- US stocks traded lower on return from the Independence Day closure with underperformance in the real economy-levered Russell 2000 as participants digested weak global macro data in the form of soft China and European PMIs, while sentiment was also dampened amid the upside in yields and after the FOMC Minutes provided very little to deviate from the current view of further rate increases.
- USD strengthened after US participants returned from the Independence Day holiday and were met by rising yields, while the latest FOMC Minutes provided very little in the way of fresh insight although confirmed that some policymakers would have been happy to accept a 25bp hike in June.
- Looking ahead, highlights include Australian Trade Data, Japanese Weekly Securities Flows, Supply from Japan.
More Newsquawk in 2 steps:
1. Subscribe to the free premarket movers reports
2. Trial Newsquawk’s premium real-time audio news squawk box for 7 days
LOOKING AHEAD
- Highlights include Australian Trade Data, Japanese Weekly Securities Flows, Supply from Japan.
US TRADE
- US stocks traded lower on return from the Independence Day closure with underperformance in the real economy-levered Russell 2000 as participants digested weak global macro data in the form of soft China and European PMIs, while sentiment was also dampened amid the upside in yields and after the FOMC Minutes provided very little to deviate from the current view of further rate increases.
- SPX -0.2% at 4,447, NDX -0.03% at 15,204, DJI -0.38% at 34,288, RUT -1.26% at 1,872.
- Click here for a detailed summary.
FOMC MINUTES
- FOMC Minutes stated that almost all judged it appropriate or acceptable to leave the target rate unchanged and most of the participants observed that leaving the target range unchanged would allow more time to assess the economy's progress toward the Committee's goals of maximum employment and price stability. All participants continued to anticipate that maintaining a restrictive stance for monetary policy would be appropriate to achieve the Committee's objectives and many also noted that after rapidly tightening the stance of monetary policy last year, the Committee had slowed the pace of tightening and that a further moderation in the pace of policy firming was appropriate in order to provide additional time to observe the effects of cumulative tightening and assess their implications for policy. Furthermore, some participants indicated that they favoured raising the target range by 25bps at this meeting or that they could have supported such a proposal, while participants agreed that their policy decisions at every meeting would continue to be based on the totality of incoming information and its implications for the economic outlook as well as the balance of risks.
NOTABLE HEADLINES
- Fed's Williams (voter) said he is not content with where inflation is right now and that fighting inflation remains the Fed's main job, while he sees progress on inflation but noted price pressures are still too high. Williams also commented that he is data dependent when it comes to future Fed actions and thinks that they still have more work to do on rates.
DATA RECAP
- US Factory Orders MM (May) 0.3% vs. Exp. 0.8% (Prev. 0.4%)
FIXED INCOME
- US Treasuries saw pronounced bear-steepening in the lack of an obvious catalyst as traders position for key June employment data.
FX
- USD strengthened after US participants returned from the Independence Day holiday and were met by rising yields, while the latest FOMC Minutes provided very little in the way of fresh insight although confirmed that some policymakers would have been happy to accept a 25bp hike in June.
- EUR gave up some ground against the firmer dollar and after softer EU PMI and PPI data.
- GBP was indecisive and GBP/USD fluctuated throughout the session before reverting to the 1.2700 level.
- JPY swung between gains and losses but ultimately weakened amid rising US yields.
COMMODITIES
- Crude saw some upside with attention on comments from the OPEC Seminar including jawboning by Saudi Arabia's Energy Minister which added to the tailwinds from recent output cuts.
- US Energy Inventory Data (bbls): Crude -4.4mln (exp. -1.8mln), Cushing +0.3mln, Gasoline +1.6mln (exp. -1.1mln), Distillate +0.6mln (exp. +0.5mln)
- Saudi Energy Minister said fresh cuts prove the "cynical spectators" of Russia-Saudi relations wrong and OPEC+ will do "whatever is necessary" to support the market, while he also commented that the market will not be left unattended.
- UAE Energy Minister said output cuts will help the market balance but noted the UAE will not be joining extra cuts for now.
- It was reported that Kuwait will seek an increase in its OPEC+ quota and hopes to have higher production but will abide by OPEC decisions, while it looks for 3.2mln BPD of oil production capacity before the end of 2024, according to Al Arabiya. However, the Kuwait minister denied that Kuwait is requesting an OPEC+ quota increase and said oil output capacity will be 3.2m BPD by the end of 2024.
- OPEC Secretary General said OPEC is in discussions with Azerbaijan, Malaysia, Brunei, and Mexico to join the group. He also earlier said that OPEC invited Azerbaijan to join the organisation, although Azerbaijan's Energy Minister said the country is currently not considering joining OPEC after an invite from the cartel, according to Interfax.
- OPEC energy and oil ministers met on the sidelines of the 8th OPEC Seminar and reviewed market conditions, while they agreed to continue consultation with their non-OPEC counterparts in continued efforts to support a stable and balanced oil market, according to a statement.
- Oil production in Kazakhstan was down 21% on July 4th from July 2nd with refining volumes down 46% following power outages, while it was later reported that the CPC pipeline said it resumed oil loadings in Kazakhstan.
- Chile's Codelco estimates copper production loss of about 7k tons due to recent rains and it is seen ending 2023 with production at the low end of the estimated 1.35mln-1.42mln tons range but noted that production will start recovering next year.
GEOPOLITICAL
- Russian Security Council said the war can be ended quickly, either with a peace agreement or with nuclear weapons, according to Al Arabiya.
- Russia's Kremlin said the situation is tense regarding the Zaporizhzhia nuclear power plant with the threat of sabotage great and consequences could be catastrophic. Kremlin also said there is still time for the West to fulfil parts of the grain deal which concern Russia and they will announce their decision in a timely manner, while it added that parts of the deal that concern Russia are still not fulfilled and that they have not officially announced a decision on the deal yet.
- Iran reportedly tried to seize two oil tankers near the Strait of Hormuz early on Wednesday before backing off after the US Navy response, according to AP. However, Iran later denied reports that it tried to seize oil tankers, while the White House National Security Council said the US will respond to Iranian aggression with allies in the Middle East after the tanker incident.
ASIA-PAC
NOTABLE APAC HEADLINES
- Chinese Premier Li said they will continue to support Japanese companies to expand investment in China.
- China's Commerce Minister said China is to set up a round-table mechanism with foreign firms in which representatives of 12 companies including large global healthcare names will attend the meeting.
- US Commerce Department firmly opposes export controls announced by China on gallium and germanium, while the US will engage with allies and partners to address the export controls announced by China.
EU/UK
NOTABLE HEADLINES
- ECB's Visco said interest rate decisions are taken meeting by meeting on the basis of incoming data and to ensure a rapid fall in inflation, while he noted more rate hikes are not the only way to curb inflation and that they can maintain rates adequately high for a sufficiently long time.
- ECB narrowed the selection for the successor of chief bank supervisor Enria to two candidates Buch and Delgado, according to Handelsblatt.
- ECB Poll showed Consumer Inflation Expectations for 12 months ahead declined to 3.9% (prev. 4.1%), while expectations for 3 years ahead were stable at 2.5%.
- German Finance Minister Lindner said they have adopted a 2024 budget proposal aligned with fiscal realities and that they are ending the crisis era of expansive fiscal policies. Lindner also commented that they will have record investments and set clear priorities, while he said they face great economic challenges.
DATA RECAP
- UK Services PMI Final (Jun) 53.7 vs. Exp. 53.7 (Prev. 53.7)
- UK Composite PMI Final (Jun) 52.8 vs. Exp. 52.8 (Prev. 52.8)
- German HCOB Services PMI (Jun) 54.1 vs. Exp. 54.1 (Prev. 54.1)
- German HCOB Composite Final PMI (Jun) 50.6 vs. Exp. 50.8 (Prev. 50.8)
- EU HCOB Services Final PMI (Jun) 52.0 vs. Exp. 52.4 (Prev. 52.4)
- EU HCOB Composite Final PMI (Jun) 49.9 vs. Exp. 50.3 (Prev. 50.3)
- EU Producer Prices MM (May) -1.9% vs. Exp. -1.8% (Prev. -3.2%)
- EU Producer Prices YY (May) -1.5% vs. Exp. -1.3% (Prev. 1.0%)
