PERU: Analyst Views On BCRP Decision
- BBVA believes that further cuts may require evidence of additional economic weakness. Given it was not the market’s base case, the cut may help temper some of the recent PEN momentum as the currency nears its strongest levels since August 2023. However, the external environment will continue to be a primary driver, which, in turn, is being heavily influenced by the twists and turns in US trade policy.
- Goldman Sachs says that the BCRP’s messaging had distinctly dovish undertones. They now see the MPC being very much open to delivering at least one more 25bp rate cut, bringing the policy stance slightly below neutrality. While GS still believes that the MPC would prefer for further clarity on the Fed funds rate path, given the now broadly closed rate differential, the benign domestic inflation backdrop endows it with room to deliver insurance cuts should the activity momentum moderate faster than envisioned.
- JP Morgan says that consistent with their house call for a 60% likelihood of a global recession in H2, they anticipate softer external demand to weigh on activity in the second half of the year. Against the grim external backdrop and considering the revised trajectory for the federal funds rate converging to 3.0% by 2Q26, they expect the BCRP to shift into an expansive monetary stance. With inflation running below target, they expect the BCRP to lower the policy rate to 3.0% by December.
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BUNDS: Trading back at pre Cash Open level
- The German Bund is now back above where it was trading at on the Cash Open, when it fell a quick big 115 ticks, as Govies caught up with some of the big moves seen Overnight in Treasuries.
- Bund was trading at 130.25 pre Cash Open.
- The earlier bid in Risk has ran out of steam, and the selling looked to be Cash led in European Equities, although nothing big in terms of moves.
- US Tnotes has already seen over 1.2mln traded lots for this time of the Day, but the contract has stayed in a fairly tight range since the EU Open.
- Since Bund is up 36 ticks and US Tnotes is down 19.5 ticks, the Tnotes/Bund spread widens another 9bps and look to test the 175bps resistance right here.
COMMODITIES: Gold Moves Affirm Bullish Case
The trend condition in Gold remains bullish and the latest pull back appears corrective. Moving average studies are unchanged, they remain in a bull-mode position highlighting a dominant uptrend. A bearish theme in WTI futures remains intact following the recent impulsive sell-off and the contract has again traded to a fresh cycle low, today. Recent weakness has resulted in the breach of a number of important support levels.
- WTI Crude down $2.07 or -3.47% at $57.53
- Natural Gas up $0.02 or +0.63% at $3.488
- Gold spot up $60.21 or +2.02% at $3046.08
- Copper up $1 or +0.24% at $415.75
- Silver up $0.45 or +1.5% at $30.2371
- Platinum up $0.5 or +0.05% at $922.51
EQUITIES: S&P 500 Remains on Cusp of Bear Market
A bearish theme in S&P E-Minis remains intact and the cross is approaching its recent lows. Scope is seen for an extension towards the 4800.00 handle next. Note that moving average studies are in a bear-mode position. Eurostoxx 50 futures remain in a bear cycle following the latest impulsive sell-off and the contract is trading just above its recent lows. Monday’s move down resulted in a breach of a key support at 4699.00, the Nov 19 ‘24 low (cont).
- Japan's NIKKEI closed lower by 1298.55 pts or -3.93% at 31714.03 and the TOPIX ended 82.69 pts lower or -3.4% at 2349.33.
- Elsewhere, in China the SHANGHAI closed higher by 41.261 pts or +1.31% at 3186.81 and the HANG SENG ended 136.81 pts higher or +0.68% at 20264.49.
- Across Europe, Germany's DAX trades lower by 668.21 pts or -3.29% at 19612.07, FTSE 100 lower by 235.89 pts or -2.98% at 7675.61, CAC 40 down 210.44 pts or -2.96% at 6889.46 and Euro Stoxx 50 down 145.38 pts or -3.05% at 4628.29.
- Dow Jones mini down 265 pts or -0.7% at 37601, S&P 500 mini down 6.25 pts or -0.12% at 5012, NASDAQ mini up 47 pts or +0.27% at 17285.25.
