- US stocks finished with a positive bias in which the major indices eked mild gains and the Russell 2000 outperformed with sentiment helped by slightly softer yields, although price action was choppy during the session amid a slew of data releases and with participants bracing for the Fed's preferred PCE measure of inflation.
- USD was marginally softer on the day with the DXY sitting just beneath the 106.00 level but off its worst levels as participants digested a slew of data releases including the upward revision to Q1 GDP and mixed Durable Goods, while Initial Jobless Claims fell more than expected but Continued Claims rose. Participants now turn their attention to the US Presidential Debate and US Core PCE data.
- Looking ahead, highlights include South Korean Industrial Production & Retail Sales, Japanese Industrial Production & Tokyo CPI, Australian Private Sector Credit, US Presidential Debate, Holiday Closure in New Zealand.
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LOOKING AHEAD
- Highlights include South Korean Industrial Production & Retail Sales, Japanese Industrial Production & Tokyo CPI, Australian Private Sector Credit, US Presidential Debate, Holiday Closure in New Zealand.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks finished with a positive bias in which the major indices eked mild gains and the Russell 2000 outperformed with sentiment helped by slightly softer yields, although price action was choppy during the session amid a slew of data releases and with participants bracing for the Fed's preferred PCE measure of inflation.
- SPX +0.1% at 5,483, NDX +0.2% at 19,789, DJI +0.1% at 39,164, RUT +1.0% at 2,038.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Bostic (2024 Voter) said inflation is moving in the right direction and a rate cut is likely in Q4, while he pencilled in four 25bps cuts for 2025 and noted the Fed is on a "long term arc". Bostic added that he wants to be absolutely certain inflation will return to 2% before an initial cut which should be seen as the first in a series.
- Fed's Bowman (Voter, Hawk) said the Fed is not at a point yet where it can consider a rate cut and if inflation moves toward 2%, an eventual rate cut is on the table. Bowman said inflation should ease with the current Fed policy setting and monetary policy is currently restrictive, while she is still willing to raise rates again if inflation doesn't ease.
DATA RECAP
- US GDP Final (Q1) 1.4% vs. Exp. 1.3% (Prev. 1.3%)
- US Core PCE Prices Final (Q1) 3.7% (Prev. 3.6%)
- US Durable Goods (May) 0.1% vs. Exp. -0.1% (Prev. 0.6%, Rev. 0.2%)
- US Durables Ex-Transport (May) -0.1% vs. Exp. 0.2% (Prev. 0.4%)
- US Pending Sales Change MM (May) -2.1% vs. Exp. 2.5% (Prev. -7.7%)
- US Initial Jobless Claims 233.0k vs. Exp. 236.0k (Prev. 238.0k, Rev. 239k)
- US Continued Jobless Claims 1.839M vs. Exp. 1.824M (Prev. 1.828M, Rev. 1.821M)
- US KC Fed Manufacturing (Jun) -11.0 (Prev. -1.0)
- US KC Fed Composite Index (Jun) -8.0 (Prev. -2.0)
FX
- USD was marginally softer on the day with the DXY sitting just beneath the 106.00 level but off its worst levels as participants digested a slew of data releases including the upward revision to Q1 GDP and mixed Durable Goods, while Initial Jobless Claims fell more than expected but Continued Claims rose. Participants now turn their attention to the US Presidential Debate and US Core PCE data.
- EUR mildly strengthened against the dollar and reclaimed the 1.0700 status, while ECB comments were varied as Kazaks said market rate bets are a pretty acceptable scenario and Kazimir anticipates a quiet summer on ECB rates and can expect one more rate cut this year.
- GBP eked mild gains and remained firmly beneath 1.2700 with upside limited ahead of UK Final Q1 GDP.
- JPY traded rangebound and finished the session little changed with a firm footing at the 160.00 handle ahead of a slew of Japanese data releases including the latest Tokyo CPI data.
- Czech CNB Repo Rate N/A 4.75% vs exp. 5.00% (Prev. 5.25%). CNB lowered the discount rate by the same amount to 3.75% and the Lombard rate to 5.75%.
- Riksbank maintained its rate at 3.75%, as expected, while it stated that if inflation prospects remain the same, the policy rate can be cut two or three times during H2 2024.
- Turkish CBT Weekly Repo Rate (Jun) 50.0% vs. Exp. 50.0% (Prev. 50.0%). CBT said a tight stance is to be maintained until a sufficient and sustained decline in the underlying trend of monthly inflation.
- Mexican Central Bank Interest Rate (Jun) 11.0% vs. Exp. 11.0% (Prev. 11.0%) with the decision not unanimous as Mejia voted in favour of lowering rates by 25bps to 10.75%, while the Board foresees that the inflationary environment may allow for discussing reference rate adjustments.
FIXED INCOME
- T-notes caught a bid on soft Durable Goods and rising Continued Claims, while a relatively strong 7-year auction also kept prices supported.
COMMODITIES
- Oil prices were firmer as they benefitted from the dollar weakness and the mildly positive risk tone.
GEOPOLITICAL
MIDDLE EAST
- Israel's PM Netanyahu indicated he foresees a prolonged battle ahead in the efforts to eliminate Hamas, according to Bloomberg.
OTHER
- US is reportedly in talks to supply Ukraine with up to eight patriot systems, according to FT.
- Russian Defence Ministry said Russia carried out a high precision strike on Ukraine's airfields planned to deploy Western Airplanes, according to Interfax.
- Russian Deputy Foreign Minister said Western politicians will not be able to shelter in bunkers if it comes to a nuclear conflict, according to TASS. Furthermore, Russia could amend the nuclear doctrine in the future, accounting for Ukraine experiences, while it already taking measures in response to the US involvement in strikes on Sevastopol.
- White House said US National Security Advisor Sullivan and Philippine National Security Advisor discussed "China's dangerous and escalatory actions" in the South China Sea, while the US said the mutual defence pact extends to armed attacks on Philippine armed forces and public vessels or aircraft.
ASIA-PAC
NOTABLE HEADLINES
- US rules curbing the export of AI chips to China are beginning to squeeze the country’s AI industry as companies ranging from behemoths like Alibaba (BABA) to rising startups like Moonshot AI are all grappling with the impact, according to The Information.
- Chinese Commerce Ministry said that when it comes to China-EU EV talks, working teams from both sides are in close communication and should expedite work.
- S&P affirmed China’s rating at at A+/A-1; Outlook Stable, while it stated that the ratings on China reflect the country's policy settings that will likely maintain robust economic growth and strong external metrics.
- BoJ Deputy Governor Uchida said a weak JPY is an upward factor for prices, which they are closely monitoring in conducting monetary policy.
- BoJ is reportedly conducting a survey of Japanese government bond players over bond-tapering plans, according to Reuters citing sources.
- Some bond market participants who met with the BoJ this month called on the bank to trim bond purchases in several stages to enhance market liquidity, according to the minutes of the meeting cited by Reuters.
- RBA's Hauser said the outlook remains uncertain and this has not changed, while it may be taking a little longer for policy to feed through and he noted that there is a whole series of data between now and the next policy meeting.
EU/UK
NOTABLE HEADLINES
- BoE Financial Stability Report (June) stated that risks to the UK financial system are broadly unchanged since Q1 but some asset prices have continued to rise and the risk of a sharp correction persists. Furthermore, it stated that global risks are material, including geopolitical risks, which remain high.
- Former BoE MPC member Saunders said the BoE will probably cut rates in August, while he sees the BoE cash rate at 3.5% by the end of 2025 and sees two or three rate cuts this year. Furthermore, he said that markets will be relieved with a large Labour win in the UK election.
- ECB's Kazaks said that market rate bets are a pretty acceptable scenario.
- ECB's Kazimir said he expects a quiet summer on ECB rates and can expect one more rate cut this year.
- German cabinet decision on a draft budget will not be possible to be presented next week. However, a political agreement on the key points and financing deal could be announced and they are targeting July 17th for a full cabinet agreement which was pushed back from the earlier July 3rd deadline, according to Reuters citing sources.
- Germany could object if the ECB attempts to lower French yields, according to Bloomberg citing the German Finance Minister.
- French President Macron named Thierry Breton as French EU commissioner.
- Far-right National Rally (FN) party is seen in the lead for the French parliament election first round with 38% of votes, while left-wing New Popular Front (NFP) coalition is in second place with 29% of votes and Macron's centrist camp in third place for 21% of votes, according to an IFOP poll.
DATA RECAP
- EU Economic Sentiment (Jun) 95.9 vs. Exp. 96.2 (Prev. 96.0)
- EU Services Sentiment (Jun) 6.5 vs. Exp. 6.4 (Prev. 6.5)
- EU Industrial Sentiment (Jun) -10.1 vs. Exp. -9.6 (Prev. -9.9)
- EU Consumer Confidence Final (Jun) -14.0 vs. Exp. -14.0 (Prev. -14.0)
