 were affected and nearly 7,000 were evacuated after heavy rain in China’s Hunan Province, according to China.org.cn.
DATA RECAP
- Chinese Caixin Manufacturing PMI Final (Jun) 50.5 vs. Exp. 50.2 (Prev. 50.9)
- Japanese Tankan Large Manufacturing Index (Q2) 5.0 vs. Exp. 3.0 (Prev. 1.0)
- Japanese Tankan Large Manufacturing Outlook (Q2) 9.0 vs. Exp. 5.0 (Prev. 3.0)
- Japanese Tankan All Industry Capex (Q2) 13.4% vs. Exp. 10.1% (Prev. 3.2%)
- Australian Building Approvals (May) 20.6% vs. Exp. 2.0% (Prev. -8.1%)
GEOPOLITICS
- Russian President Putin is reportedly seeking control of more than 100 Wagner Group companies and Russian security services raided Wagner Group institutions, according to Al Jazeera.
- Russian Duma defence committee head said the Wagner Group's departure from Russia's operation does not threaten Russia's combat potential and there is no need for a new conscript mobilisation wave, according to TASS.
- Ukrainian President Zelensky said a serious threat remains at the Zaporizhzhia nuclear plant because Russia is technically ready to provoke a localised explosion at the facility, according to Reuters.
- Ukrainian Deputy Defence Minister Maliar said Russian troops are advancing in four frontline areas in eastern Ukraine amid fierce fighting, while she added that Ukrainian troops were making advances in one eastern area and two southern areas, according to AFP.
- Ukraine urges the US to follow the EU's four-year funding pledge, while it was also reported that the EU considers a Russian bank concession to safeguard the Black Sea grain deal, according to FT.
- CIA Director Burns said it is always a mistake to underestimate Russian President Putin’s fixation to control Ukraine and that the war in Ukraine has already been a strategic failure for Russia, while he also stated that the disaffection in Russia is a once in a generation opportunity for an intelligence agency such as the CIA which is not letting it go to waste, according to Reuters.
- Belarusian President Lukashenko signed a law allowing to ban media from ‘unfriendly countries’ in Belarus, according to RIA.
- Chinese military declaration visited the UK and France from June 4th and July 1st to discuss the development of bilateral defence relations, according to Reuters.
EU/UK
NOTABLE HEADLINES
- Financial advisers warned that steps by banks and building societies to help UK borrowers cut their monthly mortgage payments risk storing up financial trouble in later life as they face a higher total interest bill and lower income in retirement, according to FT.
- French President Macron postponed his state visit to Germany amid unrest in France and met ministers to discuss a response to the unrest, while he asked his ministers to continue mobilising until complete calm is restored. It was also reported early on Sunday that the arrests in France overnight had increased to 719 and that the Paris suburb mayor’s home was attacked using a burning car.
- Foreign buyers are reportedly driving up demand and prices of real estate in Spain with buyers, especially from the US and northern Europe snapping up homes on Spain’s southern coast, according to Bloomberg.
