BOC: Some See Further Rate Cuts Delayed, But Still Coming (2/2)

There was limited market reaction to the passage of the government welfare reform bill's second reading in Commons, by a vote of 335 to 260. (Earlier, an amendment to scupper the bill was defeated by a count of 328 votes to 149.)

• But this is only after the government announced last-minute concessions to assuage the bill's critics, in which the government would delay changes to disability assessments until a review of the system was complete (due by autumn 2026).
• This latest concession will further winnow the remaining savings intended to be made through reforms, from GBP2bln seen coming into today, and the the originally set-out GBP5bln. (Social Security and Disability Minister Timms said in Commons re the costing of Tuesday's concession, “we’ll set those figures out in the usual way.")
• The implication from the last-minute U-turn is that the government faced defeat of even its watered-down legislation, suggesting limited political scope to cut spending.
• As MNI noted earlier today, "With more spending cuts looking increasingly difficult, this sets up the potential for more tax rises in the Autumn Budget (with the fiscal rules unlikely to be modified while Reeves is Chancellor. The market (and consumers) are likely to continue to worry where these tax rises will come, which isn’t going to be great for confidence over the next few months."

• Spot gold has rallied by 1.1% today to $3,338/oz, leaving the yellow metal 2.8% above yesterday's $3,248.7 low.
• Mounting fiscal concerns in the US as the Senate passed President Trump’s tax bill may be providing some support to gold, which has also benefitted from the further decline in the dollar so far this week.
• The recovery in gold highlights a possible false trendline break, after spot pushed through the 50-day EMA and trendline support drawn from the December 30 low last Friday.
• Spot has pierced initial resistance at $3,336.3, the 20-day EMA today, exposing the June 23 high at $3,395.1. Stronger gains would refocus attention on $3,451.3, the June 16 high.
• Meanwhile, crude is on track for slight gains on the day, with the market weighing stronger seasonal demand and improved global economic outlooks ahead of expected US trade deals, against expectations of another large OPEC+ output hike in August.
• WTI Aug 25 is up by 0.5% at $65.4/bbl.
• Oil traders expect OPEC+ will agree a fourth bumper oil supply increase on July 6, Bloomberg reports.
• For WTI futures, support to watch is at the 50-day EMA, at $64.64, which has been pierced. A clear break of it would signal scope for a deeper retracement, exposing $58.87, the May 30 low.
• On the upside, initial resistance to watch is $71.20, the 50.0% retracement of the Jun 23 - 24 high-low range.

• Stocks remain mixed in late Tuesday trade, the Dow continues to outperform weaker Nasdaq stocks while SPX eminis see-saw around steady. Currently, the DJIA trades up 426.94 points (+0.97%) at 44521.18, S&P E-Minis down 0.5 points (-0.12%) at 6253.25, Nasdaq down 127.80 points (-0.6%) at 20241.96.
• Trade negotiation headlines took a backseat to the Senate's US budget bill vote that needs a simple majority of 50 votes to pass, rather than the 60 required to pass under regular Senate order. In the case of a 50-50 vote, Vice President JD Vance would cast the tie-breaking vote.
• Stocks drifted higher after the Senate narrowly passed the budget bill which now goes to the House where GOP leaders want to see a final vote tomorrow, allowing Congress to send the completed bill to President Trump's desk on July 4.
• Materials, Health Care and Retail sectors led gainers in the second half with a fair amount of discretionary stocks as well: Builders FirstSource +9.44%, Las Vegas Sands +8.83%, Wynn Resorts +8.64%, Packaging Corp of America +7.44%, MGM Resorts International +7.21%, Smurfit WestRock PL +6.00%, Target Corp +5.62%, Hershey Co +5.49% and Best Buy Co +5.35%.
• Technology and energy related shares continued to underperform in late trade, the latter under pressure as an amendment to the budget bill struck down state-level bans on AI regulation: Palantir Technologies -4.60%, Broadcom -3.58%, Advanced Micro Devices -3.22%, Arista Networks -3.11% and Nvidia -2.11%. Perhaps ironically, energy stocks were under pressure for the same reasons as high speed chips use a lot of energy: Williams Cos -5.68%, GE Vernova -5.22%, Expand Energy -4.16% and Vistra -3.85%.