- US stocks traded sideways for most of the session and the major indices finished with mild losses in a day that saw few macro updates and a lack of tier-1 data releases. Furthermore, the latest comments from Fed's Bowman provided very little incrementally as she reiterated her view that rate cuts are appropriate if inflation keeps slowing but noted that she still sees upside risks to inflation, while the attention in the US turns to Wednesday's FOMC Minutes.
- USD remained pressured and the DXY slumped following a brief attempt to reclaim the 102.00 level amid light newsflow ahead of Wednesday's FOMC Minutes, while comments from Fed's Bowman did little to shift the dial in which she stated that should inflation data show inflation is moving sustainably toward the target, it will become appropriate to gradually lower rates to prevent becoming overly restrictive but added she still sees upside risks to inflation and will remain cautious in the approach to any change in policy stance.
- Looking ahead, highlights include Japanese Trade Data, Australian MI Leading Index, New Zealand Credit Card Spending, Supply from Australia, Philippines Holiday Closure.
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LOOKING AHEAD
- Highlights include Japanese Trade Data, Australian MI Leading Index, New Zealand Credit Card Spending, Supply from Australia, Philippines Holiday Closure.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks traded sideways for most of the session and the major indices finished with mild losses in a day that saw few macro updates and a lack of tier-1 data releases. Furthermore, the latest comments from Fed's Bowman provided very little incrementally as she reiterated her view that rate cuts are appropriate if inflation keeps slowing but noted that she still sees upside risks to inflation, while the attention in the US turns to Wednesday's FOMC Minutes.
- SPX -0.20% at 5,597, NDX -0.24% at 19,720, DJIA -0.15% at 40,835, RUT -1.17% at 2,142.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Bowman (voter) said they've seen some recent further progress on lowering inflation, but inflation is still uncomfortably above the committee's 2% goal and wage gains remain above the pace consistent with their inflation goal. Bowman said should incoming data show inflation is moving sustainably toward the target, it will become appropriate to gradually lower rates to prevent becoming overly restrictive, while she added they need to be patient and avoid undermining continued progress on lowering inflation by overreacting to any single data point.
FX
- USD remained pressured and the DXY slumped following a brief attempt to reclaim the 102.00 level amid light newsflow ahead of Wednesday's FOMC Minutes, while comments from Fed's Bowman did little to shift the dial in which she stated that should inflation data show inflation is moving sustainably toward the target, it will become appropriate to gradually lower rates to prevent becoming overly restrictive but added she still sees upside risks to inflation and will remain cautious in the approach to any change in policy stance.
- EUR benefitted from the weaker greenback in which EUR/USD gradually edged higher and returned to the 1.1100 handle
- GBP gained amid upward momentum in activity currencies with GBP/USD back at the 1.3000 territory.
- JPY strengthened amid outperformance in haven currencies with USD/JPY firmly below the 146.00 level which was facilitated by narrowing yield differentials.
- Riksbank cut its rate by 25bps as expected to 3.50% (prev. 3.75%), while it noted the policy rate can be cut two or three more times this year which is somewhat faster than the Board expected in June.
- Turkish CBT Weekly Repo Rate (Aug) 50.0% vs. Exp. 50.0% (Prev. 50.0%)? CBRT said the tight monetary stance will be maintained until a significant and sustained decline in the underlying trend of monthly inflation is observed, and inflation expectations converge to the projected forecast range. Furthermore, it said the monetary policy stance will be tightened in case a significant and persistent deterioration in inflation is foreseen and the Committee will make its decisions in a predictable, data-driven and transparent framework.
- Canadian CPI Median (Jul) 2.4% vs. Exp. 2.5% (Prev. 2.6%)
- Canadian CPI Inflation YY (Jul) 2.5% vs. Exp. 2.5% (Prev. 2.7%)
FIXED INCOME
- T-notes gained with treasuries higher across the curve amid bull steepening in thin newsflow and a day devoid of tier-1 events.
COMMODITIES
- Oil prices extended on the prior day's declines amid ongoing Chinese economic concerns seemingly and with the complex seemingly overlooking geopolitical risks for now.
- US Private Inventory Data (bbls): Crude +0.3mln (exp. -2.7mln), Distillate -2.2mln (exp. -0.2mln), Gasoline -1.0mln (exp. -0.9mln), Cushing -0.6mln.
- Goldman Sachs sees a sharp slowdown in China demand Y/Y growth to 0.2mb/d in H1 '24 and negative Y/Y growth this summer, while soft China demand and downside risks to Chinese GDP growth strengthen the view that risks to the USD 75-90/bbl range for Brent in 2025 are skewed to the downside. Furthermore, it sees Brent falling to USD 68/bbl by late 2025 (prev. USD 81/bbl base case) if China oil demand were to stay flat.
- Qatar Energy is in talks with Kuwait Petroleum Corporation for a 15-year LNG supply deal, while the new deal would see Qatar supplying Kuwait with 3mln tons of LNG per year from the North Field project, according to Reuters sources.
- World refined copper market in 95k metric tons surplus in June 2024, according to ICSG.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu says he is not sure there will be a deal, but if there is a deal it will be a deal that preserves the interests that he has repeated over and over again, which is the preservation of Israel's strategic assets, according to Sky News Arabia.
- Hamas said US President Biden's comments are misleading and do not represent its stance on reaching a Gaza ceasefire, while it reiterated that the agreement presented to the group goes against what was agreed on July 2nd.
- US Secretary of State Blinken said they need to get a ceasefire and hostage release agreement over the finish line now.
- Iran's IRGC spokesperson said the waiting period for Iran's retaliation to Israel "could be long", according to state media. It was also reported that the IRGC spokesman justified the delayed response to Israel and said it will come but it will take a long time, according to Al Arabiya. Furthermore, a spokesman said they control the time and Israel must wait, while their response to Israel will be different.
- Iran-backed armed factions in Iraq are ending the truce that was meant to give the Iraqi government time to negotiate the withdrawal of US troops from the country, according to a high-ranking member of one of the groups cited by The National.
OTHER
- US President Biden approved secret nuclear strategy refocusing on Chinese threat, according to NYT.
- Russian Defence Ministry said it has created new military groups in Belgorod, Kursk and Bryansk, according to RIA.
ASIA-PAC
NOTABLE HEADLINES
- China is said to be mulling allowing local governments to issue bonds for home purchases, according to Bloomberg sources.
- Two BoJ research papers showed Japan's dwindling working-age population is leading to structural changes in the labour market that are heightening pressure on firms to hike wages and services prices.
EU/UK
NOTABLE HEADLINES
- France's caretaker government limits 2025 state spending to EUR 492bln which is the same as in 2024, while 2025 spending limits on ministries imply roughly EUR 10bln in savings after inflation.
- Bundesbank said German economic output could increase slightly into Q3 and a recovery has been further delayed but a recession is not seen. Furthermore, it said they can expect a temporary increase in the German inflation rate towards the end of the year amid energy base effects.
DATA RECAP
- German Producer Prices MM (Jul) 0.2% vs. Exp. 0.2% (Prev. 0.2%)
- German Producer Prices YY (Jul) -0.8% vs. Exp. -0.8% (Prev. -1.6%)
- EU HICP Final YY (Jul) 2.6% vs. Exp. 2.6% (Prev. 2.6%)
- EU HICP-X F&E Final YY (Jul) 2.8% vs. Exp. 2.8% (Prev. 2.8%)
