North American News
US stock markets started strong but finished dreadfully
- Closing changes for the main North American markets
- S&P 500 -2.0%
- Nasdaq -3.0%
- Russell 2000 -1.7%
- DJIA -1.6%
- S&P/TSX comp -0.1%
US Treasury sells 7-year notes 3.280% vs 3.259% WI
- Results of the 7-year sale
This is another big tail. Yesterday’s 10-year sale tailed by 3 bps, which was the most since 2010.
The broader market is taking this in stride, perhaps owing to quarter end but it will be something to watch very closely next month. The weakest channel appears to be in-directs, which took down 61.9% compared to 77.9% previously. The bid-to-cover was 2.48 vs 2.69 previously.
US May manufacturing output revised to -0.2% from -0.1%
- Revisions to US manufacturing output
- Revised to +0.1% from +0.2%
- Capacity utilization revised to 80.8% from 79.0%
US May wholesale inventories +2.0% vs +2.1% prior
- US May 2022 wholesale inventory data
- Prior was +2.1% (revised to +2.3%)
- Retail inventories ex autos +0.8% vs +1.7% prior
Commodities
Gold Price Forecast: XAU/USD bears moving in for the kill, eye, $1,812 near term
- Gold is on the verge of a move to test $1,812 as the greenback remains firm.
- The US dollar has risen on Tuesday and is firmly back above 104.00, DXY.
The gold price is slightly lower in afternoon trade on Wall Street, losing some 0.13% to the greenback at $1,820.32. The price fell from a high of $1,829.50 to a low of $1,818.48 and is being pressured out of a bullish scenario on the charts.
”It’s a snoozefest in gold markets,” analysts at TD Securities note.
The price of the metal has been mostly rangebound for the month of June which has made for shorter-term two-way business between the final weeks of the month between $1,848 and $1,820 in the main. However, rather than rebounding from down here, the price is starting to eat into liquidity below with bulls checked by gains in the US dollar and inflationary pressures that are running at a 40-year high. Higher US yields, as a consequence, are detrimental for the yellow metal since gold does not offer investors yield.
”The yellow metal is being pulled in two directions as a hawkish Fed regime clashes with recession fears,” analysts at TD Securities explained.
”After all, a Fed hiking cycle tends to be associated with rising recession risks, with the US5-30s curve already pointing to an elevated probability of a recession in the next twelve months. Gold has benefited from this narrative, as highlighted by substantial safe-haven inflows recorded in past weeks. Notwithstanding, this hiking cycle differs from recent historical analogs as the Fed’s ability to control inflation is limited, given that the supply-side is disrupted.”
On Tuesday, the US dollar shot higher from below 104, making gold more expensive for international buyers. US dollar bulls moved in on euro weakness as European Central Bank (ECB) President Christine Lagarde offered no fresh insight into the central bank’s policy outlook. Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations. The US dollar index (DXY), which had made a two-decade high of 105.79 this month, was last up 0.46% at 104.420. The DXY had been as low as 103.77 and as high as 104.606.
Inflation fears have advanced again and choppy trading persists, sinking US stocks midday at the same time that a consumer confidence gauge sank amid rising inflation expectations, undermining the improvement in investor sentiment after China relaxed certain COVID-19 restrictions. The Conference Board’s measure of consumer confidence fell to 98.7 in June from 103.2 in May while the Board’s inflation expectations index rose to 8% from 7.5%, the highest since the series began in 1987. The Dow Jones Industrial Average slid over 1.48% with the S&P 500 down 1.92% and the Nasdaq Composite 2.94% lower by Tuesday afternoon. All three indexes traded higher earlier in the session.
”Gold trading will likely remain a snoozefest while bears wait for a catalyst to shake-out this complacent length. In the meantime, continued whipsaws from CTA trend followers reflect the range-bound price action.
WTI crude climbs another 2% as supply worries mount
- Russian oil to be squeezed further, protests continue in Ecuador
Russia is getting some attention in the oil market today because of what appears to be spreading efforts to lower the price it receives for crude. It’s a shipping insurance strategy that’s never been tried and sounds extremely tough to execute but it is helping crude at the margins.
A larger brewing story (and unfollowed one) is what’s happening in Ecuador. It’s a 500k bpd producer but half of that is already offline due to widespread inflation protests in the country. Ecuador’s energy ministry today warned that oil production has reached a “critical” level and may be halted as early as today if protests continue.
EIA says US oil storage report will be released Wednesday
- EIA reschedules storage data
The EIA delayed the weekly oil storage report last week and eventually said there was a voltage issue that damaged its computers. Now it’s rescheduled the release and it will release both last week’s data and this week’s data together.
Release:
The U.S. Energy Information Administration (EIA) continues its system restoration process. We will not publish new or previously delayed data today, June 28, 2022.
We will publish the Weekly Petroleum Status Report tomorrow, June 29, at its regularly scheduled time. That release will include the data for the week ending June 17, which would have been published June 22, and the data for the week ending June 24.
We continue to address the ongoing issues affecting other data releases that have been delayed. We will provide status updates at least once per day on our website and will provide further updates through our Twitter account.
We apologize for the inconvenience of this delay, and we are doing everything we can to fully resume our data releases as quickly as possible.
EU News
ECB’s Lagarde: Commitment to rate hikes is data dependent
- Remarks by ECB president, Christine Lagarde
- Intend to raise rates by 25 bps in July
- There is optionality to raise by more in September
- If inflation outlook does not improve, we will have sufficient information to move faster
- Beyond September, a “gradual but sustained” path of further rate increases will be appropriate
- In addressing fragmentation, ECB will use flexibility in reinvesting redemption coming due under PEPP
- Also decided to accelerate the completion of the design of a new instrument
- The new instrument will have to be effective, while being proportionate and containing sufficient safeguards to preserve sound fiscal policy
Other News
US officials to discuss price cap on Russian oil with nations in Africa and Latin America
- The US will put the squeeze on
A US official cited by Reuters said the country will speak with consuming countries in Latin America and Africa about its proposal on a price cap for Russian oil. They will also speak with global private companies now that the US has agreed to work on the plan.
Cryptocurrency News
JP Morgan says miners of Bitcoin are holding down the price
JP Morgan on cryptocurrency
Analysts at the bank say that miners of Bitcoin needing to sell could weigh on the token’s price for some time still to come.
Public-listed miners (circa 20% of the total) have already reported Bitcoin sales in May and June
- sales are to increase liquidity, meet costs and possibly deleverage
JPM say privately-held miners may have sold a larger share of their block rewards from mining activity to meet ongoing costs and could be less levered given their more limited access to capital markets