- US stocks finished mixed as cooler-than-expected CPI data saw a rotation out of large-cap tech stocks into smaller-cap cyclicals which resulted in heavy selling for the Nasdaq and a surge in the Russell 2000, while the S&P 500 also sold off after having initially printed a fresh intraday record high shortly after the open but the Equal Weight S&P 500 rallied with a mixed performance seen across sectors.
- USD tumbled on a cooler-than-expected US CPI report in which all components printed beneath forecasts and saw the DXY slip from a peak of 104.99 in the European morning to a low of 104.17, while the data boosted Fed rate cut bets with money markets now fully pricing a 25bps cut for September (prev. 72% before the CPI release) and a total of around 61bps of cuts are now priced by year-end (prev. 49bps).
- Looking ahead, highlights include New Zealand PMI, Singapore GDP, Chinese Trade Data, Supply from Australia.
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LOOKING AHEAD
- Highlights include New Zealand PMI, Singapore GDP, Chinese Trade Data, Supply from Australia.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks finished mixed as cooler-than-expected CPI data saw a rotation out of large-cap tech stocks into smaller-cap cyclicals which resulted in heavy selling for the Nasdaq and a surge in the Russell 2000, while the S&P 500 also sold off after having initially printed a fresh intraday record high shortly after the open but the Equal Weight S&P 500 rallied with a mixed performance seen across sectors.
- SPX -0.88% at 5,585, NDX -2.24% at 20,211, DJI +0.08 at 39,754, RUT +3.57% at 2,125.
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed's Daly said it is likely some policy adjustments will be warranted and recent inflation prints are a relief but progress is bumpy, while her expectation is inflation will come down gradually and the labour market is gradually slowing. Daly said the economy looks to be on a path where 1 or 2 rate cuts this year would be 'more or less' the appropriate path and need more information before we can fully take the next step. Furthermore, she said they are at the point where additional labour market slowing is more likely to result in a climb in unemployment and it is a fairly big signal from the Fed that so many of them are talking about the labour market, while she stated that every meeting is live.
- Fed's Musalem (2025 voter) said monetary policy is restrictive right now and the Fed is making progress on inflation, while he added CPI data points to encouraging further progress but wants more evidence that inflation is moving to 2% and said the job market is strong but has cooled in recent months.
- WSJ's Timiraos posted that the market is easing for the Fed on the heels of a mild June CPI, where the big story is shelter disinflation, while he added a September cut is mostly priced in, as is a second cut by December, and that market-implied probabilities of a third rate cut this year are rising.
- US President Biden’s campaign said there is increased anxiety after the debate but it is not seeing a drastic shift in where the race stands, while internal data and public polling show the race remains within the margin of error in key battleground states. Furthermore, it noted that polling shows Biden's post-debate net favourability is 20% pts higher than Trump's among undecided voters.
- The Biden campaign is quietly assessing the viability of Vice President Harris's candidacy against Donald Trump in a new head-to-head poll, according to MSNBC.
- Three Biden officials directly involved in his re-election told NBC News that his chances of winning are zero and one said he needs to drop out, while it was also reported that some Biden advisers are discussing how to convince him to step aside, according to NYT.
- US President Biden is expected to face a deluge of calls from House Democrats urging him to drop out of the presidential race regardless of his performance at the NATO press conference, according to Axios.
- US House Democratic leader Jefferies said House Democrats continue candid conversations when asked about Biden and are united on the Biden agenda, while he is not worried that Biden is a liability for vulnerable House Democrats.
- Politico reported that some US lawmakers in swing seats have, at the advice of Nancy Pelosi, been drafting statements on the re-election situation around President Biden to be released once the NATO summit concludes. The report added that Pelosi's recent remarks around the President were intended to serve as a subtle green light, designed to encourage members to speak on their desire for a change to the Democrat candidate.
DATA RECAP
- US CPI YY NSA (Jun) 3.0% vs. Exp. 3.1% (Prev. 3.3%)
- US Core CPI YY NSA (Jun) 3.3% vs. Exp. 3.4% (Prev. 3.4%)
- US Initial Jobless Claims w/e 222.0k vs. Exp. 236.0k (Prev. 238.0k, Rev. 239k)
- US Continued Jobless Claims w/e 1.852M vs. Exp. 1.86M (Prev. 1.858M, Rev. 1.856M)
- US Cleveland Fed CPI (Jun) 0.2% (Prev. 0.2%)
FX
- USD tumbled on a cooler-than-expected US CPI report in which all components printed beneath forecasts and saw the DXY slip from a peak of 104.99 in the European morning to a low of 104.17, while the data boosted Fed rate cut bets with money markets now fully pricing a 25bps cut for September (prev. 72% before the CPI release) and a total of around 61bps of cuts are now priced by year-end (prev. 49bps).
- EUR briefly climbed to just shy of 1.0900 handle against the weaker dollar where it then hit resistance and gave back some of the gains.
- GBP benefitted from the broad weakness in the dollar, while monthly UK GDP data topped forecasts but had little impact.
- JPY surged on reported FX intervention which saw USD/JPY slide from the 161.00 handle to briefly below the 158.00 level.
FIXED INCOME
- T-notes advanced and the curve bull steepened after softer-than-expected US CPI data boosted Fed rate cut bets.
COMMODITIES
- Oil prices were choppy but ultimately gained with the upside in prices facilitated by a weaker dollar.
- IEA OMR sees 2024 and 2025 oil demand growth forecasts were little changed from the prior month at just below 1mln BPD with oil demand growth seen at 970k BPD in 2024 (prev. 960k BPD) and 980k BPD in 2025 (prev. 1mln BPD), while IEA said global oil demand growth slows further at China cools and that China’s oil demand growth eased to 710k BPD in Q2.
- US Senior Energy Adviser Hochstein said the US can tap the Strategic Petroleum Reserve if needed and if conditions call for it, according to Bloomberg TV.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu said they will not stop the Gaza war until all goals have been reached, while he also said he is committed to the ceasefire framework and that Hamas is sticking to demands that contradict the ceasefire deal.
- Israeli negotiating team was reportedly headed to Cairo this evening for more Gaza ceasefire talks, according to PM Netanyahu's office.
- White House National Security Adviser Sullivan said there has been no deviation on the pause of the shipment of 2,000 lb bombs to Israel and he sees a possibility of reaching a Gaza agreement, while he said there are still lots of details to be hammered through, but he thinks the remaining issues can be resolved.
- Israel and Hamas reportedly agree that both will not govern the Gaza Strip in the second phase of any agreement, according to Al Arabiya citing Channel 12.
- Progress was said to have been made in talks on detainees and an Israeli withdrawal from areas in Gaza, while work is underway on security arrangements and guarantees for a ceasefire in Gaza. Work is also underway on Hamas's demand for written guarantees for a permanent ceasefire although there are still disagreements over security arrangements at the crossings leading to Gaza, according to Al Arabiya citing Egyptian sources.
- Iranian Foreign Minister said Tehran is holding indirect talks with the US on its nuclear file via Oman.
OTHER
- Russia's Kremlin said Russia sees NATO military infrastructure approaching its borders and that NATO wants to suppress Russia, while it added that this is a very serious national security threat and Russia will have to respond.
- Russian Deputy Foreign Minister said the US and Germany's decision to deploy long-range missiles in Germany is aimed at harming Russia's security and Russia will respond in a military manner, according to RIA. It was separately reported that France, Germany, Italy, and Poland have signed an accord to develop long-range cruise missiles.
ASIA-PAC
NOTABLE HEADLINES
- Japan reportedly intervened in the forex market, according to TV Asahi citing sources. A government official reportedly said the government and the BoJ intervened in the FX market causing the dollar to drop from the 161 yen range to the 157 yen range.
- Japan's outgoing top currency diplomat Kanda said he is not in a position to state if it was intervention or not and noted that FX moves since the beginning of the year have been very big and impacting households, according to JiJi. Kanda said the forex market has become one that is dominated by speculation and FX moves that are not in line with fundamentals are "quite concerning", while he added if they intervened in FX, it would be disclosed at the end of the month.
EU/UK
NOTABLE HEADLINES
- UK Energy Secretary Miliband ordered an immediate ban on new drilling in the North Sea, while the UK will not issue new licences to explore new fields and will not revoke existing oil and gas licences, according to Daily Record's McCall.
- France must reportedly find EUR 15bln annually to meet EU fiscal demands and adjustments sought by the EU correspond to around 0.55% of GDP, while the adjustment is part of the EU excessive deficit procedure, according to Bloomberg sources.
DATA RECAP
- UK GDP Estimate MM (May) 0.4% vs. Exp. 0.2% (Prev. 0.0%)
- UK GDP Estimate YY (May) 1.4% vs. Exp. 1.2% (Prev. 0.6%, Rev. 0.7%)
- UK Industrial Output MM (May) 0.2% vs. Exp. 0.2% (Prev. -0.9%)
- UK Industrial Output YY (May) 0.4% vs. Exp. 0.6% (Prev. -0.4%, Rev. -0.7%)
- UK Manufacturing Output MM (May) 0.4% vs. Exp. 0.4% (Prev. -1.4%, Rev. -1.6%)
- UK Manufacturing Output YY (May) 0.6% vs. Exp. 1.2% (Prev. 0.4%, Rev. -0.4%)
