- US stocks were predominantly lower on Thursday with the downside led by the Nasdaq amid weakness in AI-darling Nvidia (NVDA) which eased back from all-time highs and failed to hold on to its status as the most valuable company by market cap despite initially gaining pre-market. As such, tech was the worst-performing sector although most industries finished in the green, while participants also digested soft data releases in which US Housing Starts, Building Permits, headline Philly Fed, and Initial Jobless Claims all missed forecasts.
- USD strengthened throughout the session and was buoyed by rising US yields to reach an intraday peak of 105.655, while the dollar showed little care towards disappointing data including higher-than-expected Initial Jobless Claims for the week that coincides with the survey window for the BLS NFP report, while headline Philly Fed data eased to its lowest reading in five months but the Prices Paid component increased.
- Looking ahead, highlights include Australian Flash PMIs, Japanese National CPI & Flash PMIs, Supply from Australia.
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LOOKING AHEAD
- Highlights include Australian Flash PMIs, Japanese National CPI & Flash PMIs, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were predominantly lower on Thursday with the downside led by the Nasdaq amid weakness in AI-darling Nvidia (NVDA) which eased back from all-time highs and failed to hold on to its status as the most valuable company by market cap despite initially gaining pre-market. As such, tech was the worst-performing sector although most industries finished in the green, while participants also digested soft data releases in which US Housing Starts, Building Permits, headline Philly Fed, and Initial Jobless Claims all missed forecasts.
- SPX -0.25% at 5,473, NDX -0.79% at 19,752, DJIA +0.77% at 39,135, RUT -0.39% at 2,017.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Kashkari (Non-Voter) said it will probably take a year or two to get inflation back to 2% and wage growth might still be a bit too high to get back to 2% right now, while he added that interest rate outlook depends on the path of the economy and the US economy has proven to be remarkably resilient.
- US President Biden noted that core inflation is at its lowest level since April 2021, grocery prices have fallen, and wages are rising faster than prices, while he added that families are still feeling squeezed by the cost of living, so he is fighting to lower the costs for hardworking Americans.
- White House economic adviser Brainard said every reason to expect further progress on inflation and that aberrations in Q1 inflation have not stretched into Q2.
DATA RECAP
- US Philly Fed Business Index (Jun) 1.3 vs. Exp. 5.0 (Prev. 4.5)
- US Philly Fed Prices Paid (Jun) 22.5 (Prev. 18.7)
- US Initial Jobless Claims w/e 238.0k vs. Exp. 235.0k (Prev. 242.0k, Rev. 243k)
- US Continued Jobless Claims w/e 1.828M vs. Exp. 1.805M (Prev. 1.82M, Rev. 1.813M)
- US Building Permits: Number (May) 1.386M vs. Exp. 1.45M (Prev. 1.44M)
- US Housing Starts Number (May) 1.277M vs. Exp. 1.37M (Prev. 1.36M, Rev. 1.352M)
FX
- USD strengthened throughout the session and was buoyed by rising US yields to reach an intraday peak of 105.655, while the dollar showed little care towards disappointing data including higher-than-expected Initial Jobless Claims for the week that coincides with the survey window for the BLS NFP report, while headline Philly Fed data eased to its lowest reading in five months but the Prices Paid component increased.
- EUR gave way to the firmer buck and snapped its three-day win streak but just about held on to the 1.0700 status.
- GBP weakened in the aftermath of the BoE meeting where the Bank Rate was maintained at 5.25% and the voting composition remained at 7-2 although it was revealed that the decision was "finely balanced" for some on the MPC as higher services inflation reflected factors that would not push up medium-term inflation.
- JPY was among the worst performers in the G10 FX space in which USD/JPY approached just shy of 159.00.
- CHF retreated following the SNB rate decision where the central bank cut rates by 25bps, which was as expected but still resulted in an unwinding of the hawkish bets.
- US Treasury semi-annual currency report found that no major US trading partner manipulated their currency to gain unfair trade advantage in four quarters through December 2023, while the monitoring list of trading partners whose currency practices 'merit' close attention includes China, Japan, Malaysia, Singapore, Taiwan, Vietnam, and Germany. Furthermore, it stated that Japan, Taiwan, Vietnam, and Germany are on the monitoring list due to a significant bilateral US trade surplus and material global account surplus.
- SNB cut the policy rate by 25bps to 1.25% (vs split expectations between a 25bps cut and a hold) and reiterated the SNB is willing to be active in the FX market as necessary. SNB Chairman Jordan said underlying inflation pressure has decreased and they are also willing to be active in the foreign exchange market as necessary. Jordan said they do not give any forward guidance regarding interest rates and will adjust the policy rate to ensure inflation stays in the range of price stability, as well as noted that FX interventions can be in both directions.
- Norges Bank maintained its key policy rate at 4.50% as expected and stated the policy rate will likely be kept at that level for some time ahead, while there will be a need to maintain a tight monetary policy stance for somewhat longer than previously projected. Furthermore, Governor Bache said if the economy evolves as currently envisaged, the policy rate will continue to lie at 4.5% to the end of the year, before gradually being reduced.
FIXED INCOME
- T-notes were lower across the curve despite dovish data in likely anticipation of supply next week and alongside month/quarter end.
COMMODITIES
- Oil prices were firmer for the duration of the session with geopolitical tensions rife.
- US EIA Weekly Crude Stocks -2.547M vs. Exp. -2.0M (Prev. 3.73M).
GEOPOLITICAL
MIDDLE EAST
- Israeli officials were in Qatar this week in an attempt to nail down a hostage deal, according to Times of Israel.
- Israeli Foreign Minister said they must stop Iran now before it is too late, according to Sky News Arabia.
- US Secretary of State Blinken is to meet with top officials from Israel on Thursday, according to a senior State Department official, while Blinken will discuss ongoing work on ceasefire and hostage release in the meeting with Israeli officials.
- US is to redirect patriot air defence orders to Ukraine and sources noted that the decision would be announced on Thursday, according to FT.
OTHER
- EU countries agreed on the 14th package of sanctions against Russia over its war in Ukraine.
- Russian President Putin said Russia is thinking about changes to its nuclear doctrine and does not rule out supplies of high-precision weapons to North Korea, according to Russian press. Possible changes are related to lowering the threshold for the use of nuclear weapons in the West but it was noted that there is no need for a Russian pre-emptive nuclear strike and it expects that cooperation with North Korea will be a deterrent factor. Furthermore, it was stated that Seoul's supply of weapons to Kyiv would be a mistake and that South Korea should not worry about agreements between Russia and North Korea, while it was said that NATO is moving to Asia, creating a security threat to Russia.
- Russian navy said trials of nuclear-powered cruiser Admiral Nakhimov will begin in 2024 and be completed next year, according to RIA.
- China authorised small banks in northeast China to facilitate Russian payments.
- Outgoing Dutch PM Rutte is to become NATO chief after the Romanian leader dropped out.
ASIA-PAC
NOTABLE HEADLINES
- China is reportedly accelerating the take up of unsold properties and is calling for local governments to vigorously, orderly and effectively undertake the acquisition of completed stock of commercial housing for affordable housing, according to state media.
- ByteDance and TikTok urged the US Court of Appeals to block the law that would compel divestiture or impose a ban on the app in the US by January 19th, access to a court filing.
- Japanese top currency diplomat Kanda said they will thoroughly respond to excessive FX moves and there is no limit for FX intervention resources, while he added the FX market is determined by various factors including rate gap and need to pay close attention to the impact on FX market from central banks' policy decision. Furthermore, he said FX intervention announced at the end of May was quite effective in responding to excessive FX moves caused by speculators, according to JiJi.
EU/UK
NOTABLE HEADLINES
- BoE kept the Bank Rate at 5.25% (exp. 5.25%) in a 7-2 vote (exp. 7-2) as Dinghra and Ramsden voted for cuts again, while it stated that the decision was "finely balanced" for some on the MPC as higher services inflation reflected factors that would not push up medium-term inflation. Furthermore, there was a range of views among MPC members who voted to keep rates on hold about how much more evidence was needed to cut.
- ECB's Centeno said let's leave all options to July and naturally September as well, while he added they cannot risk undershooting when asked about where rates could go.
DATA RECAP
- EU Consumer Confidence Flash (Jun) -14.0 vs. Exp. -13.6 (Prev. -14.3)
- German Producer Prices MM (May) 0.0% vs. Exp. 0.3% (Prev. 0.2%)
- German Producer Prices YY (May) -2.2% vs. Exp. -2.0% (Prev. -3.3%)
