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Breakfast Bites - Fri Jun 30, 2023

Rise and shine everyone and Happy Friday!

The big news event today is the PCE Inflation numbers coming out for the US. As a recap, last month we saw the PCE numbers come in hotter than expected, which likely led to the Fed’s resolve of two further hikes this year.

Speaking of hikes, I’m sure you read our note on the upward revision in the GDP numbers to 2% for Q1, 2023 which quite possibly led to a firming of the Fed Fund Futures on rate hikes. The possibility of a rate cut moved from a first cut in January to traders now seeing the first cut coming in during May 2024. Bonds also sold off in response, causing the 10-year rate to spike.

In other news Nike reported numbers after the close and while they beat on Revenues, they missed on EPS. North American sales came in at 5%, lower than expected but, Greater China came in at 16%, better than expected. Gross Margins are stabilizing with a decline of -1.4% vs. -3% in the last quarter and inventory levels have also stabilized. They announced price increases to offset increasing costs, while still discounting to get rid of their older inventory.

US equity futures are trading higher this morning. Gold pulls back slightly. The US Dollar, rates, Bitcoin, Oil and Copper are all trading higher. The Yield Curve inverts further to 104bps.

Constellation Brands (STZ) reports before market open.

Asia and Australia

  • Asian equities ended mostly higher Friday. Small gains for mainland China, Australia, South Korea; India's Sensex hit fresh record high.

  • China - Official manufacturing PMI was 49.0 in June, matching expectations, following 48.8 in the previous month, extending contractions to a third straight month. Slight improvement in manufacturing PMI, while still in contractionary territory. Services PMI slid mildly to 52.8

  • Japan Finance Minister Suzuki said authorities are closely watching FX moves with an "extremely high" sense of urgency after the yen weakened to the psychologically important 145 line against the dollar.

  • Tokyo core CPI rose 3.2% y/y in June, below consensus 3.4% and follows revised 3.1% in the previous month. Ex-fresh food & energy inflation edged lower to 3.8% from 3.9% -- easing from the highest reading since January 1982.

  • Japan’s Industrial production fell 1.6% m/m in May, weaker than expected 1.0% decline, following 0.7% rise in the previous month.

  • Mixed views on whether RBA will hike or hold at Tuesday's meeting - July 4.

  • South Korea May factory production unexpectedly rose, led by increased output of automobiles and semiconductors

Europe, Middle East, Africa

  • European equity markets higher.

  • Eurostat reported that EZ flash CPI estimate for June came in at 5.5% y/y vs 5.6% expected and 6.1% prior, while the core came in 5.4% vs 5.5% expected and 5.3% prior. This was the first acceleration for the core measure in three months.

  • UK avoids a recession in Q1, but outlook still weak. The ONS published the final UK Q1 GDP data, which confirmed the economy expanded 0.1%.

  • UK business confidence rose to a 13-month high in June

The Americas

  • Initial jobless claims for week to 24-Jun down 25K w/w to 239K, beating consensus for 264K. Was lowest print since May and biggest w/w decline since Oct-21.

  • Atlanta Fed President Bostic reiterates view rates are now at a level to return inflation to target

  • Several US states that enjoyed recent budget surpluses now seeing revenue drops

  • After the Fed’s stress test results, JPMorgan Chase and Goldman Sachs were the biggest winners in the Dow Jones Industrial Average.

  • May Pending Home Sales declined 2.7% month-over-month following a downwardly revised 0.4% decline (from 0.0%) in April.


(news taken from Reuters, FT, Bloomberg; Calendar from Benzinga Pro)


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