- US stocks traded mostly higher amid a cyclical/value bias after the chunky upward revisions to Q1 GDP and decline in weekly initial jobless claims, although the Nasdaq 100 underperformed as the strong data releases facilitated the upside in yields, pronounced bear-flattening and deeper yield inversion.
- USD was firmer as yields climbed in the aftermath of strong data releases from the US including a larger-than-expected upward revisions to Q1 GDP and the surprise fall in jobless claimants.
- Highlights include South Korean Industrial Production & Retail Sales, Japanese Industrial Production & Tokyo CPI, Australian Private Sector Credit, Chinese Official PMIs, Supply from Australia.
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LOOKING AHEAD
- Highlights include South Korean Industrial Production & Retail Sales, Japanese Industrial Production & Tokyo CPI, Australian Private Sector Credit, Chinese Official PMIs, Supply from Australia.
US TRADE
- US stocks traded mostly higher amid a cyclical/value bias after the chunky upward revisions to Q1 GDP and decline in weekly initial jobless claims, although the Nasdaq 100 underperformed as the strong data releases facilitated the upside in yields, pronounced bear-flattening and deeper yield inversion.
- SPX +0.45% at 4,396, NDX -0.16% at 14,939, DJIA +0.80% at 34,122, RUT +1.23% at 1,881.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed Chair Powell reiterated that a strong majority of Fed policymakers see two or more rate rises by the end of this year. Furthermore, Powell expects a moderate pace of interest rate decisions to continue, while he noted that Core PCE likely rose 4.7% Y/Y in May and overall PCE is estimated to have risen 3.9%.
- Fed's Bostic (non-voter) said they have only been in restrictive territory for 8-10 months and are just at the beginning stage of what tightening should look like. Bostic said he is looking for more signs that the slowdown is happening in the next several months and if that happens, they can get back to the target with a minimum economic dislocation. Furthermore, he reiterated that he doesn’t see additional Fed rate hikes as needed and said policy is in place to bring inflation back to the 2% target.
- White House Economic Advisor Brainard said there is reason to believe they can get near 2% inflation pre-election, while she added they see housing inflation down "considerably" and inflation "continually" improving in H2 2023.
DATA RECAP
- US GDP Final (Q1) 2.0% vs. Exp. 1.4% (Prev. 1.3%)
- US PCE Prices Final (Q1) 4.1% vs. Exp. 4.2% (Prev. 4.2%)
- US Core PCE Prices Final (Q1) 4.9% vs. Exp. 5.0% (Prev. 5.0%)
- US Pending Sales Change MM (May) -2.7% vs. Exp. -0.5%
- US Initial Jobless Claims 239.0k vs. Exp. 265.0k (Prev. 264.0k)
- US Continued Jobless Claims 1.742M vs. Exp. 1.765M (Prev. 1.759M)
FIXED INCOME
- US Treasuries saw pronounced bear-flattening after a jerk lower in Initial Jobless Claims and strong upward revisions to Q1 GDP.
FX
- USD was firmer as yields climbed in the aftermath of strong data releases from the US including a larger-than-expected upward revisions to Q1 GDP and the surprise fall in jobless claimants.
- EUR slipped beneath 1.0900 against the dollar as firm US data favoured further US rate hikes.
- GBP was marginally pressured which saw GBP/USD briefly dip beneath the 1.2600 handle.
- JPY weakened on widening yield differentials and faded the sudden strength seen in European trade.
- Riksbank raised its rate by 25bps to 3.75%, as expected. Riksbank said inflation is falling but is still far too high, while its forecast expects at least one more hike this year and it increased the pace of bond sales.
COMMODITIES
- Crude settled marginally firmer in a choppy session amid ongoing fears of rising interest rates and as markets digested a bout of mostly stronger-than-expected US data.
- Oil loadings from Russia's western ports are set to fall 18% M/M in July, according to Reuters calculations citing sources.
GEOPOLITICAL
- US is close to approving long-range ATACMS missiles to help Ukraine’s fight, according to WSJ.
- US Department of Defense said the Chinese spy balloon that was brought down earlier this year did not collect information over the US, while it is not aware of any imminent decisions regarding the possible provision of ATACM long-range missiles to Ukraine.
ASIA-PAC
NOTABLE APAC HEADLINES
- China's Cabinet said it will take measures to promote household consumption, while it passed a draft rule on consular protection and assistance and is to better protect the legitimate rights and interests of Chinese citizens overseas.
- China issued measures to promote opening up in some free trade zones and ports on a pilot basis to meet high international standards.
- Chinese state banks were spotted selling USD in onshore currency markets at around the 7.2500 level, according to sources cited by Reuters.
- Chinese regulators are stepping up Yuan surveys "as currency slump worsens" and are stepping up scrutiny of currency trading and cross-border capital flows. China’s SAFE also asked for suggestions to stabilize the currency with a submission deadline of a few days, according to Bloomberg.
- China's CISA said the government should further strengthen supervision of the coking coal market, as well as investigate and crack down on behaviour such as price gouging.
- BoJ Deputy Governor Himino said recent rises in Japan's consumer inflation are much more modest than in the US and Europe, but stronger than previously expected. Himino added that while the pass-through of import price rises is broadening, new factors such as labour shortages and strong domestic demand may be playing a part in rising inflation. Furthermore, he stated the BoJ must guide policy flexibly but the best approach is to maintain ultra-easy monetary policy.
EU/UK
NOTABLE HEADLINES
- BoE's Tenreyro said her vote to leave the bank rate unchanged rested on what the latest data implied about the medium term and stated that forward-looking indicators had pointed towards falls in both pay growth and core-goods inflation over the rest of the year. Tenreyro also said they have seen very little pass through so far of UK policy tightening and the more the BoE hikes now, the sooner and faster it will later need to cut rates.
- ECB's de Cos said the ECB September meeting is absolutely open regarding interest rates.
DATA RECAP
- German CPI Prelim MM (Jun) 0.3% vs. Exp. 0.2% (Prev. -0.1%)
- German CPI Prelim YY (Jun) 6.4% vs. Exp. 6.3% (Prev. 6.1%)
- German HICP Prelim MM (Jun) 0.4% vs. Exp. 0.3% (Prev. -0.2%)
- German HICP Prelim YY (Jun) 6.8% vs. Exp. 6.7% (Prev. 6.3%)
- Spanish CPI MM Flash NSA (Jun) 0.6% vs. Exp. 0.3% (Prev. 0.0%)
- Spanish CPI YY Flash NSA (Jun) 1.9% vs. Exp. 1.7% (Prev. 3.2%)
- EU Consumer Confidence Final (Jun) -16.1 vs. Exp. -16.1 (Prev. -16.1)
- EU Services Sentiment (Jun) 5.7 vs. Exp. 5.5 (Prev. 7.0)
- EU Economic Sentiment (Jun) 95.3 vs. Exp. 96.0 (Prev. 96.5)
- EU Industrial Sentiment (Jun) -7.2 vs. Exp. -5.5 (Prev. -5.2)
