- US stocks rallied in which the S&P 500 and Nasdaq printed fresh record highs again with gains led by outperformance in tech after semis were buoyed by strong TSMC sales and Apple caught a bid on reports it is to boost its iPhone 16 shipments. Attention was also on Fed Chair Powell's second day of testimony to Congress where he largely stuck to the script and noted more good data was needed to be convinced inflation is returning to the target in a sustainable way, as well as repeated that risks to both sides of the mandate have come back into better balance.
- USD was rangebound and just about retained the 105.00 status heading into Thursday's CPI release, while Fed Chair Powell largely echoed remarks from the prior day's testimony.
- Looking ahead, highlights include Japanese Machinery Orders, BoK Rate Decision, Comments from Fed's Cook, Supply from Japan.
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LOOKING AHEAD
- Highlights include Japanese Machinery Orders, BoK Rate Decision, Comments from Fed's Cook, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks rallied in which the S&P 500 and Nasdaq printed fresh record highs again with gains led by outperformance in tech after semis were buoyed by strong TSMC sales and Apple caught a bid on reports it is to boost its iPhone 16 shipments. Attention was also on Fed Chair Powell's second day of testimony to Congress where he largely stuck to the script and noted more good data was needed to be convinced inflation is returning to the target in a sustainable way, as well as repeated that risks to both sides of the mandate have come back into better balance.
- SPX +1.02% at 5,633, NDX +1.09% at 20,675, DJI +1.09% at 39,721, RUT +1.10% at 2,051.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed Chair Powell said they have made quite a lot of progress on the balance sheet runoff but there is still a way to go and it is hard to be precise on the stopping point, while they want a bit of a buffer and going slower could allow them to go further. Powell repeated the suggestion of not wanting to wait until inflation gets all the way to 2% to ease policy and said the Fed wants to have greater confidence, which means more good inflation readings. Furthermore, Powell has some confidence in inflation coming down but is not yet prepared to say he is sufficiently confident in it coming sustainably down to 2%.
- WSJ’s Timiraos wrote "Federal Reserve Chair Jerome Powell made the beginning of a pivot on interest rates that might prove more durable than one that sparked a big market rally at the end of last year".
- US President Biden could attempt to deliver on sweeping student loan forgiveness weeks before the election, according to CNBC.
- US House Democratic Leader Jeffries told lawmakers he will relay their concerns about Biden's electability for president, according to Politico.
DATA RECAP
- US Wholesale Sales MM (May) 0.4% vs. Exp. 0.1% (Prev. 0.1%, Rev. 0.2%)
- US Wholesale Inventories MM (May) 0.6% vs. Exp. 0.6% (Prev. 0.6%)
FX
- USD was rangebound and just about retained the 105.00 status heading into Thursday's CPI release, while Fed Chair Powell largely echoed remarks from the prior day's testimony and noted he has some confidence inflation is coming down, but is not quite comfortable yet in being convinced it is coming down sustainably.
- EUR marginally gained against the greenback with pertinent drivers light ahead of the ECB quiet period beginning on Thursday.
- GBP outperformed following hawkish remarks by BoE's Pill who noted that annual services price inflation and wage growth continue to point to uncomfortable strength in those underlying inflation dynamics.
- JPY continued to weaken which saw USD/JPY gain a firmer footing at the 161.00 handle although has since pulled back from its intraday peak of around 161.80.
FIXED INCOME
- T-notes initially tracked EGBs higher before returning to flat territory alongside Aramco issuance and Fed Chair Powell sticking to the script, while the brief support after a strong 10-year auction faded ahead of CPI data.
COMMODITIES
- Oil prices moved higher throughout the day amid the positive risk sentiment and US inventory data.
- US EIA Weekly Crude Stocks w/e -3.443M vs. Exp. -3.0M (Prev. -12.157M)
- OPEC MOMR (July) said the demand growth forecasts for 2024 and 2025 remain broadly unchanged vs the prior month at 2.2mln BPD and 1.8mln BPD, respectively.
- US Energy Department announced a new solicitation for up to 4.5mln barrels of oil for delivery to the Strategic Petroleum Reserve's Bayou Choctaw site from October through December.
- Russia boosted liquefied petroleum gas exports to China via rail by almost a third in H1 to 133k tonnes, according to Reuters citing sources and calculations.
- Chile's Codelco copper production rose 0.7% Y/Y in May to 111.7k tons, while Escondida copper production rose 26.5% to 106.1k tons and Collahuasi copper production rose 6.9% Y/Y to 46.2k tons.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu's office said the PM has stressed his commitment to a potential ceasefire deal as long as red lines are upheld.
- Israeli Defence Minister Gallant and IDF Chief of the General Staff Halevi both said they are in favour of a hostage deal with Hamas, according to Kann News.
- Tel Aviv agreed in the Cairo meeting that Palestinian parties would take over the management of the Rafah crossing, according to Israeli media. Solutions proposed during the Cairo meeting do not include an Israeli presence on the ground in Gaza, while Tel Aviv requested guarantees from Washington that it could attack the Gaza Strip again if it was proven that militants had returned to its north.
- Israel is close to agreeing to withdraw from the Rafah crossing and there are attempts to open the Rafah crossing by the end of July after the full Israeli withdrawal. However, there are sticking points regarding the identification of the Palestinian parties that will operate the Rafah crossing, according to Al Arabiya citing Arabic sources.
- Israel-Hamas negotiations will be complicated and will take several weeks, while efforts to narrow differences will be made at the Doha meeting, according to Israeli press citing sources.
- Israel Defense Forces called on all of Gaza City residents to evacuate to the south, according to Amichai Stein on X. It was separately reported that a security source said 3 additional teams of the Israeli ground forces are ready in the Northern Command and days of difficult fighting are expected on the Lebanese and Syrian fronts.
- Israel Military said it struck Syrian army targets in the Golan Heights area.
- Iraqi armed factions announce the targeting of the Israeli port of Ashdod with drones, according to Sky News Arabia.
- IRGC commander said if necessary, they will take practical and direct steps and support the resistance forces in the region, according to Al Jazeera.
OTHER
- Russia's Kremlin said operations in Ukraine's Kharkiv region are aimed at creating a buffer zone but this will take time and it warned if the UK allows Ukraine to strike Russia with British weapons, this is an escalatory step and Russia will respond.
- Russian Defence Ministry said it scrambled a MIG-31 fighter jet to escort Norwegian military aircraft away from Russian territory over the Barents Sea.
- US is to start deploying long-range fire capabilities in Germany in 2026 in an effort to demonstrate its commitment to NATO and European defence, according to a joint statement from Germany and the US.
- NATO leaders are expected to call China a "decisive enabler" of Russia's war against Ukraine in the summit statement, while they are expected to urge China to cease all material and political support for Russia's war efforts, according to a NATO source.
- Hungarian Foreign Minister Szijjarto sees a chance for peace in Ukraine if Trump returns as US President and said that only Trump is likely to be able to bring Russia and Ukraine into negotiations, according to Reuters
- China said India has no right to carry out the development in the area called South Tibet, while it added the establishment of "Arunachal Pradesh" is illegal and invalid.
ASIA-PAC
NOTABLE HEADLINES
- China’s securities regulator approved an increase to the margin requirement for securities lending from a minimum of 80% to 100%, while the move is to further strengthen the countercyclical adjustment of securities relending.
- China's MOFCOM is to investigate EU trade barriers following the probe on Chinese firms with the investigation to occur through to 10th January 2025 and can be extended to April.
- German government representatives and mobile carriers agreed on 5G regulation regarding Huawei in which a decision to exclude Chinese components has been made, according to Sueddeutsche Zeitung.
- US Treasury Undersecretary Shambaugh said the US may need to take further action to protect US industries from China's industrial overcapacity and more creative approaches beyond Section 301 tariff adjustments may be necessary against China's overproduction and exports.
- US and Mexico's new import requirements on steel/aluminium are aimed at preventing an expected surge in transhipped products primarily from China with the US to require steel product imports from Mexico to be melted and poured into North America to avoid 25% Section 232 tariffs.
- Many Japanese private banks who met with the BoJ on Tuesday urged it to halve monthly bond buying from current JPY 6tln by around 2026, according to Reuters citing sources.
- India’s Trade Minister said India is to discuss a proposed foreign investment of USD 100bln from the four-nation European bloc EFTA on Sunday.
EU/UK
NOTABLE HEADLINES
- BoE's Pill said more data will come before they take their next policy decision at the MPC meeting on August 1st but have to be realistic about how much any one or two releases can add to their assessment. Pill said annual services price inflation and wage growth continue to point to uncomfortable strength in those underlying inflation dynamics but added the latest data remains consistent with the view that these inflationary pressures have now been contained and may be starting to revert towards levels that are more consistent with the achievement of the inflation target. Furthermore, he said it is an open question as to whether the time for cutting rates is upon us and he is reluctant to be drawn on whether he's cautious or not about cutting rates, as well as noted it is important to get the balance right.
- BoE's Mann said the supply side of the economy is growing very slowly, while she still sees labour market tightness and stated that wage growth is still far away from being consistent with the inflation target.
- French President Macron stated in a letter addressed to the nation that he will be asking the various political forces within the republican bloc to assemble a solid majority for parliament and he will then name a new PM. Macron said that no political force obtains a sufficient majority on its own and the blocs or coalitions that emerge from these elections are all minorities, while he added that if the extreme right came out on top in the first round with nearly 11mln votes, the nation clearly refused to allow it to enter the government.
- Bank of France sees Q2 economic growth of 0.1% vs. prior forecast of 0.0-0.1% with French political uncertainty to impact Q3 more than Q2. Furthermore, the director general of statistics at the Bank said it was too early to gauge the economic impact of any political deadlock and the Paris Olympic Games could have a positive impact to counterbalance this.
