- US stocks finished mostly positive in a shortened trading session ahead of Independence Day with the dollar and yields pressured as markets digested a slew of soft data releases including disappointing ISM Services PMI data. As such, the S&P 500 and Nasdaq continued their recent momentum and notched record closes once again although the Dow lagged and finished relatively flat, while the latest FOMC Minutes released after the close noted that most participants saw the current policy stance as restrictive and several participants said if inflation were to persist at an elevated level or rise further, the Fed Funds Rate might need to be raised.
- USD weakened following several disappointing data releases stateside including Factory Orders, ADP Employment, Jobless Claims and ISM Non-Manufacturing PMI data, while the FOMC Minutes, released after the market close, revealed little new about the Fed's policy path.
- Looking ahead, highlights include Australian Trade Data, Supply from Japan, UK General Election & US Independence Day.
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LOOKING AHEAD
- Highlights include Australian Trade Data, Supply from Japan, UK General Election & US Independence Day.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks finished mostly positive in a shortened trading session ahead of Independence Day with the dollar and yields pressured as markets digested a slew of soft data releases including disappointing ISM Services PMI data. As such, the S&P 500 and Nasdaq continued their recent momentum and notched record closes once again although the Dow lagged and finished relatively flat, while the latest FOMC Minutes released after the close noted that most participants saw the current policy stance as restrictive and several participants said if inflation were to persist at an elevated level or rise further, the Fed Funds Rate might need to be raised.
- SPX +0.51% at 5,537, NDX +0.87% at 20,187, DJI -0.06% at 39,308, RUT +0.14% at 2,037.
- Click here for a detailed summary.
FOMC MINUTES
- Fed Minutes stated that most saw the current policy stance as restrictive and several participants said if inflation were to persist at an elevated level or rise further, the Fed Funds Rate might need to be raised, while a number of participants said that policy should stand ready to respond to unexpected economic weakness. Minutes noted that a vast majority assessed that US economic growth appeared to be gradually cooling and participants remarked that demand and supply in the labour market had continued to come into better balance. Participants also saw 'modest further progress' toward the committee's 2% inflation objective in recent months and May's CPI reading was seen by participants as providing additional evidence of progress toward the inflation goal. Furthermore, participants observed that longer-term inflation expectations had remained well anchored and viewed this anchoring as underpinning the disinflation process, while participants affirmed that additional favourable data were required to give them greater confidence that inflation was moving sustainably toward 2%.
- WSJ's Timiraos posted on X that "While there isn't an obvious signal about the policy path in the FOMC minutes, the discussion about inflation and labor market developments offers little to suggest fear of overheating or policy being too loose".
NOTABLE HEADLINES
- US President Biden reportedly told an ally that he is weighing whether to continue in the race and that he knows he may not be able to salvage his candidacy if he cannot convince the public in the coming days that he is up for the job after a disastrous debate performance last week, according to NYT. However, it was reported shortly after that President Biden is refuting the NYT story and a White House spokesperson denied that Biden is considering dropping out, while President Biden also reportedly asserted during a staff call that no one is pushing him out, according to AP.
- White House said US President Biden taped two interviews with Black Radio that will air on Thursday.
- House Democrats reportedly considered a demand that US President Biden withdraw from the race in which dozens of House Democratic lawmakers considered signing a letter calling for Biden to withdraw, according to Bloomberg.
DATA RECAP
- US Factory Orders MM (May) -0.5% vs. Exp. 0.2% (Prev. 0.7%, Rev. 0.4%)
- US ISM N-Mfg PMI (Jun) 48.8 vs. Exp. 52.5 (Prev. 53.8)
- US ISM N-Mfg Price Paid Idx (Jun) 56.3 (Prev. 58.1)
- US S&P Global Services PMI Final (Jun) 55.3 (Prev. 55.1)
- US S&P Global Comp Final PMI (Jun) 54.8 (Prev. 54.6)
- US ADP National Employment (Jun) 150.0k vs. Exp. 160.0k (Prev. 152.0k, Rev. 157k)
- US Initial Jobless Claims 238k vs. Exp. 235k (Prev. 233k, Rev. 234k)
- US Continued Jobless Claims 1.858M vs. Exp. 1.84M (Prev. 1.839M, Rev. 1.832M)
- US Challenger Layoffs (Jun) 48.786k (Prev. 63.816k)
- US International Trade (USD)(May) -75.1B vs. Exp. -76.2B (Prev. -74.6B, Rev. -74.5B)
FX
- USD weakened following several disappointing data releases stateside including Factory Orders, ADP Employment, Jobless Claims and ISM Non-Manufacturing PMI data, while the FOMC Minutes, released after the market close, revealed little new about the Fed's policy path.
- EUR benefitted from the softer dollar but was well off intraday highs after failing to sustain a brief foray above 1.0800.
- GBP continued its recent advances in which GBP/USD broke above the 1.2700 level as the UK heads to the polls on Thursday.
- JPY was ultimately softer on the day and underperformed against the dollar after fully reversing an intraday US data-induced surge that briefly saw USD/JPY dip beneath the 161.00 level before gradually returning to near 38-year highs.
- CBRT Minutes noted they remain highly attentive to inflation risks and leading indicators point to a slowdown in the underlying trend of inflation in June.
FIXED INCOME
- T-notes rallied across the curve after soft ADP, rising jobless claims, and a dismal ISM Services PMI.
COMMODITIES
- Oil prices were choppy but ultimately settled in the green in the aftermath of bullish inventory data and a weaker dollar.
- US EIA Weekly Crude Stocks -12.157M vs. Exp. -0.9M (Prev. 3.591M).
- Ukrainian President Zelensky said they are discussing the transit of Azeri gas to Europe, according to Bloomberg.
- Russia's Deputy PM Novak said Russia is ready to continue supplying gas to Europe via Ukraine after 2024, according to TASS.
- Russian firms reportedly boosted zinc production over the past month amid rising state demand and to reduce reliance on China, according to Reuters sources.
GEOPOLITICAL
MIDDLE EAST
- Israeli Defence Minister said they will reach a state of full readiness to take any action required in Lebanon and that Israel prefers to reach a negotiated arrangement, but is prepared to fight if needed.
- Hezbollah launched 100 Katyusha rockets targeting Israeli military positions.
- Mediators gave Israel the response from Hamas regarding the Gaza ceasefire proposal, according to Israel's Mossad. It was also reported that Hamas said it exchanged some ideas with mediators to end the war in Gaza.
- Hamas said its leader Haniyeh conducted a call with Qatari and Egyptian mediators around ideas to reach a deal to end the war in Gaza and communicated with Turkish officials about the latest developments, while Hamas said it dealt with the content of ongoing talks with a positive spirit, according to Reuters.
- A senior Hezbollah field commander was killed in an Israeli strike, according to Reuters citing two security sources.
- Arab League Council will hold an emergency meeting on Thursday to discuss ways to confront Israeli attacks against Palestinians, according to Sky News Arabia.
OTHER
- Ukrainian drones reportedly hit the Zaporizhzhia nuclear plant on Wednesday morning, according to TASS.
- Russian President Putin told China President Xi that relations between Russia and China are at their best period in history and that they act in the interest of their countries, not against someone. It was separately reported that Russian President Putin and Chinese President Xi instructed Russian and Chinese companies to agree on terms of delivery for power on Siberia 2 as soon as possible, according to Interfax citing Russian Deputy PM Novak.
- German budget committee approved defence purchases of more than EUR 6bln including purchases of Leopard tanks, ammunitions, and patriots.
GLOBAL
- Venezuelan delegate said the first virtual meeting with the US government ended, while a White House spokesperson said the US discussed a range of issues with Venezuelan negotiators including urging competitive and inclusive elections in Venezuela on July 28th.
ASIA-PAC
NOTABLE HEADLINES
- German Economy Minister said they must find a solution to the trade dispute with China by November and that Germany has no interest in a tariff race, and neither does China. It was also reported that the German cabinet blocked the planned sale of Volkswagen's (VOW3 GY) gas turbine business to China, according to government sources cited by Reuters.
- Japanese PM Kishida said experts are to decide on declaring the end of deflation.
EU/UK
NOTABLE HEADLINES
- ECB's Stournaras said two more rate cuts this year seems reasonable and recent data strengthens the case for more cuts a little but rates will still be restrictive, even after two more cuts.
- ECB's Vasle said the ECB must be mindful of inflation risks and not rush into the next rate cut, while he added that if inflation falls as projected, then market rate cut expectations are broadly in line with his views.
- Some ECB policymakers are urging a review of the consequences of QE policies, according to Reuters sources. Policymakers are said to question the commitment to "especially forceful" or persistent action at the lower bound, while the debate is expected to be held at the strategy review which is expected to commence soon and end at some point in 2025.
DATA RECAP
- UK S&P Global Services PMI (Jun) 52.1 vs. Exp. 51.2 (Prev. 51.2)
- UK S&P Global PMI Composite (Jun) 52.3 vs. Exp. 51.7 (Prev. 51.7)
- German HCOB Services PMI (Jun) 53.1 vs. Exp. 53.5 (Prev. 53.5)
- German HCOB Composite Final PMI (Jun) 50.4 vs. Exp. 50.6 (Prev. 50.6)
- EU HCOB Services Final PMI (Jun) 52.8 vs. Exp. 52.6 (Prev. 52.6)
- EU HCOB Composite Final PMI (Jun) 50.9 vs. Exp. 50.8 (Prev. 50.8)
- EU Producer Prices MM (May) -0.2% vs. Exp. -0.1% (Prev. -1.0%)
- EU Producer Prices YY (May) -4.2% vs. Exp. -4.1% (Prev. -5.7%)
