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Post-PMI risk-off has abated somewhat, Powell Day 2 ahead - Newsquawk US Market Open

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Thursday, Jun 23, 2022 - 10:55 AM
  • European bourses are pressured overall, but well off lows going into the US session, Euro Stoxx 50 -0.2%
  • Broad pressure was seen post-PMIs which missed expectations and featured pessimistic internal commentary; hitting EUR and lifting EGBs
  • EUR impaired by the PMIs which lifted the DXY to a 104.78 peak and pressured peers in turn, though JPY outperforms on risk
  • Fixed firmer on the data with Bunds and OATs leading the way and peers lifted in sympathy
  • Crude complex remains pressured with specific newsflow limited and focused on known themes; note, the EIA release has been delayed
  • Looking ahead, highlights include US Flash PMIs, US IJC, Policy Announcements CBRT & Banxico, US Bank Stress Test Results, Fed’s Chair Powell Speaks at the House Finance Committee.

 

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As of 11:25BST/06:25ET

LOOKING AHEAD

  • US Flash PMIs, US IJC, Policy Announcements CBRT & Banxico, US Bank Stress Test Results, Fed’s Chair Powell Speaks at the House Finance Committee.
  • Click here for the Week Ahead preview

GEOPOLITICS

  • US senior administration official said the G7 will build on the work of leaders to increase pressure on Russia and will address Russian President Putin's war on prices related to global energy security and food security, while the official added that NATO leaders will announce a new force posture commitments at next week's NATO summit and that the US remains confident Turkey's concerns will be addressed in relation to Sweden and Finland's NATO bids.
  • US senior official hinted that more Arab nations are looking to make gestures to improve relations with Israel when US President Biden visits the region next month, according to AFP.
  • Russian Foreign Minister Lavrov says Russia and Iran are cooperating as part of international efforts to stabilise oil and gas markets; Moscow fully supports revival of Iran's 2015 Nuclear Deal with major powers.
  • Turkish media reports authorities arrested 10 members of an Iranian intelligence cell planning to assassinate Israeli tourists and to kidnap a former Israeli ambassador and his wife, Kann reports.

EUROPEAN TRADE

CENTRAL BANKS

  • Norges Bank Key Policy Rate (June-MPR): 1.25% vs. Exp. 1.00% (Prev. 0.75%); points to a 25bps hike in August (interim meeting). Click here for full details, reaction and newsquawk analysis.
  • Norges Bank Governor Bache says cannot rule out increasing rates by more than 25bps in future meetings.
  • NBH keeps its one-week deposit rate unchanged at 7.25%

EQUITIES

  • European bourses are pressured overall, but well off lows going into the US session, Euro Stoxx 50 -0.2%; pressure was seen post-PMIs which missed expectations and featured pessimistic internal commentary
  • The sectoral breakdown is mixed as such while individual movers are affected by numerous broker moves.
  • Stateside, futures are now firmer on the session, ES +0.4%, having shrugged off the French/German/EZ flash-PMI induced risk move ahead of Powell's second day of testimony.
  • Click here for more detail.

FX

  • Poor preliminary Eurozone PMIs pull rug from under Euro; EUR/USD sub-1.0500 at worst, EUR/JPY under 142.00 vs almost 144.00 peak and EUR/GBP probes 0.8600 from circa 0.8641.
  • Buck benefits indirectly alongside Yen as risk aversion intensifies on heightened recession anxiety; DXY towards top end of 104.780-050 range, USD/JPY vice-versa between 136.25-135.12 parameters.
  • Pound pares some declines with assistance of solid UK services PMI, Cable keeps tabs on 1.2200 handle.
  • Franc makes way for rebounding Dollar, LoonieAussie and Kiwi bear brunt of ongoing losses in underlying commodities; USD/CHF back above 0.9650 from sub-0.9600, USD/CAD hovering under 1.3000, AUD/USD capped into 0.6900 and NZD/USD around 0.6250.
  • Norwegian Crown underpinned by bigger than expected 50bp Norges Bank hike and loftier rate path with caveats, EUR/NOK pivots 10.4800 vs near 10.5300 peak and 10.4400 trough.
  • Click here for more detail.

Notable FX Expiries, NY Cut:

  • EUR/USD: 1.0450-55 (1.18BN), 1.0460-65 (711M), 1.0500 (1.425BN), 1.0525-30 (338M), 1.0595-00 (990M)
  • USD/CAD: 1.2800 (1.36BN), 1.2915 (1.0BN), 1.2935 (260M), 1.3040-50 (441M)
  • Click here for more detail.

FIXED INCOME

  • Bunds and OATs front-run latest broad and big bond bounce as PMI miss consensus by some distance.
  • Gilts and US Treasuries tag along with a lag post-solid UK services PMI and pre-US jobless claims, PMIs and Fed Chair Powell part 2.
  • Bunds reach 147.89 from 144.81 low, Gilts 113.36 vs 111.93 and 10 year T-note 117-16 compared to 116-25+.
  • Italy raises EUR 9.45bln with the BTP Italia bond, via Reuters.
  • Click here for more detail.

COMMODITIES

  • Crude complex remains pressured with specific newsflow limited and focused on known themes, WTI/Brent -0.5% having benefitted from the recent pick up in broader sentiment; note, the EIA release has been delayed.
  • Private US Energy Inventory Data (bbls): Crude +5.7mln (exp. -0.6mln), Gasoline +1.2mln (exp. -0.5mln), Distillates -1.7mln (exp. +0.3mln), Cushing -0.4mln.
  • US EIA said product releases scheduled this week will be delayed due to system issues, while it added the nat gas storage report will be released as scheduled on June 23rd but all other releases will be delayed, according to Reuters.
  • Germany reportedly fears that a planned 'maintenance' shutdown of the Nordstream 1 pipeline could be used by Russia to shut off gas supplies completely to Germany which would threaten its efforts to build stores ahead of winter, according to FT.
  • Germany declares Phase Two of Emergency Gas Plan due to supply cuts from Russia and high prices.
  • Spot gold is back below the DMAs it briefly surmounted yesterday, downside in wake of post-PMI USD upside.
  • Click here for more detail.

NOTABLE EUROPEAN HEADLINES

  • Majority of economists expect the ECB to hike the deposit rate by 25bps in July and 50bps in September, while the Deposit Rate is seen at 0.75% at year-end (prev. 0.25%) and there is a median 34% (prev. 30%) chance of a recession in 12 months, according to a Reuters poll.

NOTABLE EUROPEAN DATA

  • French S&P Global Manufacturing Flash PMI (Jun) 51.0 vs. Exp. 54.0 (Prev. 54.6); Services Flash PMI (Jun) 54.4 vs. Exp. 57.6 (Prev. 58.3); Composite Flash PMI (Jun) 52.8 vs. Exp. 56.0 (Prev. 57.0)
  • German S&P Global Manufacturing Flash PMI (Jun) 52.0 vs. Exp. 54.0 (Prev. 54.8); Services Flash PMI (Jun) 52.4 vs. Exp. 54.5 (Prev. 55.0); Composite Flash PMI (Jun) 51.3 vs. Exp. 53.1 (Prev. 53.7)
  • EZ S&P Global Manufacturing Flash PMI (Jun) 52.0 vs. Exp. 53.9 (Prev. 54.6); Services Flash PMI (Jun) 52.8 vs. Exp. 55.5 (Prev. 56.1)
  • UK Flash Services PMI (Jun) 53.4 vs. Exp. 53.0 (Prev. 53.4); Manufacturing PMI (Jun) 53.4 vs. Exp. 53.7 (Prev. 54.6); Composite PMI (Jun) 53.1 vs. Exp. 52.6 (Prev. 53.1)

NOTABLE US HEADLINES

  • Click here for the US Early Morning note.

CRYPTO

  • Bitcoin is firmer overall but continues to pivot the USD 20k mark and has struggled to gain any real traction during brief forays either side.

APAC TRADE

EQUITIES

  • APAC stocks were mostly positive after risk appetite slightly improved from the uninspiring lead from Wall St where stocks were choppy as tailwinds from lower oil prices and softer yields were offset by recession fears.
  • ASX 200 was led higher by strength in real estate and consumer stocks, while Manufacturing PMI data remained in a firm expansion.
  • Nikkei 225 swung between gains and losses with the index hampered by currency inflows.
  • Hang Seng and Shanghai Comp. were kept afloat with auto manufacturers lifted after China’s cabinet pledged to boost the auto industry, while markets also shrugged off initial cautiousness brought on by COVID concerns after Shenzhen required PCR tests for anyone entering a public venue.

NOTABLE APAC HEADLINES

  • China's Shenzhen is to require PCR tests for anyone entering a public venue, according to Bloomberg.
  • US State Department warned about reconsidering travel to China due to COVID lockdown risks, according to Reuters.
  • Former Japanese FX chief Nakao said continuing with YCC has many negative effects and that it is clear monetary policy is playing a role in the weak JPY, according to Bloomberg.

DATA RECAP

  • Australian Manufacturing PMI (Jun P) 55.8 (Prev. 55.7); Services PMI (Jun P) 52.6 (Prev. 53.2)
  • Australian Composite PMI (Jun P) 52.6 (Prev. 52.9)
  • Japanese Manufacturing PMI (Jun P) 52.7 (Prev. 53.3); Services PMI (June P) 54.2 (Prev. 52.6)
  • Japanese Composite PMI (June P) 53.2 (Prev. 52.3)
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