- US stocks finished positive in which the S&P 500 and Nasdaq printed fresh record closes with sentiment helped amid slightly softer yields and dovish-leaning comments from Fed Chair Powell who said they have made quite a bit of progress on inflation are getting back on the disinflationary path, while the data calendar was quiet although JOLTS topped estimates and further pointed to a hot US labour market.
- USD mildly softened in which the DXY pulled back after failing to sustain a brief return to above the 106.00 level with headwinds from lower yields after dovish-leaning commentary from Fed Chair Powell who noted that the disinflation trend shows signs of resuming.
- Looking ahead, highlights include Australian AIG Manufacturing and Construction Performance Indexes, Services PMI, Building Approvals & Retail Sales, Japanese Services PMI, Chinese Caixin Services & Composite PMIs, US Markets Close Early on Wednesday ahead of Independence Day.
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LOOKING AHEAD
- Highlights include Australian AIG Manufacturing and Construction Performance Indexes, Services PMI, Building Approvals & Retail Sales, Japanese Services PMI, Chinese Caixin Services & Composite PMIs, US Markets Close Early on Wednesday ahead of Independence Day.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks finished positive in which the S&P 500 and Nasdaq printed fresh record closes with sentiment helped amid slightly softer yields and dovish-leaning comments from Fed Chair Powell who said they have made quite a bit of progress on inflation are getting back on the disinflationary path, while the data calendar was quiet although JOLTS topped estimates and further pointed to a hot US labour market.
- SPX +0.62% at 5,509, NDX +1.01% at 20,012, DJI +0.41% at 39,332, RUT +0.19% at 2,034.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed Chair Powell said the labour market is still strong and Q1 growth was solid, while the disinflation trend shows signs of resuming and they have made quite a bit of progress on inflation and they are getting back on the disinflationary path. Powell repeated that the Fed needs to be more confident before reducing policy rates and needs to see more data like they have been seeing recently. Furthermore, he said most think the US is not going back to the ultra-low rates of the recent past, but nobody really knows and noted that US inflation should be in the "mid-to-low twos" a year from now.
- Fed's Goolsbee (2025 voter, dove) said policy gets more tight as inflation comes down and he thinks they should tighten by choice not default, while he sees some warning signs from the real economy. Goolsbee said he only wants to stay this restrictive for as long as they have to and expects inflation to decline to 2% but does not buy that the last mile of inflation could take longer, according to CNBC.
- US presidential candidate Trump's sentencing over the hush money conviction will likely be delayed, according to Bloomberg. It was later reported that a judge postponed Trump's sentencing to September 18th.
DATA RECAP
- US JOLTS Job Openings (May) 8.14M vs. Exp. 7.91M (Prev. 8.059M, Rev. 7.919M)
FX
- USD mildly softened in which the DXY pulled back after failing to sustain a brief return to above the 106.00 level with headwinds from lower yields after dovish-leaning commentary from Fed Chair Powell who noted that the disinflation trend shows signs of resuming.
- EUR ultimately returned to flat territory against the dollar after clawing back initial losses, while EU inflation data printed mostly in line with expectations and ECB speakers were out in force with slight divergences between views on the interest rate path for 2024.
- GBP was among the outperformers and edged closer towards the 1.2700 level as focus remains on the looming election.
- JPY is flat on the day as it pared some of the losses after printing a fresh 38-year low against the dollar but with the recovery of the Japanese currency only limited with USD/JPY remaining at the 161.00 handle.
FIXED INCOME
- T-notes bull steepened after dovish comments from Fed Chair Powell albeit with yields off lows following above-forecast JOLTS.
COMMODITIES
- Oil prices reversed their initial gains and settled at lows as Hurricane Beryl fears seemingly subsided.
- OPEC oil output rose in June by 70k BPD from May to 26.70mln BPD, rising for the 2nd consecutive month, according to a Reuters survey.
GEOPOLITICAL
MIDDLE EAST
- Israel’s top generals want to begin a ceasefire in Gaza even if it keeps Hamas in power for the time being, widening a rift between the military and PM Netanyahu, according to the New York Times. However, Israeli PM Netanyahu later said this will not happen in response to the New York Times report on Israel's readiness to end the war in Gaza before achieving its goals, according to Sky News Arabia
- IDF spokesperson said they will continue to strengthen the war readiness in the north and defence efforts on all their borders, according to Sky News Arabia.
- Iran's IRGC said conditions are not ripe to target Israel with a new strike and they have the power to strike Israel, but their hands are tied, according to Al Arabiya.
OTHER
- US is set to announce a USD 2.3bln security assistance package for Ukraine, according to Defense Secretary Austin.
- Germany and Poland are to discuss further strengthening of the NATO presence on the Eastern flank due to the Russian threat, according to a joint action plan cited by Reuters. Furthermore, Poland is considering joining the European Sky Shield initiative, while Germany and Poland are committed to optimising the repairing and maintenance of Leopard 2 tanks.
- Belarus defence official announced a demonstration of tactical nuclear missiles sent by Russia in Minsk tomorrow, according to Al Arabiya.
ASIA-PAC
NOTABLE HEADLINES
- Chinese Commerce Minister and Swiss Economics Minister agreed to initiate talks to upgrade the China-Switzerland FTA as soon as possible.
- US added six firms to its trade restriction list including four for training China's military.
- German government is to block the planned sale of Man Energy Solution's gas turbine division to China's CSIC Longjiang GH gas turbine, according to Reuters sources.
EU/UK
NOTABLE HEADLINES
- ECB's Lagarde said the ECB is very advanced in the disinflationary process and inflation is heading in the right direction but noted it is likely to be a bumpy road until the end of the year. Furthermore, Lagarde said it is very unlikely they will go back to ultra-low rates and said EZ inflation should be in the "low twos".
- ECB's Centeno said must be prudent on rates, but added they are confident and the baseline has improved, while he noted confidence that inflation will hit 2% in 2025. Furthermore, Centeno said he expects a few more rate cuts this year and that they need to follow a meeting-by-meeting strategy.
- ECB's de Guindos said the ECB does not have a predetermined path and inflation is to hover around current levels but with some ups and downs this year, while he added that the evolution of the French market has been quite orderly.
- ECB's Kazaks said if inflation moves sideways and the outlook does not change, then a September cut is a possibility, while he added if the economy and lending growth remain weak, then this opens "more possibilities" for cutting. Furthermore, Kazaks said the direction is very clear given the current backdrop and that rates will go down, as well as noted they do not have to move at only projection meetings.
- ECB's Makhlouf said he is comfortable with expectations of another interest rate cut and said two cuts is probably going a little bit too far, but he would not rule it out.
- ECB's Muller said they can probably cut more if the baseline holds and need to be patient with further rate cuts, while he sees a risk of underestimating price stickiness.
- ECB's Simkus said the inflation path will be bumpy and they will end the year with inflation at around 2.5%, as well as noted that further rate cuts are possible if the baseline holds.
- ECB's Vasle said rates can be lowered further if things go as planned and need to not declare victory too soon, while he added the labour market is very important for the next steps.
- German Chancellor Scholz expects to reach a deal on the 2025 budget this week and told members of his Social Democratic Party that sufficient meetings had been scheduled to ensure a draft budget could be put together by Thursday, according to Reuters sources.
DATA RECAP
- EU HICP Flash YY (Jun) 2.5% vs. Exp. 2.5% (Prev. 2.6%)
- EU HICP-X F&E Flash YY (Jun) 2.8% vs. Exp. 2.8% (Prev. 2.9%)
- EU HICP-X E, A&T Flash YY (Jun) 2.9% vs. Exp. 2.8% (Prev. 2.9%)
- EU Unemployment Rate (May) 6.4% vs. Exp. 6.4% (Prev. 6.4%)
