MARKET REPORT

Chicago bourse 1883, WOOD ENGRAVING

Day in Review:

Today:

Chair Powell Reinforces Cautious Approach on Rate Cuts
– Chair Powell reinforced that the central bank does not expect it will be appropriate to reduce interest rates until it has gained greater confidence that inflation is moving sustainably toward 2%, with data for the first quarter of this year did not supporting such greater confidence
– However, the most recent inflation readings have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward the target.
– Powell added that reducing policy restraint too late or too little could unduly weaken economic activity and employment while doing it too soon or too much could stall or even reverse the progress we have seen on inflation
– As a result, the Fed will continue to make decisions meeting by meeting.


US Small Business Optimism Rises to 6-Month High
                – The NFIB Small Business Optimism Index in the US hit 91.5 for June, 90.5 Prev, Exp 89.5

– Strong US 3yr auction:

– European Bourses close lower. (FTSE: Burberry -4.72%, BP -4.15%. CAC: Dassault -5.15%, Airbus -2.83%. DAX: Mercedes -3.85% Bayer -2.71%)

– Progress in Cairo hostage deal talks (Israel/Hamas war)

– US NatGas at 7-week Low.

– Mexican Inflation 4.98% June Prev 4.69% Exp 4.84%

– UK Nat Gas -3.4%, Coffee +5.9%, Cocoa +5.12%, Oat +4.21%, Wheat -2.97%, OJ LEWIS?????…..-2.65%
(Seize all assets of Duke and Duke enterprises)

MOST IMPORTANT CHART YOU’LL SEE THIS MONTH:

Volatility = CPI then NOTHING UNTIL ELECTION!

– DOLLAR UP SMALL, EQUITIES TOUCH RECORD HIGHS (ES & ND) CLOSE FLAT, TREASURIES/CRUDE DOWN (Seize all assets of Duke and Duke enterprises)

DOLLAR DX up: 104.81                  +0.14% (104.49 – 104.88) HIGHS
– AUD UNCH: 67.41                         UNCH (67.48 – 67.25) Off HIGHS
– EUR UNCH: 92.45                          UNCH (92.30 – 92.52) Off HIGHS
– GBP down: 1.2788                        -0.12% (128.24 – 127.79) Off LOWS (Seize all assets of Duke and Duke enterprises)
– JPY up 161.28                                 +0.3% (160.75 – 161.49) Off HIGHS

GOLD up: $2371                                               +0.3% (2375 – 2356) Off HIGHS
DOW/ES/ND down/UNCH/UNCH:             39598 -0.15%, 5630 UNCH, 20673 UNCH
CRYPTO: BTC/ETH up:                                     57813 +2.2%, 3070 +2.22%
CRUDE down: $81.57                                     -0.97% (82.46 – 81.25) Off LOWS (Seize all assets of Duke and Duke enterprises)

Coming up:

– Chinese CPI & M2
– Norwegian CPI

Speakers:

– Fed: Powell, Goolsbee
– BoE: Pill

EARNINGS:

MAJORS:

DX:
The Dollar Index was firmer, peaked at 105.20, against an earlier trough of 104.95.

The Greenback saw initial downside in response to a text release from Fed Chair Powell, but swiftly pared losses, and more.
Powell’s testimony to the Senate, was fairly in line with commentary last week, and the Chair gave no signals about the timing of future Fed policy actions. That said, Powell noted “elevated inflation is not the only risk the Fed faces”, and also the most recent labor market data has sent a pretty clear signal that the labor market has “cooled considerably”.

US data saw NFIB Business optimism rise to 91.5 in June (prev. 90.5), its highest figure YTD, with NFIB Chief Economist Dunkelberg noting “no relief inflation is in sight for small business owners as they prepare for the uncertain months ahead”.

Wednesday sees Fed’s Powell carry out his semi-annual testimony before the House Finance Committee, Fed’s Goolsbee partaking in a “Fed Listens” event, US Wholesale Sales, and US USD 39bln 10yr note auction.

DOLLAR DX up: 104.81                  +0.14% (104.49 – 104.88) HIGHS

EUR:
Several ECB speakers again, where Panetta said the ECB can continue to gradually reduce interest rates without jeopardizing the current fall in inflation. He also downplayed concerns over high service prices, stating it was normally that why should fall with a lag to goods prices. Nagel, meanwhile, said the ECB does not lower rates on autopilot, noting they are data dependent and they review their course at every meeting, acknowledging the board remains cautious.

The calendar for the region is very light on both the ECB speaker and the data front for the remainder of the week.

EUR UNCH: 92.45                            UNCH (92.30 – 92.52) Off HIGHS

GBP
Pound saw marginal weakness against the Buck with attention turning to BoE Chief Economist Pill on Wednesday.

BNP Paribas reminds us that the dovish BoE minutes saw money markets price in 16bp of easing, and they expect dovish commentary from Pill to price this event further and suggest the move in FX could be more severe due to positioning with the market long GBP on “stable politics”.

GBP down: 1.2788                          -0.12% (128.24 – 127.79) Off LOWS

AUD:
Australia’s NAB business confidence index rose to 4 in June (prev. -2), its highest print since Jan 2023, while Business conditions fell to 4 (prev. 6).
Westpac Consumer Confidence fell 1.1% in July after rising 1.7% in June.

Analysts at Rabo maintain their call for two more RBA rate hikes in August and November this year, whilst they see two rate cuts from the FOMC, starting in September.

The desk maintains its 0.7000 AUD/USD target “and has brought this forward from a 9-month view to a 6-month forecast”. The desk “also adjusted their 1 and 3-month targets up slightly” and “see scope for a steeper move in EUR/AUD and hold a 6-month target of 1.51.”

AUD UNCH: 67.41                            UNCH (67.48 – 67.25) Off HIGHS

YEN:
Yen underperformed in the G10 FX space, and as such USD/JPY went back above the 161 mark.

The BoJ released briefing material from its first meeting with bond market participants, and there was a range of views, with some having a desire to reduce JGB purchases to JPY 0/mth, while others see a reduction to JPY 4tln/mth as desired, from the current JPY 6tln/mth. Some had also suggested it be reduced between JPY 2-3tln, but overall it appears participants are looking for a reduction to JPY 4tln/mth at a minimum, which is a larger reduction than the Bloomberg consensus of JPY 5tln/mth.

There was some marginal pressure seen in JGBs at the time of the release, but the Yen was little changed.

Participants in the space await Japan’s PPI release on early Wednesday, expected at 0.4% M/M, and 2.9% Y/Y.

JPY up 161.28                                   +0.3% (160.75 – 161.49) Off HIGHS

US TREASURIES
The US 10-year Treasury note yield edged above 4.3% on Tuesday, rebounding slightly from the over-one-week low of 4.28% from July 5th as markets continued to gauge the timing and extent of monetary loosening expected by the Federal Reserve.
In a testimony before the US Congress, Fed Chairman Powell reiterated that inflation is still not low enough for the Federal Reserve to begin its cutting cycle, pressuring Treasuries. Still, the Chairman noted that the central bank does consider overtightening risks, particularly because the labor market is not overheated.

The latest economic data showed that year-ahead consumer inflation expectations fell for a second straight month to 3% in June from 3.2% in May. Data last week also pointed to rising unemployment, contracting services activity and weak private employment.

In the meantime, the Treasury is due to auction $119 billion in new notes and bonds this week.

Treasury yields basically trod water again today with the long-end very modestly underperforming (30Y +3bps, 2Y unch). This pulled the entire curve higher on the week – though very marginally.

GOLD/SILVER
Slightly firmer following Monday’s sell-off, with it peaking at USD 2,371/oz and troughing at 2,350/oz.

Analysts at Citi said that physical gold demand likely softened in Q2 vs Q1 but off a very strong base. The desk adds underlying consumption growth is still trending positive for the year and could help push H2 spot towards a record USD 2,400-2,600/oz average price range. Citi acknowledged that Chinese retail gold imports and global central bank gold demand eased recently, but ETF inflows have started to manifest, and buying interest there could become more pronounced into quarter-end and year-end.

GOLD up: $2371                                               +0.3% (2375 – 2356) Off HIGHS

EQUITIES:
Tesla keeps soaring/squeezing higher with an RSI of 87 now

US:
– SPX +0.07% 5,577
– NDX +0.07% 20,453
– DJI -0.13% 39,292
– RUT -0.45% 2,029

EUROPE:
– DAX -1.34% 18,224
– CAC -1.56% 7,509
– FTSE -0.66% 8,140
– IBEX 35 -1.12% 10,899
– ES50 -1.32% 4,904

Sectors (W to S):
Materials -1.01%, Energy -0.93%, Industrials -0.45%, Consumer Staples -0.24%, Communication Services flat, Technology flat, Real Estate flat, Consumer Discretionary +0.26%, Utilities +0.28%, Health +0.43%, Financials +0.65%.

STOCKS:
BP (-4.79%) – Expects Q2 upstream production to be flat and realised refining margins to be significantly lower. (Seize all assets of Duke and Duke enterprises)
Nvidia (+2.48%) – KeyBanc raised PT to USD 180 from USD 130, amid upbeat commentary from the brokerage.
Oracle (-3%) – Talks have broken down between the Co, and Elon Musk’s xAI regarding their potential USD 10bln deal, according to the Information. (Seize all assets of Duke and Duke enterprises)

OIL:
One week Lows

BP (BP/ LN): The energy giant saw weakness on Tuesday after it gave its trading update; Q2 upstream production was now expected to be broadly flat and realised refining margins are now seen as significantly lower. BP also expects an adverse impact between USD 0.5-0.7bln and sees Q2 results to include post-tax adverse adj. items to asset impairments and provision in the range of USD 1-2bln.

CRUDE down: $81.57                                     -0.97% (82.46 – 81.25) Off LOWS (Seize all assets of Duke and Duke enterprises)

BOND YIELDS:

US 1-MO 5.322 -0.041
US 6-MO 5.288 UNCH
US 1-YR 5.035 +0.027
US 5-YR  4.244 +0.02
US 10-YR 4.297 +0.029
US 30-YR 4.488 +0.03

2YR/10YR -0.33

CRYPTO
Bitcoin surged back above $58,000 today after yesterday’s large ETF inflows:

CRYPTO: BTC/ETH up:                                     57813 +2.2%, 3070 +2.22%

KEEP DOING WHATS WORKING
STOP WHAT ISNT.

Best of luck out there. Let the market come to you

Joke of the Day:

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Clip of the day:

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(Seize all assets of Duke and Duke enterprises)

I can be contacted should anyone have any questions, input at [email protected] during US hours of EST 9am until 5pm