North American News
US equities finish flat as tech leads. Micron jumps after the bell
- Shares of Micron up 3.8% after hours
Closing changes in North America:
- S&P 500 -0.1%
- Nasdaq Comp +0.3%
- Russell 2000 +0.5%
- DJIA -0.2%
Value and smaller technology companies outperformed on Wednesday in less-volatile trading. Shares of Netflix, Google and Tesla were strong. After hours, shares of Micro rallied 3.8% on earnings.
US treasury auctions off $35 billion 7-year notes at a high yield of 3.839%
- WI at the time of the auction 3.850%
- High-yield 3.839%
- Tail -1.1 basis points versus six-auction average of 0.3bps.
- Bid-to-Cover 2.65 X versus six-auction average of 2.51x.
- Dealers 8.14% versus six-auction average of 12.7%.
- Directs 16.55% versus six-auction average of 18.9%.
- Indirects 75.31% versus six-auction average of 68.4%.
US wholesale inventories advanced for May -0.1% vs. -0.3% last month (revised from -0.1%)
- US wholesale and retail inventories data for May 2023
- Prior month wholesale inventories -0.1% revised to -0.3%
- wholesale inventories for May -0.1% versus -0.3% last month revised. This figure is up 3.6% compared to May 2022.
- Advance retail inventories for May were estimated at $778.7 billion, indicating a 0.8% increase from April 2023.
- Retail inventories increased by 7.0% compared to May 2022.
- The change in retail inventories from March to April 2023 was revised from a 0.1% increase to a 0.3% increase.
- Retail inventories EX auto for May 0.0% versus -0.3% last month (revised from -0.2%)
Powell: We believe there is more restrictive policy coming
- Comments from Powell
- If you look at the data over the last quarter, data on jobs, inflation and activity is all strong
- Policy hasn’t been restrictive for very long
- As you get closer and close to the goal, the risks become more in balance
- We have not made a decision to hike at every other meeting. I would not take moving at consecutive meetings off the table
- New rents are happening at n
- We haven’t seen much progress in non-housing services. Notes hotels, travel services, healthcare as places not seeing a lot of progress
- Labour costs are high in non-housing services. Cites that as a causing inflationary pressures
- We need to see more softening in the labour market
- The services sector isn’t particularly interest-rate sensitive
US May advanced goods trade balance -91.13B vs -96.11B prior
- US May 2023 good trade balance data
- Prior was -96.11B
- Exports $162.8B vs $163.3B prior
- Imports $254.0B vs $260.0B prior
US MBA mortgage applications W.E. 23 June +3.0% vs +0.5% prior
- Latest data from the Mortgage Bankers Association for the week ending 23 June 2023
- Prior +0.5%
- Market index 216.1 vs 209.8 prior
- Purchase index 170.3 vs 165.6 prior
- Refinance index 439.2 vs 425.1 prior
- 30-year mortgage rate 6.75% vs 6.73% prior
US CBO sees public debt hitting 181% of GDP in 20 years
- That’s up from 98% currently
US government debt will roughly double in the next 20 years, according to the Congressional Budget Office.
They see public debt at 181% of GDP on the current trajectory versus 98% currently. These CBO numbers don’t account for what will almost-surely require huge spending on Social Security and Medicare.
Commodities
Natural Gas price over 2% down on Wednesday as supply concerns ease
- Natural Gas price trades 2% lower on Wednesday, continuing Tuesday’s sell-off on the back of easing supply concerns.
- Volatility from positoning ahead of front-month Options and Futures contract expiration may be driving prices lower.
- The heatwave in North America and Europe continues to drive demand to power air conditioning, but temperatures are set to ease in the US.
- Price has climbed towards a significant level around $3.000 MMBtu where the longer-term downtrend could be at risk of reversing.
Natural Gas price trades over 2% lower during the US Session on Wednesday, extending the heavy sell-off witnessed the day before. Easing Russia turmoil after Wagner’s failed coup has taken the bullish tendancy out of markets and some volatility appears to be creeping in as traders adjust positions ahead of month end. The heatwave that has ravaged much of the US is expanding into the South but forecasters say temperatures will fall next week, reducing demand for air conditioning.
WTI crude oil future settle at $69.56
- Up $1.86 or 2.75%
The price of WTI crude oil futures settled at $69.56.That’s up $1.86 or 2.75% on the day.
The low price reached $67.05. The high was at $69.73.
US weekly crude oil inventories -9.603 million versus -1.757 million estimate
- Weekly petroleum inventories from the US EIA
- Prior was -3.831 million
- Crude oil -9.603 million versus -1.757 million estimate
- Gasoline 0.603 million versus -0.126 million estimate
- Distillates 0.124 million versus +0.782 million estimate
- Refinery utilization -0.9% versus 0.2% expected
- SPR draw 1.467 million
private oil inventories released late yesterday showed:
- Crude -2.408 million
- Gasoline -2.85 million
- Distillates +777, 000
Russia’s energy ministry says gasoline exports down 30% in June from May
Statement from Russian Energy Ministry via Reuters:
- Says Russia’s gasoline exports fell 30% in June from May
- Russian refineries’ gasoline production up 3.1% y/y as of the last week of June
- Diesel production +2% y/y at the end of June, reserves are at a historical high
EU News
European equity close: Solid gains and a finish near the highs
- Closing changes for the main European bourses
- Stoxx 600 +0.7%
- German DAX +0.7%
- UK FTSE 100 +0.6%
- French CAC +1.0%
- Spain IBEX +1.0%
- Italy MIB +0.9%
Eurozone May M3 money supply +1.4% vs +1.5% y/y expected
- Latest data released by the ECB – 28 June 2023
- Prior +1.9%
Switzerland June Credit Suisse investor sentiment -30.8 vs -32.2 prior
- Latest data released by Credit Suisse and CFA Society Switzerland – 28 June 2023
- Prior -32.2
France June consumer confidence 85 vs 83 prior
- Latest data released by INSEE – 28 June 2023
- Prior 83
Germany July GfK consumer confidence -25.4 vs -23.0 expected
- Latest data released by GfK – 28 June 2023
- Prior -24.2, (revised to -24.4)
Italy June preliminary CPI +6.4% vs +6.8% y/y expected
- Latest data released by Istat – 28 June 2023
- Prior +7.6%
- HICP +6.7% vs +6.8% y/y expected
- Prior +8.0%
Italy PM Meloni says more ECB rate hikes may harm the economy
- Meloni pushes back against the ECB
- Simplistic approach of hiking rates is not the right path to take for many
BOE’s Bailey: Data showed clear persistence of inflation
- Bailey says they will be ‘evidence driven’
- We will do what is necessary
- It’s a worse outcome if we don’t get inflation back to target
- I expect headline inflation to come down
- The unwind of energy subsidies is on a longer track
- We have a very, very robust labour market in the UK
- The size of the labour force is smaller than at the outbreak of covid
- The economy has turned out to be much-more resilient so far but we’ve had a very sharp fall in energy prices
- We do talk quite a bit about global events
- We have to judge the rollover of fixed rate mortgages
- I’ve always bee interested to see that markets think it will be a short-term top in rates when we’re fighting a long-term inflation process
Lagarde: We will very likely hike again in July
- For September we are data dependent
- If baseline stands, we will likely hike in July
- We still have ground to cover
- We’re not seeing enough tangible evidence of stabilizing domestic inflation
- We’re looking at as many indicators as we can
- Q2 was not great for manufacturing
- The European economy is ‘stagnant at best’
- Manufacturing does not give a great hope for a strong recovery
- Our baseline does not include a recession
- Transmission of mon pol will be slower because there are more fixed-rate mortgages than 15 years ago
- Resilience has been the theme so far
- Interest rates are our primary tool (not unwinding QE)
- APP reinvestment will end soon
ECB’s Vasle: We need to keep tightening policy at our next meeting
- Remarks by ECB policymaker, Bostjan Vasle
- Inflation remains persistent
- Beyond that, we will remain data dependent
- But the burden of proof will be on invalidating a rate hike, rather than validating one
ECB’s Centeno: Inflation is easing as quickly as it went up
- Is he for real?
- Over-tightening is not an acceptable position
- Economy already taking a hit, inflation will react
- We are definitely getting to the terminal rate
ECB’s Vujčić: There is a good chance of a September rate hike
- Remarks by ECB policymaker, Boris Vujčić
- I think we can engineer a soft landing
ECB’s Muller: Need to look at the data for rate hike beyond July
- Remarks by ECB policymaker, Madis Muller
- Too early to say where rates will end up
- Risks to inflation are still on the upside
- Rate hikes are gradually having an impact
ECB’s de Guindos: July rate hike is set
- Remarks by ECB vice president, Luis de Guindos
- There is more ground to be covered on rates
Other News
BOJ’s Ueda: Underlying inflation is still under 2%
- Comments from the Bank of Japan leader
- We’re monitoring the situation with the yen very carefully but it’s the jurisdiction of the ministry of finance
- Wage inflation is now running at around 2%
- If you want a 2% inflation rate, you want wage inflation that’s slightly or well-above 2% to match productivity growth, so there’s still some ground to cover
- Yen is being influenced by many factors, including the policy of these other central banks
- If we become reasonably sure about the second part of inflation forecasts, that would be a good reason for reconsidering a policy change
- Investment is fairly strong at the moment
- We think the economy is going to expand at slightly-above potential for some time
- We do talk but do policy independently
- Demographics are working to tighten the labour market for quite a long while and that will continue
- We haven’t had any serious monetary policy tightening in decades
- If we do get to normalize our normal monetary policy, then rates may go up by large margins and we will have to be careful and carry out all kinds of stress tests
- It’s the business of the diet to create sustainable finances
- Wage growth is a good sign for us
Japan finance minister says exchange rate should move stably
- Remarks by Japan finance minister, Shunichi Suzuki
- One-sided movement seen in the current market
- Will respond appropriately to excessive moves if necessary
- No comment on FX levels
ANZ still expect a rate rise from the RBA next week, a +25bp cash rate hike
An unchanged call for the Reserve Bank of Australia even after the better inflation figures earlier:
- We still expect a rate rise from the RBA in July despite the deceleration of monthly inflation (though the risk of a pause increases).
- CPI ex volatile items and holidays barely moved in May.
- Strong jobs momentum may also sway the RBA’s decision towards a rise.
Reports that the US is looking to curb AI chips to China
- Reuters report
Reuters, citing sources, says US officials are considering tightening the export of AI chips to China based on computing power.
How would you feel about this if you were China? Especially knowing that Nvidia’s chips are mainly manufactured in Taiwan.
Head of Volkswagen in China asked Premier Li Qiang for clarity on new anti-espionage law
Earlier this year concerns were raised over China’s new law against espionage that tightens state control over a wider swath of data and digital activities.
Indeed head of VW in China has specifically addressed Premier Li Qiang.
- Said that the carmaker needed clarity on cross-border data transfers in a meeting with the country’s Premier Li Qiang
- “As a globalized industry, the transformation of the automotive sector highly depends on international exchange of personnel, data and knowledge. We therefore need more clarity on cross-border data transfers,” the VW exec said, according to a copy of the speech held at a World Economic Forum meeting in Tianjin.
Cryptocurrency News
SHIB prospects are positive on the back of growing recognition, adoption, and potential as a valuable asset
- Shiba Inu price is bullish, with the Parabolic SAR indicator showing the meme coin was headed north.
- The optimism has proper drivers, suggesting a developing network as investors identify the token’s potential.
- Meanwhile, the network continues to focus on burns as the SHIB supply remains huge.
SHIB, the ticker for the Shiba Inu ecosystem, remains one of the most promising long-term investments despite its price being many zeros away from $1.0. The meme coin’s price has been very volatile over the years, evidenced by the spiraling price actions as bulls and bears tugged for control.
Fed Chair Jerome Powell says recession is possible but unlikely; Bitcoin price holds up above $30,000
- Federal Reserve Chair Jerome Powell hints at more restrictive policy at the 2023 ECB Forum on Central Banking, diminishing risks of US recession.
- Powell stated that consecutive rate hikes should not be ruled out after pausing earlier this month.
- Bitcoin price has been lingering above $30,000 for nearly a week now, unfazed by Powell’s comments.
Bitcoin price has been keeping investors happy, sitting above the key support level of $30,000. This is expected to change as we move into July as Federal Reserve Chair Jerome Powell has been hinting at rate hikes. The hawkish rhetoric was reiterated on Wednesday when Powell also discussed the possibility of a recession this year.
However, Powell said that he would not rule out the possibility of consecutive rate hikes. This was a confirmation of his previous statement of two more rate hikes taking place this year. He added,
“Although policy is restrictive it may not be restrictive enough and it has not been restrictive for long enough.
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