- US stocks edged higher on what was a choppy session, although the gains in the major indices and the bull steepening in treasuries were ultimately facilitated by the downward BLS Payrolls revision and after the FOMC Minutes from the July meeting continued to point to a September move as a vast majority of participants said it would likely be appropriate to ease policy at the next meeting if data continued to come in as expected.
- USD was pressured with early headwinds amid the downward BLS Payrolls revision, while there was further pressure seen heading into the FOMC Minutes which noted that a vast majority of participants at the July meeting said it would likely be appropriate to ease policy in September if data continued to come in as expected and several participants believed there was a 'plausible case' for a July 25bps rate cut based on recent progress on inflation and increases in the unemployment rate. This briefly dragged the DXY beneath the 101.00 level although has since rebounded off lows, while the focus turns to Initial Jobless Claims and Flash PMI data on Thursday, before Fed Chair Powell's comments on Friday at the Jackson Hole Symposium.
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LOOKING AHEAD
- Highlights include Australian & Japanese Flash PMIs, Malaysian CPI, BoK Rate Decision, Supply from Japan.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks edged higher on what was a choppy session, although the gains in the major indices and the bull steepening in treasuries were ultimately facilitated by the downward BLS Payrolls revision and after the FOMC Minutes from the July meeting continued to point to a September move as a vast majority of participants said it would likely be appropriate to ease policy at the next meeting if data continued to come in as expected.
- SPX +0.42% at 5,621, NDX +0.53% at 19,825, DJIA +0.13% at 40,890, RUT +1.32% at 2,171.
- Click here for a detailed summary.
FOMC MINUTES
- FOMC Minutes said the vast majority of participants at the July 30th-31st meeting said it would likely be appropriate to ease policy at the next meeting if data continued to come in as expected, and participants viewed incoming data as enhancing their confidence that inflation was moving towards the 2% objective. A majority of participants said risk to the employment goal has increased and many noted risks to the inflation goal decreased, while several participants said recent progress on inflation and increases in the unemployment rate provided a 'plausible case' for a 25bps cut at July's meeting or that they could have supported such a move. Furthermore, many participants noted that easing policy too late or too little could unduly weaken economic activity or employment and several participants said reducing policy restraint too soon or too much could risk a reversal of progress on inflation.
DATA RECAP
- US Payrolls Benchmark NSA Prelim (2024) -818k (Prev. -187k), -0.5%.
FX
- USD was pressured with early headwinds amid the downward BLS Payrolls revision, while there was further pressure seen heading into the FOMC Minutes which noted that a vast majority of participants at the July meeting said it would likely be appropriate to ease policy in September if data continued to come in as expected and several participants believed there was a 'plausible case' for a July 25bps rate cut based on recent progress on inflation and increases in the unemployment rate. This briefly dragged the DXY beneath the 101.00 level although has since rebounded off lows, while the focus turns to Initial Jobless Claims and Flash PMI data on Thursday, before Fed Chair Powell's comments on Friday at the Jackson Hole Symposium.
- EUR continued to benefit from the softer greenback and notched a fourth consecutive daily gain to print fresh YTD highs at the 1.1100 handle.
- GBP strengthened and GBP/USD briefly reclaimed the 1.311 status before pulling back from its best levels in more than a year.
- JPY saw two-way price action during the day but ultimately reverted to flat territory against the dollar.
FIXED INCOME
- T-notes gained with bull steepening seen in the aftermath of the BLS payrolls revisions and FOMC Minutes.
COMMODITIES
- Oil prices extended on declines amid the ongoing Chinese demand concerns and despite the geopolitical backdrop, while a larger-than-expected draw in crude inventories failed to support prices.
- US EIA Weekly Crude Stocks -4.649M vs. Exp. -2.723M (Prev. 1.357M).
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu said they are ready for any scenario, whether in defence or attack in the face of near and far threats, according to Al Jazeera.
- Gaza truce talks have reached an impasse, according to Sky News Arabia citing Times of Israel.
- US President Biden spoke with Israeli PM Netanyahu to discuss the ceasefire and hostage release deal with diplomatic efforts to de-escalate regional tensions, while Vice President Harris also joined the call.
- Israel Broadcasting Corporation reported the meeting between Blinken and Netanyahu did not succeed in reducing the gaps and did not make progress on the deal, while differences on outstanding issues were resolved despite optimistic US statements, according to Al Jazeera.
- Israel is expected to retaliate in a "strong manner" to Hezbollah striking the city of Katzrin in the Golan Heights with 50 rockets, according to Kann News.
- Israeli Defense Minister Galant confirmed the elimination of Hamas's Rafah Brigade in Gaza, while the Israeli army confirmed the assassination of IRGC-QF operative Khalil al-Maqdah in a raid on southern Lebanon, according to Sky News Arabia.
- New head of Israeli military intelligence Binder said they continue to strengthen preparations for the expansion of the war in the north, according to Sky News Arabia.
ASIA-PAC
NOTABLE HEADLINES
- Chinese Commerce Ministry launched an anti-subsidy investigation into dairy products imported from the EU from August 21st with the dairy product probe to include Ireland, Austria, Italy, Belgium and Finland.
- Chinese Chamber of Commerce for Machinery and Electronics said China will continue to respond on behalf of China's EV industry and will resolutely defend the rights of their firms through various means.
- Chinese financial regulatory official said they will strengthen supervision of the behaviour of major shareholders of small and medium size financial institutions.
EU/UK
NOTABLE HEADLINES
- ECB's Panetta said the EU needs common and centralised fiscal policy and Italy must cut debt and fix structural weaknesses. It was later reported that ECB's Panetta said he hopes they cut in September, according to ANSA.
