EURJPY TECHS: Northbound
Jul-16 19:00
* RES 4: 175.43 High Jul 11 '24 and a key medium-term resistance * RES 3: 174.86 1.764 proj of the F...
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US STOCKS: Late Equities Roundup: Walking Back Early Risk-On Tone
Jun-16 18:54
- Stocks rebounded from last Friday's sell-off, reacting positively early Monday to headlines that Iran is hoping intermediaries will pressure Israel to a ceasefire in return for "flexibility in nuclear negotiations" with the US.
- The early risk appetite abated as the two continued to bombard each other, Iran stating they are "ready to deal a major blow to Israel". Of note, crude prices remained weaker after late last week's spike higher (WTI -1.34 at 71.64).
- Currently, the DJIA trades up 283.05 points (0.67%) at 42480.07 (42707.73 high), S&P E-Minis up 53 points (0.88%) at 6084.5 (6055.25 high), Nasdaq up 264.1 points (1.4%) at 19670.82 (19733.31 high).
- Information Technology and Communication Services sectors continued to outperform in the second half, Advanced Micro Devices +9.20%, Teradyne +5.46%, ON Semiconductor +5.15%, Monolithic Power Systems +5.11% and Super Micro Computer +4.98% buoyed the IT sector.
- Leading gainers in the Communication Services sector included Warner Bros Discovery +5.63%, Take-Two Interactive Software +3.45%, TKO Group Holdings +3.41% and Meta Platforms +2.91%.
- Energy and Utilities sectors underperformed on the back of weaker crude prices: Diamondback Energy -3.03%, APA -2.43%, ONEOK -2.20%, Occidental Petroleum -2.11% and Targa Resources -2.08%. Meanwhile, Consolidated Edison -2.82%, NextEra Energy -2.26%, DTE Energy -2.03% and CMS Energy -1.69%.
US OUTLOOK/OPINION: Macro Since Last FOMC: Prices - Sharper Increases Expected
Jun-16 18:49
- Surveys are indeed pointing to sharp increases in both cost pressures and selling price inflation.
- Business measures have continued to push strongly higher. The ISM services report for May saw prices paid rise further to 68.7 for its highest since Nov 2022, clearly at the expense of new orders which slid to their lowest since Dec 2022.
- This price backdrop was echoed by the S&P Global US services PMI for May reporting that “rising backlogs in part reflected delays in the delivery of ordered equipment due to tariffs, which also drove up cost inflation to its highest in nearly two years. Increased costs were passed on to clients via the steepest increase in output charges since August 2022.”
- Further, the Fed’s Beige Book published June 4th revealed that respondents in all districts indicated higher tariff rates were putting upward pressure on costs and prices and that those that plan to pass tariff-related costs on expect to do so within three months.
Consumer surveys of inflation expectations meanwhile are off April or May highs although there is a wide range to them. The University of Michigan inflation metrics remain historically elevated despite the 1Y surprisingly cooling in the preliminary June survey, the Conference Board 1Y equivalent is still on the high side whilst the NY Fed’s metrics are far less elevated.
US OUTLOOK/OPINION: Macro Since Last FOMC: Prices - Surprisingly Soft Inflation
Jun-16 18:47
- The two CPI reports since the May FOMC meeting surprised lower, the first for April heavily exaggerated by rounding (0.24% M/M vs unrounded consensus of 0.26%) before a large miss for May (0.13% M/M vs 0.27%).
- May’s report started to show some signs of tariff impact across a range of core goods – we estimate the highest median across 56 items since early 2023 – but they were offset by weakness in some heavily weighted items such as new & used cars plus, more surprisingly, apparel. What’s more, core services also surprised softer across both key housing and non-housing components.
- The two PPI reports meanwhile have seen largely benign trends even if trade margins bounced back in May. The PCE-relevant components of PPI were largely neutral on the month in May after a heavy drag in April. That profile has been heavily influenced by portfolio management & investment advice fluctuating on swings in equity markets following US trade policy announcements with near-term strength likely ahead.
- We’re left with core PCE estimates at circa 0.15% M/M for May (released June 27th), which if realized and without revisions would follow 0.12% in April and 0.09% in March. That’s three particularly subdued months, averaging 1.4% annualized, although it would follow what was a worryingly strong 4.1% in the prior three months.
- The Fed will be vary of this volatility in the data whilst acknowledging a still stubbornly high core PCE Y/Y rate of 2.6% currently expected for May, along with strong increases in market-based services PCE inflation at 3.2% Y/Y back in April.
- Further increases in core PCE are expected as greater tariff-driven inflation shows in the summer months although after May’s surprise weakness, questions could start to be asked if there isn’t a stronger increase in next month’s June data.
