The 23 largest banks in the U.S. passed the Fed’s annual stress tests, and while none were expected to fail, the fact that there were no negative surprises is a general positive for the banking sector and financials, Tom Essaye, founder of research firm Sevens Reports, wrote Thursday. Click here to read the full article.
What’s in Today’s Report:
Futures are flat to start the second half of 2023 following a quiet weekend of news.
Economic data was mixed overnight as the EU Manufacturing PMI slightly missed estimates (43.4 vs. (E) 43.6) while the UK reading slightly beat expectations (46.5 vs. (E) 46.2), but neither number is moving markets.
Saudi Arabia and Russia made separate announcements about further reducing oil supply in the coming months, although they aren’t causing a material rally.
Today focus will be on the ISM Manufacturing PMI (E: 47.2) and at this point, and with yields this high, markets need to see solid data and that means the ISM Manufacturing PMI moving closer towards 50 and beating expectations.
As a reminder, the stock market will close at 1:00 p.m. today ahead of the July 4th holiday.
Sevens Report Quarterly Letter Delivered Today
Our Q2 ’23 Quarterly Letter will be released today.
We use our strength (writing about the markets) to help you:
You can view our Q1 ’23 Quarterly Letter here
To learn more about the product (including price) please click this link.
If you’re interested in subscribing, please email info@sevensreport.com.
This heavy price action with repetitive tests of the same support and continuously weaker recoveries suggests the oil market is approaching a tipping point; poised to either break down to new 2023 lows or finally move beyond the $72-$73 area, triggering a squeeze as sentiment and positioning in the energy markets is very bearish, noted analysts at Sevens Report Research, in a Friday note. Click here to read the full article.
WTI futures have dropped below $70/bbl four times this year with increasing frequency, but each time technical support has held at $67-$69, Sevens Report Research said, also noting each subsequent price bounce has run out of steam at a lower price point. Click here to read the full article.
This heavy price action with repetitive tests of the same support and continuously weaker recoveries suggests the oil market is approaching a tipping point; poised to either break down to new 2023 lows or finally move beyond the $72-$73 area, triggering a squeeze as sentiment and positioning in the energy markets is very bearish, noted analysts at Sevens Report Research, in a Friday note. Click here to read the full article.
What’s in Today’s Report:
Futures are slightly lower as markets digest the political volatility in Russia and underwhelming economic data.
A short-lived rebellion by the Wagner private army against the Russian government dominated headlines this weekend, but from a market standpoint this only matters via its impact on oil prices, and they are little changed.
Economically, German IFO Business Expectations fell to 83.6 vs. (E) 88.0, which is the second weak German economic number in the past two trading days.
Today focus will remain on the Russian political situation, so watch oil to cut through the headline noise. If oil rises sharply, the situation is deteriorating and that would weigh on markets.
What’s in Today’s Report:
Stock futures are tracking global equity markets lower this morning while longer duration bonds are rallying after soft PMI data in Europe bolstered recession fears overnight.
Economically, the Eurozone Composite PMI Flash fell to 50.3 vs. (E) 52.5 indicating the EU economy is on the brink contracting.
The Manufacturing PMI was better than feared but the Services PMI dropped to 52.4 vs. (E) 54.7 pointing to a sudden slowdown in the service sector which accounts for the bulk of developed economic growth around the globe.
Looking into today’s session, focus will be on the U.S. PMI Flash data due out shortly after the bell with the Manufacturing PMI Flash expected to come in at 48.5 while the Services PMI Flash is expected at 53.5. If the data meaningfully disappoints, especially in the service sector, expect more risk off money flows amid growing recession worries today.
Finally, there are two Fed officials speaking today: Bostic (7:30 a.m. ET) and Mester (1:40 p.m. ET) but it is unlikely that either materially deviates from the Fed’s narrative from the last week which is continued commitment to reigning in inflation with further policy tightening in H2’23.
What’s in Today’s Report:
Stock futures are falling with global markets and yields are rising this morning after more hawkish central bank decisions overnight as focus turns to the BOE.
In Europe, monetary policy decisions were net hawkish as Norway’s central bank raised rates 50 bp vs. (E) 25 bp to 3.75% while the Swiss National Bank met estimates with a 25 bp hike to 1.75%. The rate hikes are pressuring global bond markets (yields higher) and weighing on sentiment, dragging equity markets lower.
Looking into today’s session, early focus will be on the Bank of England as a 25 bp hike to 4.75% in the benchmark policy rate is expected but there is risk of a 50 bp hike to 5.00% which would be another hawkish surprise for markets and likely result in rising yields and more pressure on overbought equity markets.
In the U.S. there are two economic reports to watch: Jobless Claims (E: 261K) and Existing Home Sales (E: 4.250M). A further rise in claims could bring into question whether or not the labor market is suddenly beginning to deteriorate meaningfully while strong housing data would warrant a hawkish reaction after the much better than expected Housing Starts print earlier this week.
From there, focus will turn to the Fed as Chair Powell continues his semi-annual Congressional testimony at 10:00 a.m. ET while Mester will speak around the same time (10:00 a.m. ET).
Finally, there is a 5-Yr TIPS auction at 1:00 p.m. ET that could offer insight to inflation expectations and move yields, but most of the market-moving news will likely hit before the lunch hour today.
What’s in Today’s Report:
Futures are flat as investors digest a disappointing earnings forecast by FDX (down 3% premarket) and a hotter than expected inflation print overseas as focus turns to Powell’s testimony on Capitol Hill today.
U.K. CPI held steady at 8.7% vs. (E) 8.4% y/y in May which saw the odds of a 50 bp BOE hike tomorrow jump to 50% which is weighing modestly on bonds this morning.
There are no notable economic reports in the U.S. today which will leave investors focused on Powell’s semiannual testimony before Congress which begins at 10:00 a.m. ET. Investors will be looking for any clarity on the Fed’s future policy plans as the markets currently do not believe the FOMC’s dot plot showing two more rate hikes before year end.
Outside of the D.C., there are several other Fed speakers to watch including: Cook (10:00 a.m. ET), Jefferson (10:00 a.m. ET), Goolsbee (12:25 p.m. ET), and Mester (E: 4:00 p.m. ET). Again markets will be looking for any clarity on rate hiking plans following the June “skip.”
Finally, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could impact yields and if we see yields move meaningfully higher, that will weigh on the high valuation sectors that have led the market higher this year.
What’s in Today’s Report:
Futures are lower to start the holiday-shortened trading week today with Asian markets underperforming as the latest Chinese stimulus efforts were seen as underwhelming while inflation trends in Europe remain favorable.
The PBOC lowered both the 1-Yr and 5-Yr prime loan rates by 10 bp overnight to 3.55% and 4.2%, respectively, but the cuts disappointed versus hopeful investor expectations given weak economic data lately, and markets traded with a risk-off tone in the wake of the announcements.
In Europe, German PPI fell to 1.0% vs. (E) 1.8% in May offering the latest evidence that the global disinflation trends remain intact.
Looking into today’s session, there is just one economic report to watch: Housing Starts (E: 1.40M) which shouldn’t move markets, and only one Fed speaker: Williams (11:45 a.m. ET).
With stocks overextended by multiple measures right now, there will likely be some degree of digestion of the latest leg higher in equity markets now that the June Fed decision and Friday’s massive options expiration are behind us. With that in mind, focus will begin to shift to Powell’s semi-annual Monetary Policy Report to Congress which begins tomorrow as investors look for further insight to the Fed’s future policy plans.