Breakfast Bites - Thu Jul 6, 2023

Rise and shine everyone.

US Equity Futures are down for a second day. Gold, Oil, Bitcoin are all trading higher and the US Dollar index has pulled back marginally. The Yield Curve has steepened somewhat, with long-term rates higher.

Fed minutes showed a hawkish tilt with regard to inflation expectations and hiking. It would seem that the Fed is pretty certain about at least one more hike and cut further out in 2024. Here’s our summary

We have the ISM Services number coming out today and that will be one to watch for any signs of weakness, particularly where employment is concerned. That could be key to a rise in unemployment and a firm decline in inflation. We also have JOLTS, initial claims and ADP employment numbers today.

Asia and Australia

• Asian equities ended sharply lower Thursday. MSCI Asia-ex Japan index down 1.6%, dragged lower by Hong Kong that fell almost 3% on banking sector falls.

• Hong Kong-listed Chinese banking shares sharply lower Thursday with Hang Seng Mainland Banks Index down 6.5% as Goldman Sachs downgraded top mainland banks and on reports Chinese banks have stopped buying bonds issued by Shanghai Free Trade Zone

• Malaysia central bank holds steady on rates at 3% as the Malaysian Ringgit recovers

• Chinese investors rush offshore to make dollar deposits, buy Hong Kong insurance amid a weakening yuan

• RBA to raise cash rate to 4.35% in August while economists split on when rate would peak, poll shows

• Japan’s shunto wage negotiations showed an average pay raises of 3.58%, notably up 1.51% from last year's talks, marking the highest increase since the 3.90% awarded in 1993. This is a positive sign for the country and one of the issues that’s influencing monetary policy decisions.

Europe, Middle East, Africa

• European equity markets lower.

• Big beat in German factory orders in May, which rose 6.8% m/m versus consensus 1.2% and compared with prior 0.4% drop.

• UK: Market rate expectations continue to steepen with peak rate pricing now at 6.5% for March 2024. A lot attention on JP Morgan research earlier this week highlighting risk that the BoE might have to hike rates to 7%. UK sold two-year Gilts yesterday at the highest level since June 2007 at 5.668%.

• May Eurozone retail sales at 0% m/m vs consensus of +0.2% and prior at 0.0%. On a y/y basis, the print came in at (2.9%) y/y vs consensus (2.7%).

• Over a third of UK homes dropped in value in the last six months, as reported by the property portal Zoopla

The Americas

• NY Fed President Williams says more work needed on reducing inflation to 2%

• Exxon flags $4B earnings hit from lower natural gas prices and refining margins

• Bank of America plans to increase its quarterly common stock dividend by 9% from Q3 after Fed stress test

• S&P 500 earnings expected to decline 6.8% y/y in Q2, the worst performance since Q2 of 2020. However, bar going into earnings season looks higher when considering revision activity.

Calendar

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