- US stocks sold off in the wake of the disappointing US ISM Manufacturing PMI data in which the headline surprisingly declined and printed outside the bottom end of the forecast range and prices paid rose, while other data also showed a larger-than-expected rise in jobless claims. There was a distinct flight-to-quality throughout the session which benefitted the dollar and treasuries, while the key after-market earnings from the likes of Amazon, Apple and Intel were mixed.
- USD strengthened and haven currencies benefitted the most from the risk-off mood which was triggered following weak ISM Manufacturing PMI data which included an unexpected increase in the Prices Paid subcomponent.
- Looking ahead, highlights include South Korean CPI, Japanese Monetary Base, Australian Home Loans and PPI.
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LOOKING AHEAD
- Highlights include South Korean CPI, Japanese Monetary Base, Australian Home Loans and PPI.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks sold off in the wake of the disappointing US ISM Manufacturing PMI data in which the headline surprisingly declined and printed outside the bottom end of the forecast range and prices paid rose, while other data also showed a larger-than-expected rise in jobless claims. There was a distinct flight-to-quality throughout the session which benefitted the dollar and treasuries, while the key after-market earnings from the likes of Amazon, Apple and Intel were mixed.
- SPX -1.4% at 5,447, NDX -2.4% at 18,890, DJIA -1.2% at 40,348, RUT -3.0% at 2,186.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Apple Inc (AAPL) Q3 2024 (USD): EPS 1.40 (exp. 1.35), revenue 85.78bln (exp. 84.53bln), Products rev. USD 61.56bln (exp. 60.63bln), iPhone rev. USD 39.30bln (exp. 38.95bln), iPad revenue USD 7.16bln (exp. 6.63bln), Mac rev. USD 7.01bln (exp. 6.98bln), Wearables, home and accessories rev. USD 8.10bln (exp. 7.79bln), Service rev. USD 24.21bln (exp. 23.96bln), Greater China rev. USD 14.73bln (exp. 15.26bln).
- Amazon.com Inc (AMZN) Q2 2024 (USD): EPS 1.26 (exp. 1.03), rev. 148bln (exp. 148.56bln).
- Intel Corp (INTC) Q2 2024 (USD): Adj. EPS 0.02 (exp. 0.10), rev. 12.83bln (exp. 12.94bln).
DATA RECAP
- US ISM Manufacturing PMI (Jul) 46.8 vs. Exp. 48.8 (Prev. 48.5)
- US ISM Mfg Prices Paid (Jul) 52.9 vs. Exp. 51.8 (Prev. 52.1)
- US S&P Global Manufacturing PMI Final (Jul) 49.6 (Prev. 49.5)
- US Construction Spending MM (Jun) -0.3% vs. Exp. 0.2% (Prev. -0.1%, Rev. -0.4%)
- US Productivity Prelim (Q2) 2.3% vs. Exp. 1.7% (Prev. 0.2%, Rev. 0.4%)
- US Unit Labor Costs Prelim (Q2) 0.9% vs. Exp. 1.8% (Prev. 4.0%, Rev. 3.8%)
- US Initial Jobless Claims 249.0k vs. Exp. 236.0k (Prev. 235.0k)
- US Continued Jobless Claims 1.877M vs. Exp. 1.856M (Prev. 1.851M, Rev. 1.844M)
- US Challenger Layoffs (Jul) 25.885k (Prev. 48.786k)
FX
- USD strengthened and haven currencies benefitted the most from the risk-off mood which was triggered following weak ISM Manufacturing PMI data which included an unexpected increase in the Prices Paid subcomponent, while other data releases were mixed as Initial Jobless Claims topped estimates and Unit Labor costs were softer.
- EUR weakened against the firmer dollar and retreated beneath the 1.0800 handle, while data showed an uptick in the EU Unemployment Rate.
- GBP underperformed in the aftermath of the BoE meeting where they cut rates by 25bps to 5.00%, as expected.
- JPY was firmer on the day amid haven demand with USD/JPY beneath the 150.00 handle albeit off Asia-Pac lows.
- Czech CNB Repo Rate 4.50% vs exp. 4.50% (Prev. 4.75%).
FIXED INCOME
- T-notes saw notable strength as a flight-to-quality assets was sparked by soft US ISM Manufacturing PMI.
COMMODITIES
- Oil prices declined with prices weighed on by the broad risk-off sentiment and flight-to-quality trade, while the OPEC+ JMMC did not make any recommendations, as expected.
- OPEC+ JMMC did not make any recommendations (as expected), according to delegates. Furthermore, OPEC+ statement said JMMC reiterated that the gradual phase-out of the voluntary reduction of oil production could be paused or reversed, while the JMMC will next meet on October 2nd, according to Reuters citing sources.
- Russian Deputy PM Novak said current oil prices are comfortable for the Russian budget and oil market supply and demand are in balance.
- Algeria's Energy Minister said uncertainties affecting the oil market are unlikely to continue for much longer as long as the market remains adequately supplied, while oil demand is expected to follow a sustained upward trend in the coming weeks.
GEOPOLITICAL
MIDDLE EAST
- Israeli military said warning sirens sounded in northern Israel.
- Hezbollah leader said the battle with Israel has entered a new phase, while the Hezbollah leader also said that Israel does not understand to what extent it has crossed the red lines and the response to any Hezbollah attack will determine if the war escalates.
- Iranian Chief of Staff said the response is inevitable and multiple measures must be taken, according to Al Jazeera. It was separately reported that Iran and its proxies are meeting in Tehran to discuss a retaliation strategy against Israel, according to sources cited by Reuters.
- US officials said they are preparing to counter an Iranian attack on Israel within days, according to Axios.
- Turkish President Erdogan told US President Biden that Israel does not want a ceasefire, while he added the killing of the Hamas chief harmed ceasefire efforts and that Israel is trying to spread conflict to the wider region.
OTHER
- US announced the release of detainees including Evan Gershkovich and Paul Whelan from Russia in a multi-country swap with the swap effort the result of intense diplomacy involving multiple countries, while the Biden administration will not change policy related to Russian aggression.
ASIA-PAC
NOTABLE HEADLINES
- China's Industry Minister plans to strengthen supervision and management of "over the air" upgrades.
- China is reportedly expected to appoint securities official Li Jizun to lead the Shenzhen Stock Exchange, according to Reuters sources.
EU/UK
NOTABLE HEADLINES
- BoE cut rates by 25bps to 5.00% (exp. 5.00%, prev. 5.25%) in which 4 policymakers voted to keep rates unchanged (exp. 4, prev. 7) and 5 voted to cut rates (exp. 5; prev. 2). BoE said the decision was finely balanced for some MPC members who voted for cuts, while it said that inflationary persistence had not yet conclusively dissipated and there remained some upside risks to the outlook. MPC will ensure Bank Rate is restrictive for sufficiently long until the risks to inflation returning to target have dissipated further and Governor Bailey stated that the MPC must be careful not to cut rates too quickly, or by too much.
- BoE Governor Bailey when asked if today's cut was a one-off, said he will not give any view on the future path of rates and the BoE will take a meeting-by-meeting approach, making judgements based on the evidence. Bailey also said it is unlikely rates will go back to the world between 2009 and when the MPC started raising rates.
- BoE Deputy Governor Ramsden said everyone on the MPC thinks restrictive policy is needed to squeeze out persistent parts of inflation. Furthermore, Ramsden said the BoE wants QT to run in the background but added they will not do QT if it disrupts markets and he is confident QT can run in the background for the next year.
- BoE Deputy Governor Lombardelli said recent data has evolved broadly in line with BoE expectations and gives more confidence n easing inflation pressure.
- BoE Chief Economist Pill said there will be bumps in the road on inflation ahead and he is not committing to further interest rate cuts.
- ECB's Stournaras expects two rate cuts this year if disinflation continues and sees the risk of inflation falling below 2% in the near term, via Platow. Stournaras said growth is weaker than expected which supports cuts, while forward-looking indicators suggest slower 2025 wages.
DATA RECAP
- UK S&P Global Manufacturing PMI (Jul) 52.1 vs. Exp. 51.8 (Prev. 51.8)
- German HCOB Manufacturing PMI (Jul) 43.2 vs. Exp. 42.6 (Prev. 42.6)
- EU HCOB Manufacturing Final PMI (Jul) 45.8 vs. Exp. 45.6 (Prev. 45.6)
- EU Unemployment Rate (Jun) 6.5% vs. Exp. 6.4% (Prev. 6.4%).
