EM LATAM CREDIT: Argentina: July CPI Match Expectations - Neutral
(ARGENT; Caa1/CCC/CCC+)
Progress in inflation continued with July’s increase in inflation of 1.9%, the third print in a row at a sub 2% monthly rate, though higher than June’s 1.6% increase and May’s rise of 1.5%.
On a YoY basis, the annual rate declined to 36.6%, matching consensus of 36.6%, down from 39.4% last month and 43.5% in May.
The increase in consumer price inflation was better than we expected given the City of Buenos Aires 2.5% increase in July vs 2.1% the previous month and 1.6% in May. The official ARS FX rate has been weakening vs the USD, moving from 1204 to 1370 during July, a nearly 14% decline in one month.
Market focus has shifted away from inflation these past few months to other more pressing issues. Today it is likely more anxious about the ARS15Tn local debt rollover taking place as well as an imminent ruling due from a U.S. Court of Appeals regarding the YPF case which will determine if a previous court judgement will be enforced ordering the government to hand over its 51% stake in the government-controlled energy company.
Other medium term challenges include building of reserves sufficient to meet IMF requirements and maintaining budget restraint given heightened opposition in the legislature.
ARGENT 35s were last quoted USD67.17, unchanged QTD and up ½ point YTD.
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EURJPY TECHS: Another Day, Another High
- RES 4: 174.86 1.764 proj of the Feb 28 - Mar 18 - Apr 7 price swing
- RES 3: 173.43 High Jul 12 ‘24
- RES 2: 172.92 High Jul 16 ‘24
- RES 1: 172.44 High Jul 14
- PRICE: 172.42 @ 16:08 BST Jul 14
- SUP 1: 170.81 Low Jul 11
- SUP 2: 169.48 20-day EMA
- SUP 3: 168.46 Low Jul 1
- SUP 4: 166.88 50-day EMA
The trend condition in EURJPY is unchanged, a bull cycle is in play and the cross continues to trade closer to its recent highs. Fresh gains last week confirm a resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Note that MA studies are in a bull-mode position, highlighting a dominant medium-term uptrend. Sights are on 172.92, the Jul 16 ‘24 high. Support to watch lies at 169.48, the 20-day EMA.
FED: Hassett A "Leading Contender" For Fed Chair: Washington Post
The Washington Post reported Monday that National Economic Council director Kevin Hassett is "emerging as a leading contender to become the next chair of the Federal Reserve, according to people who have discussed the matter with White House officials".
- Appointing Hassett to succeed Chair Powell (whose term ends May 2026) would be considered a development that augurs support at the top of the Fed for lower rates: in recent weeks he's advocated for strong easing in the Fed funds rate.
- Per the report, "The selection process remains fluid, and it isn't a sure thing that Hassett will get the nod. But Hassett, who leads the National Economic Council and served as a key economic adviser during Trump's first term, has advantages that others lack, said people familiar with the process."
- Hassett's name has been floated several times in this process. The Washington Post lists the usual set of "competitors" for the role: ex-Fed governor Warsh, Treasury Secretary Bessent, and current governor Waller. Hassett is a favorite among the front-runners per political prediction sites: Kalshi has him at 33%, vs Warsh 30%, Waller at 21% and Bessent 13%.
- The Washington Post notes "Fed watchers expect the president could announce his decision as early as this month".
- That would be very early vs other reporting. Indeed, administration officials played down an early announcement that was reported by the WSJ which wrote "In recent weeks, the president has toyed with the idea of selecting and announcing Powell's replacement by September or October, according to people familiar with the matter. One of these people said the president's ire toward Powell could prompt an even-earlier announcement sometime this summer."
US STOCKS: Late Equities Roundup: Interactive Media & Financial Services Leading
- Stocks have gradually recovered from early session lows Monday, indexes back near late Friday session highs. Currently, the DJIA trades up 61.81 points (+0.25%) at 44443.32, S&P E-Minis up 12.0 points (+0.09%) at 6312.00, Nasdaq up 68.55 points (+0.07%) at 20654.08.
- Monday was a generally muted start to the week with no economic data with sidelined trading accounts ahead of Tuesday's CPI inflation data. Not to mention this week kicks off the latest earnings cycle with banks and financial stocks reporting tomorrow: Blackrock, JPMorgan Chase & Co, Wells Fargo & Co, Bank of New York Mellon, State Street Corp and Citigroup.
- Interactive media and entertainment shares buoyed the Communications sector in the second half, leaders include: Warner Bros Discovery +2.69%, Live Nation Entertainment +2.51%, Netflix +1.97% and Take-Two Interactive Software +1.89%.
- Services shares supported the Financials sector: Arch Capital Group +3.56%, PayPal Holdings +3.33%, Globe Life +1.89% and Coinbase Global +1.82%.
- On the flipside, Energy and Materials sectors continued to underperform in late trade, oil & gas stocks weighing on the former with crude prices receding (WTI -1.39 at 67.06): Halliburton -4.51%, APA -3.43%, Schlumberger -2.92% and Occidental Petroleum -2.63%.
- Meanwhile, chemical and mining stocks continued to weigh on the Materials sector in late trade: Dow Inc -4.23%, LyondellBasell Industries -2.27%, Freeport-McMoRan -2.11%, Eastman Chemical -1.56% and Smurfit WestRock PLC -1.38%.
