- US stocks finished mixed with price action choppy amid light catalysts and with no tier-1 data releases, while participants also lacked conviction ahead of this week's major risk events including the BoJ and FOMC policy meetings, ISM Manufacturing PMI, NFP, key tech earnings and Quarterly Refunding.
- USD strengthened but with gains capped amid light catalysts and as the focus lies on key risk events later in the week.
- Looking ahead, highlights include UK BRC Shop Price Index, Japanese Unemployment Rate, Australian Building Approvals & Retail Sales.
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LOOKING AHEAD
- Highlights include UK BRC Shop Price Index, Japanese Unemployment Rate, Australian Building Approvals & Retail Sales.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks finished mixed with price action choppy amid light catalysts and with no tier-1 data releases, while participants also lacked conviction ahead of this week's major risk events including the BoJ and FOMC policy meetings, ISM Manufacturing PMI, NFP, key tech earnings and Quarterly Refunding.
- SPX +0.1% at 5,464, NDX +0.2% at 19,059, DJIA -0.1% at 40,540, RUT -1.1% at 2,235.
- Click here for a detailed summary.
NOTABLE HEADLINES
- US Treasury expects to borrow USD 740bln (prev. 847bln) in Q3, assuming end of September cash balance of USD 850bln, while it expects to borrow USD 565bln in Q4, assuming year-end cash balance of USD 700bln, according to Treasury Financing Estimates.
- WSJ’s Timiraos wrote on X that “The NY Fed's measure of inflation persistence (the "multivariate core trend" rate) fell again in June, to 2.1%”, while he added that "With meaningful shelter disinflation arriving in June, the declines in inflation are broadening".
DATA RECAP
- US Dallas Fed Manufacturing Business Index (Jul) -17.5 (Prev. -15.1)
FX
- USD strengthened but with gains capped amid light catalysts and as the focus lies on key risk events later in the week.
- EUR was pressured against the dollar and trickled towards the 1.0800 level but was off today's lows with little macro newsflow to drive prices.
- GBP saw two-way price action and returned to relatively flat territory after gradually clawing back initial losses, while the statement from Chancellor Reeves who cut some winter fuel payments and public spending had little impact on the currency.
- JPY gradually softened during the session which saw USD/JPY reclaim the 154.00 handle, while the BoJ is scheduled to kick-start its 2-day policy meeting and there was a recent source report that some policymakers believe rate increases would have positive effects on consumption as the major cause of weak spending is the JPY depreciation although others doubt how much a small rate hike could help the JPY recovery.
FIXED INCOME
- T-notes were higher amid bull flattening after recent steepening and as the attention turned to a plethora of key risk events including the FOMC, BoJ, Quarterly Refunding, BoE, ISM Manufacturing PMI, and NFP.
COMMODITIES
- Oil prices were choppy to start the week but eventually settled with losses, and at lows, as dollar strength and risk aversion offset the geopolitical risk premium.
- US DoE finalised the purchase of 4.65mln bbls of crude for the SPR which is to be delivered to the Bayou Choctaw SPR site in Louisiana between October-December.
- US senior official accused Venezuela's Maduro government of "electoral manipulation" although the US is not currently considering revoking individual licenses previously granted to Chevron (CVX) and other companies for oil operations in Venezuela.
- Russian Deputy PM Novak said the Russian market is fully supplied with gasoline and diesel fuel, while he recommends oil companies increase loading of refineries in seasons of high gasoline demand.
GEOPOLITICAL
MIDDLE EAST
- Hamas said Israeli PM Netanyahu added new conditions and demands to the US ceasefire proposal, according to the statement.
- Israeli Defence Minister told US counterpart that the Golan Heights rocket attack was a significant escalation and Hezbollah will be held responsible.
- Israeli defence official said the nation wishes to hurt Hezbollah but is not seeking an all-out regional war, while it is preparing for the possibility of a few days of fighting following the attack in the Golan Heights.
- Israeli senior official told Israeli's N12 News that Israel doubts its updated truce deal proposal that it gave to the US on Saturday will be passed on to Hamas by mediators citing the fundamental change in it.
- Israeli Channel 14 reported that in Israel, they estimate the Israeli reaction against Hezbollah will lead to war.
- White House said Israel has every right to respond after the Hezbollah attack, while it added that nobody wants an all-out war and the US is confident it will be able to avoid such an outcome. It also said there is no sign the weekend strike by Hezbollah will affect hostage talks and it does not believe that the Hezbollah attack needs to result in escalation, as well as noted that negotiations on a ceasefire and hostage release are ongoing.
- US is leading a diplomatic push to deter Israel from targeting Beirut and southern suburbs in response to the Golan strike, according to Reuters citing sources.
- Israel's Foreign Minister called on NATO to expel Turkey as a member.
OTHER
- US President Biden’s administration announced a new USD 1.7bln lethal aid package for Ukraine.
ASIA-PAC
NOTABLE HEADLINES
- BoJ sources suggested some policymakers believe rate increases would have positive effects on consumption as the major cause of weak spending is the JPY depreciation, while other policymakers doubt how much a small rate hike could help the JPY recovery, according to WSJ.
EU/UK
NOTABLE HEADLINES
- UK Chancellor Reeves said they will be taking immediate action to deal with the fiscal inheritance from the previous government and total pressures on budgets are additional GBP 35bln, while she added that GBP 22bln is the shortfall for this financial year and if left unaddressed, would have resulted in a 25% increase in the budget deficit this year. Reeves announced to cut spending projects worth a total of GBP 5.5bln in 2024/25 and a total of GBP 8bln in 2025/26. Furthermore, Reeves said she will present the Autumn statement on October 30th which will involve difficult decisions on spending, welfare and tax, while she will not increase taxes on national insurance, VAT or income tax.
- UK Treasury Statement said the GBP 21.9bln fiscal gap is not an estimate of how much additional government borrowing may be required this year and fiscal decisions so far will not be enough to deal with the shortfall. It added that the multi-year spending review will conclude in Spring 2025 and departmental budgets for 2025/26 will be set in the October budget, while inflation means 2024/25 departmental budgets are at least GBP 15bln lower in real terms than planned in 2021. Furthermore, it said cutting pensioners' winter fuel payments will save GBP 1.4bln this year.
