- US stocks tumbled with heavy losses in the S&P 500 and Nasdaq which suffered their worst declines since late 2022 alongside substantial weakness in large-cap Tech, Consumer Discretionary and Communication Services after post-earnings losses in Alphabet and Tesla weighed on risk appetite ahead of the other Magnificent Seven results in the upcoming weeks. Sentiment was also not helped by mixed data releases including a surprise contraction in Manufacturing PMI although the risk-off trade supported defensives and the mild reprieve in oil prices underpinned the energy sector.
- USD softened on the day with pressure amid flows into havens and following some soft data releases including a surprise contraction in US Manufacturing PMI and weaker-than-expected New Home Sales.
- Looking ahead, highlights include South Korean GDP & Japanese Services PPI.
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LOOKING AHEAD
- Highlights include South Korean GDP & Japanese Services PPI.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks tumbled with heavy losses in the S&P 500 and Nasdaq which suffered their worst declines since late 2022 alongside substantial weakness in large-cap Tech, Consumer Discretionary and Communication Services after post-earnings losses in Alphabet and Tesla weighed on risk appetite ahead of the other Magnificent Seven results in the upcoming weeks. Sentiment was also not helped by mixed data releases including a surprise contraction in Manufacturing PMI although the risk-off trade supported defensives and the mild reprieve in oil prices underpinned the energy sector.
- SPX -2.3% at 5,427, NDX -3.7% at 19,032, DJIA -1.3% at 39,854, RUT -2.1% at 2,195
- Click here for a detailed summary.
NOTABLE HEADLINES
- Republican Presidential Candidate Trump holds 49% support among registered voters nationwide vs. Harris’s at 46%, according to a CNN poll which was a closer contest than previous CNN polling on the matchup between Biden and Trump.
DATA RECAP
- US S&P Global Manufacturing PMI Flash (Jul) 49.5 vs. Exp. 51.7 (Prev. 51.6)
- US S&P Global Services PMI Flash (Jul) 56 vs. Exp. 55.0 (Prev. 55.3)
- US S&P Global Composite Flash PMI (Jul) 55 (Prev. 54.8)
- US Advance Goods Trade Balance (Jun) -96.84B (Prev. -99.37B)
- US Wholesale Inventories Adv. (Jun) 0.2% (Prev. 0.6%)
- US Retail Inventories Ex-Auto Adv. (Jun) 0.2% (Rev. -0.1%)
- US New Home Sales-Units (Jun) 0.617M vs. Exp. 0.64M (Prev. 0.619M, Rev. 0.621M)
FX
- USD softened on the day with pressure amid flows into havens and following some soft data releases including a surprise contraction in US Manufacturing PMI and weaker-than-expected New Home Sales.
- EUR traded choppy and remained firmly beneath the 1.0900 handle against the dollar with the single currency not helped by a miss on German and EU PMI data.
- GBP was ultimately flat and reclaimed the 1.2900 status with early momentum facilitated after UK PMI data mostly topped forecasts.
- JPY continued to strengthen which dragged USD/JPY to a sub-154.00 level with the pair pressured amid a BoJ source report that the central bank is to weigh a rate hike next week and have a detailed plan to halve bond buying in the coming years.
- BoC cut its rate by 25bps to 4.50%, as expected, while it stated that ongoing excess supply is lowering inflationary pressures but noted that at the same time, price pressures in some important parts of the economy—notably shelter and some other services—are holding inflation up. BoC said risks to the inflation outlook are balanced and it dropped April language referring to the BoC being more concerned about upside risks.
- BoC Governor Macklem stated if inflation continues to ease broadly in line with their forecast, it is reasonable to expect further cuts in the policy interest rate, while the timing will depend on how they see the opposing forces playing out. Macklem also said there was a clear consensus to cut rates by 25bps and that the stance of monetary policy is still restrictive.
FIXED INCOME
- T-notes were lower and treasuries continue to steepen with soft US data adding to signs of a cooling economy.
COMMODITIES
- Oil prices were firmer and ended a 4-day losing streak with prices supported by large draws in the EIA data and amid a softer dollar.
- US EIA Weekly Crude Stocks -3.741M vs. Exp. -2.05M (Prev. -4.87M)
- Iraq’s overproduced volumes in the first six months of 2024 totalled about 1.184mln bpd, while Russia's cumulative oil overproduction during that period stands at 480k bpd and it is set to compensate 40k bpd of oil overproduction in Oct-Nov 2024 and 440k bpd in March-Sept according to OPEC.
GEOPOLITICAL
MIDDLE EAST
- Israel PM Netanyahu said Israel will do what it must to return security to the northern border, while he added that America and Israel can forge a security alliance in the Middle East to counter the Iranian threat. Furthermore, Netanyahu said all countries that will make peace with Israel should be invited to join this alliance with the new alliance to be a natural extension of the Abraham accords and will be called the Abraham Alliance.
- Hamas official said Israeli PM Netanyahu's speech shows he doesn't want to conclude a ceasefire deal.
- Israeli PM Netanyahu told leaders of Jewish organisations on Tuesday night that he will present in his speech a plan for the day after the war in Gaza, according to Axios.
- Israeli official said Israel delayed the departure of its delegation to the Gaza ceasefire talks to next week. It was also reported that an official in Israeli PM Netanyahu's entourage in Washington said one of the goals of the PM’s meeting with US President Biden is to promote the outline of the agreement for the release of hostages, while the two leaders discussed the outline and how it can be advanced. Furthermore, the Israeli delegation will leave for talks after the leaders' meeting and the negotiating team will continue talks with mediators, according to Axios’s Ravid.
- White House said Israeli PM Netanyahu is to meet with US President Biden and VP Harris separately on Thursday.
- Hezbollah broadcasted drone footage claiming to show Israel's Ramat David airbase, nearly 50km south of the Lebanon border.
OTHER
- Russian Defence Minister said it scrambled a fighter jet in response to three British planes flying over the Black Sea, according to Interfax.
- US Treasury imposes sanctions targeting a China-based network supporting North Korea's ballistic missile and space programmes.
ASIA-PAC
NOTABLE HEADLINES
- BoJ is to weigh a rate hike next week and have a detailed plan to halve bond buying in the coming years with the BoJ to taper bond buying gradually at a pace near market consensus, according to Reuters citing sources. It was also noted that a July rate hike decision is a close call and consumption outlook is key with a source describing it as a judgement call in terms of acting now or later in the year. Furthermore, the BoJ is said to see no compelling reason to rush given that price rises remain moderate and inflation expectations are stable, while a source added the BoJ is likely to taper its bond purchases gradually and in several stages, at a pace roughly in line with the markets dominate view, to avoid any yield spike.
- Japan is reportedly to set the national minimum wage standard at JPY 1054/hr on average for the largest ever increase, according to NHK.
- Taiwan is to suspend stock trading for a second day on Thursday due to the typhoon, while Typhoon Gaemi is expected to be the strongest to hit Taiwan in eight years, according to weather authorities.
- India is reportedly likely to ease curbs on Chinese investment within non-sensitive sectors such as solar panels and battery making but is seen as likely to keep curbs on telecoms and electronics, according to Reuters citing sources.
EU/UK
NOTABLE HEADLINES
- BoE expanded its toolkit to intervene where severe liquidity-related dysfunctions in the Gilt market threaten financial stability.
- ECB's Buch said they are now developing a framework for assessing the potential impact on capital and baking liquidity from geopolitical risks.
DATA RECAP
- UK Flash Manufacturing PMI (Jul) 51.8 vs. Exp. 51.1 (Prev. 50.9)
- UK Flash Services PMI (Jul) 52.4 vs. Exp. 52.5 (Prev. 52.1)
- UK Flash Composite PMI (Jul) 52.7 vs. Exp. 52.6 (Prev. 52.3)
- German GfK Consumer Sentiment (Aug) -18.4 vs. Exp. -21.0 (Prev. -21.8, Rev. -21.6)
- German HCOB Manufacturing Flash PMI (Jul) 42.5 vs. Exp. 44.0 (Prev. 43.5)
- German HCOB Services Flash PMI (Jul) 52.0 vs. Exp. 53.3 (Prev. 53.1)
- German HCOB Composite Flash PMI (Jul) 48.7 vs. Exp. 50.7 (Prev. 50.4)
- French HCOB Manufacturing Flash PMI (Jul) 44.1 vs. Exp. 45.8 (Prev. 45.4)
- French HCOB Services Flash PMI (Jul) 50.7 vs. Exp. 49.8 (Prev. 49.6)
- French HCOB Composite Flash PMI (Jul) 49.5 vs. Exp. 49.0 (Prev. 48.8)
- EU HCOB Manufacturing Flash PMI (Jul) 45.6 vs. Exp. 46.1 (Prev. 45.8)
- EU HCOB Services Flash PMI (Jul) 51.9 vs. Exp. 53.0 (Prev. 52.8)
- EU HCOB Composite Flash PMI (Jul) 50.1 vs. Exp. 51.1 (Prev. 50.9)
