• US stocks declined in which the S&P 500 closed off its worst H1 performance since 1970 as growth concerns were exacerbated after data showed weak consumer spending dynamics in May, which resulted in the Atlanta Fed GDPnow model tracking an economic contraction of 1.0% in Q2 and stoked recession fears.
• DXY weakened amid the lower yield environment after soft data releases including lower-than-expected US Core PCE Price Index, a miss on Chicago PMI and disappointing consumption data.
• Looking ahead, highlights include Australian AiG Manufacturing Index & Manufacturing PMI, New Zealand Building Permits, Japanese BoJ Tankan, Unemployment Rate & Tokyo CPI, Regional PMIs, Chinese Caixin Manufacturing PMI, Hong Kong is closed for the Special Administrative Region Establishment Day.

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LOOKING AHEAD

• Australian AiG Manufacturing Index & Manufacturing PMI, New Zealand Building Permits, Japanese BoJ Tankan, Unemployment Rate & Tokyo CPI, Regional PMIs, Chinese Caixin Manufacturing PMI, Hong Kong is closed for the Special Administrative Region Establishment Day.
• Click here for the Week Ahead preview

US TRADE

EQUITIES

• US stocks declined in which the S&P 500 closed off its worst H1 performance since 1970 as growth concerns were exacerbated after data showed weak consumer spending dynamics in May, which resulted in the Atlanta Fed GDPnow model tracking an economic contraction of 1.0% in Q2 and stoked recession fears.
• SPX -0.88% at 3,785, NDX -1.33% at 11,504, DJIA -0.82% at 30,775, RUT -0.66% at 1,708.
• Click here for a detailed summary.

DATA RECAP

• US Chicago PMI* (Jun) 56.0 vs. Exp. 58.0 (Prev. 60.3)
• US PCE Price Index MM* (May) 0.6% (Prev. 0.2%)
• US PCE Price Index YY * (May) 6.3% (Prev. 6.3%)
• US Core PCE Price Index MM * (May) 0.3% vs. Exp. 0.4% (Prev. 0.3%)
• US Core PCE Price Index YY* (May) 4.7% vs. Exp. 4.8% (Prev. 4.9%)
• US Initial Jobless Claims w/e 231k vs. Exp. 228.0k (Prev. 229.0k, Rev. 233k)
• US Continued Jobless Claims w/e 1.328M vs. Exp. 1.31M (Prev. 1.315M, Rev. 1.331M)
• US Personal Income MM* (May) 0.5% vs. Exp. 0.5% (Prev. 0.4%, Rev. 0.5%)
• US Personal Consumption Real MM* (May) -0.4% (Prev. 0.7%, Rev. 0.3%)
• US Consumption Adjusted MM* (May) 0.2% vs. Exp. 0.4% (Prev. 0.9%, Rev. 0.6%)

FIXED INCOME

• T-note (U2) futures settled 32+ ticks higher at 118-17; Treasuries rallied as recession fears mounted and amid the month/quarter/half-year end rebalancing, while Core PCE cooled but headline PCE picked up and consumption missed expectations.

FX

• DXY weakened amid the lower yield environment and with data releases printed mostly softer than expected.
• Euro gained with eurozone employment ticking lower, while sources revealed some details about the ECB's PEPP reinvestments.
• GBP benefitted from the softer greenback and rebounded from a brief dip beneath the 1.2100 handle.
• JPY was supported amid the risk version and narrowing of yield US-Japan yield differentials.
• Riksbank hiked its rate by 50bps to 0.75% as expected, while it said the rate will be raised further and will be close to 2% at the start of 2023.

COMMODITIES

• Oil tumbled amid risk-off trading conditions and concerns about the growth outlook which weighed on the demand side of the equation, while analysts noted futures of Brent (for August), heating oil (for July), and RBOB (for July) expired which may have contributed to the volatile price action.
• OPEC+ ratified the planned August oil-supply hikes, as expected, while OPEC+ made no decision on output policy beyond August and the next meeting is planned for August 3rd, according to Reuters sources.
• Kuwait’s Oil Minister said the OPEC+ decision to maintain its existing plan for oil output increases meets the increasing global demand for crude and said that Kuwait's output is to increase to 2.811mln BPD, according to Reuters.
• UAE's ADNOC revised July Murban crude OSP to USD 109.68/bbl (vs 109.69/bbl on June 2nd), while Oman crude OSP was increased by USD 5.71/bbl M/M for August to USD 112.93/bbl.
• US President Biden said he hopes the Gulf state leaders he will be meeting with next month see it as in their interest to increase oil production, according to CNN. It was also reported that President Biden said he will not be making an individual request to Saudi Arabia to increase oil production, according to CNBC's Tausche.
• Pipeline and Hazardous Materials Safety Administration said Freeport LNG pipes are damaged and need a repair following a blast.
• Ecuador's government and protests leaders reached an agreement after two weeks of crisis, according to Reuters.
• Libya's NOC announced force majeure over Es Sider, Ras Lanuf Ports and the El Feel oilfield.
• Norway's SAFE union members have voted in favour of the wage deal agreed with employers but Lederne union members voted against the wage deal, while the Lederne union said strikes at three Equinor (EQNR NO) platforms are likely to hit oil production but there will hardly be any impact on gas output.
• Italian PM Draghi is confident Italy will reach its year-end target of gas storage filled to 90% of capacity by November, according to Reuters.
• Chilean Copper Output YY* (May) -2.7% (Prev. -9.8%)

GEOPOLITICS

RUSSIA-UKRAINE

• Russian Security Council Deputy Chairman Medvedev said in certain circumstances, sanctions may be seen as an act of aggression and justification for war.
• Russia has withdrawn troops from Snake Island and said it withdrew troops as a gesture of goodwill, according to Tass. However, other reports suggested that Russia withdrew following a series of heavy attacks.
• Russian Deputy PM Novak said oil output in June was nearly back to the level seen in February and warned that price caps for oil would lead to market imbalances and a deficit, according to Tass. It was also reported that Russia's Kremlin sees risks that Western sanctions could hit revenues from oil exports, according to IFX.
• Germany and other EU governments cautioned in a closed-door meeting that price caps on Russian oil are far from imminent, according to Reuters sources.
• Russian President Putin said sanctions from the West have caused issues for global food and fertiliser markets and he is in contact with the UN over these issues.
• Russia will reportedly ban exports of rice from July 1st to December 31st, according to IFX.
• NATO Secretary General Stoltenberg said Turkey and Greece are facilitating talks to try and get grain out of Ukraine, according to Reuters.
• Turkish President Erdogan said he will try to continue phone diplomacy with Ukraine President Zelensky and Russian President Putin this weekend or early next week with the grain corridor. Erdogan also said Finland and Sweden must first realise their promises and warned that if not, ratification will not be sent to the Turkish Parliament, according to Reuters.

OTHER

• Iran said its assessment of Doha nuclear talks is positive and Iran is determined to continue talks.
• Iran's Ambassador to the UN said Iran has demanded verifiable and objective guarantees from the US that the nuclear deal will not be torpedoed again and it will be in touch with the EU coordinator for the next stage of nuclear talks, while Iran added that its negotiating team is ready to engage constructively again to conclude and reach a deal, according to Reuters.
• EU diplomat said he is concerned that they will not make it over the finish line to revive the Iranian nuclear deal and said the space for further significant changes to the text had been exhausted and it is time to overcome the last outstanding issues, according to Jerusalem Post.

ASIA

NOTABLE HEADLINES

• China Cabinet will issue CNY 300bln of bonds to replenish capital for major projects and boost employment, according to Global Times. Furthermore, China will start construction of a new batch of connection projects including national expressways within 2022.
• China's Defense Ministry said the Chinese military will take countermeasures whenever foreign military aircraft come on China's doorstep to provoke, in response to ‘recent provocation’ by Australian and Canadian warplanes, according to Global Times.
• UK PM Johnson said it is very important to remember they have a huge economic relationship with China, but there are areas in which they need to challenge what China is up to, according to Reuters. PM Johnson also said China has been failing to comply with its commitments on Hong Kong and the UK intends to do all it can to hold China to account.
• BoJ Quarterly Schedule of Outright Purchases of Japanese Government Bonds was unchanged for July-September.
• Japanese government announced to lift the power shortage warning for the Tokyo area.
• EU and New Zealand concluded negotiations for a free trade agreement which could increase the flow of goods and services by 30%, while EU’s Dombrovskis said the deal sent an important "geopolitical signal" and stressed the EU would seek further partnerships, according to Reuters.

EUROPEAN TRADE

• European stock markets traded lower and the STOXX Europe 600 finished with losses of 1.6%.

NOTABLE HEADLINES

• ECB's Holzmann said he would have preferred earlier rate hikes and that reaching the ECB's CPI target will take some time.
• ECB will divide Eurozone countries into "donors, recipients and neutrals" for reinvestments of PEPP proceeds in which recipients will include Italy, Spain, Portugal and Greece, while donors include Germany, France and Netherlands. Furthermore, the ECB will review the list on a monthly basis, as well as the speed of bond spread moves, according to Reuters sources.
• EU will likely agree on rules targeting foreign subsidised takeovers of EU companies with over EUR 500mln in revenue, according to Reuters sources.

DATA RECAP

• UK Revised GDP QQ (Q1) 0.8% vs. Exp. 0.8% (Prev. 0.8%)
• UK Revised GDP YY (Q1) 8.7% vs. Exp. 8.7% (Prev. 8.7%)
• EU Unemployment Rate (May) 6.6% vs. Exp. 6.8% (Prev. 6.8%, Rev. 6.7%)
• German Unemployment Change SA (Jun) 133k vs. Exp. -6.0k (Prev. -4.0k)
• German Unemployment Rate SA (Jun) 5.3% vs. Exp. 5.0% (Prev. 5.0%)
• German Retail Sales MM Real* (May) 0.6% vs. Exp. 0.5% (Prev. -5.4%)
• German Retail Sales YY Real* (May) -3.6% vs. Exp. -2.0% (Prev. -0.4%)