Weekly Market Update: CPI Solidifies Fed Confidence in Inflation Trajectory
US stocks markets continued to track higher, further into uncharted territory this week. Signals coming from both the corporate sector and the economic calendar highlighted a clear resurgence in disinflationary trends within the economy. Affording Chairman Powell to sharpen his message while appearing on Capitol Hill. By underscoring inflation progress has picked up after disappointing in Q1, and that there are now real risks to both sides of the Fed’s dual mandate, he placed notable emphasis on the considerable cooling seen in the labor market. His demeanor only seemed to solidify market expectations around a September rate cut. Separately, Bank of England’s Pill and Mann both sounded less sanguine on the prospects for imminent UK rate cut allowing the Pound to move up.
Inflation readings out of Norway and China weighed on global bond yields even before US June CPI came in stunningly weak. June CPI figures revealed outright deflation in airfares and used cars along with a long awaited deceleration in shelter costs which resulted in the first negative m/m print since May 2020. Core CPI also missed expectations at 0.1% and the annualized number over the last three months suggest core inflation is running at ~2.2% y/y. The data undoubtedly puts the Fed closer to finally beginning to lower its funds rate, and emboldened those who want to see cuts start as soon as this month. It also resulted in historically choppy and bifurcated trade. On Thursday a clear rotation out of a small number of megacap, technology names into more value oriented small caps resulted in only the second trading day since 1979 that the Russell 2K rose 3%+ while the S&P 500 was down. The US dollar came under broad pressure, and it appeared BOJ officials took that opportunity to intervene on behalf of the Yen. For the week the Dow was up 1.6%, S&P gained 0.9%, NASDAQ rose 0.2% while the Russell 2K surged 6%.
NATO leaders gathered in Washington and affirmed their support for Ukraine. Deals were reached to send additional weapons and equipment to the battle field including F-16 fighters. Moscow again warned of consequences. Former President Trump met with Hungary PM Orban amid reports he would consider plans to cut intelligence sharing with NATO should he be re-elected in November. But the real drama surrounded President Biden who struggled to keep his campaign hopes alive. His end of conference presser went better the debate but failed ally a growing number of Democrats’ beliefs that he should step aside.
Taiwan Semi reported acceleration in June sales this week sparking fresh highs in the SOX and continued enthusiasm in the AI trade. Helen of Troy’s extremely poor quarterly results and slashed guidance was just the first of offer fresh insight into a stretched consumer this week. Delta’s guidance and revenue per seat mile missed market expectations. The CEO noted the industry finds itself in a temporarily oversupplied environment which resulted reduced fares. Pepsico’s top line growth and guidance disappointed as a stretched consumer has clearly pushed back on pricing. Tesla shares came under pressure following a report they were going to delay the highly anticipated robotaxi event from August to October. Friday saw the first spate of major US bank earnings reports. The reception was underwhelming as most had run up into number already. JP Morgan beat while charge offs and provisions were mostly inline with expectations allowing them to affirm their FY outlook. Wells Fargo was forced to guide FY NII to the low end as management talked about weaker than expected loan growth. Citigroup expenses trended towards the upper end of guidance as they have seen consumer payment rates starting to decline while savings taper.
MON 07-08
(CN) CHINA JUNE FOREIGN RESERVES: $3.232T V $3.232T PRIOR (V $3.225TE); Halts gold buying for 2nd straight month
(CN) Follow up: China PBOC expected to Conduct ‘Large-Scale’ Bond Borrowing; Releases details on operations - PBOC-backed Financial News
(DE) Germany Chancellor Scholz: We are relieved by French election results
(EU) EURO ZONE JULY SENTIX INVESTOR CONFIDENCE: -7.3 V -0.5E (back into negative territory; lowest since March)
(FR) French PM Attal offers resignation after Macron party's election defeat and a hung parliament – press
(FR) PRES MACRON DOES NOT ACCEPT FRENCH PM ATTAL RESIGNATION; ASKS HIM TO STAY 'FOR NOW' - PRESS
(FR) One of far-left leaders and former presidential candidate Melenchon: Left-wing New Popular Front will apply all of its program; Refuses any deals with Pres Macron; Macron's PM Attal must go; Macron's defeat is clearly confirmed; Election score is result of magnificent mobilization effort
(FR) FRENCH PARLIAMENTARY SNAP ELECTION (2ND ROUND) OFFICIAL EXIT POLLS; Left-wing Popular Front alliance seen to win 2nd round, But with no absolute majority; Le Pen's Right-wing National Rally party seen to finish only third, getting 110-158 seats
(FR) One of left-wing leaders and socialist politician Faure: Confirms call that Macron's pension reform must be cancelled; We are not prepared for any kind of coalition of the opposites
(IL) Hamas reportedly over the weekend dropped its longstanding demand that Israel promise to end the war as part of any ceasefire deal - press (update)
(JP) JAPAN MAY LABOR CASH EARNINGS Y/Y: 1.9% V 2.1%E
(US) Bloomberg News/Morning Consult poll indicates former Pres Trump leads Pres Biden by only 2ppts (smallest gap since Oct 2023) in key battleground states (1st comprehensive poll in swing states since debates on June 27th)
(US) MAY CONSUMER CREDIT: $11.4B V $8.9BE
(US) Reportedly fast-growing number of Democrats are "praying for and plotting" a more earthly intervention to beg Biden to drop out of the race by Friday, July 12th; Lawmakers from all factions of the party tell Axios that big donors and key constituents have grave concerns about Biden's strength - Axios [**Note: last week, Axios circulated report that one House Democrat said Biden should "step down and help lead a transition of candidacy" and that a "very large majority of the caucus shares this sentiment."]
(US) Reportedly backing of Pres Biden among Hill Democrats, especially inside the House Democratic Caucus, is slipping; There’s been "some extravagant" speculation that Schumer and Jeffries would somehow lead a high-level Democratic delegation to the White House and tell Biden he needs to step aside in favor of VP Harris, but that is all wildly premature - Punchbowl
(UK) UK newly appointed Chancellor of the Exchequer (Fin Min) Reeves: Reiterates pledges Not to raise VAT, National Insurance (NI) and income tax; I have ordered assessment of economic inheritance and will present to parliament before Summer Recess; Our economy has been held by ducked decisions - first major speech since Labour win
AMAT Unveils industry’s first use of ruthenium in high-volume production enables copper chip wiring to be scaled to the 2nm node and beyond and reduces resistance by as much as 25%; Also publicly introduced its latest IMS which combines six different technologies in one high-vacuum system, including an industry-first combination of materials that enables chipmakers to scale copper wiring to the 2nm node and beyond
BA Boeing confirms to plead guilty to criminal conspiracy to defraud the US over two fatal 737 MAX crashes 5 years ago; To be fined $243.6M as part of agreement with DOJ; To invest $455M in safety - US press, citing DOJ official
GLW Raises Q2 core Rev ~$3.6B v $3.4Be ($3.4B prior), EPS at the High End or Slightly Above $0.42-0.46 v $0.45e; Cites strong adoption of new optical connectivity products for Generative AI ‘Springboard’ framework; Began buying back shares in Q2
(US) TTN Research Alert: Goldman Sachs analysts see consensus for Q2 earnings beats set a higher bar than in previous quarters; Consensus expects +9% y/y EPS growth in Q2, which would be the strongest quarterly growth since Q4 2021
TUES 07-09
(CN) CHINA JUNE CPI Y/Y: 0.2% V 0.4%E
(DE) German second-largest Verdi trade union agreed wage hike of ~12.6% for workers in wholesale and foreign trade in Baden-Wuerttemberg (update)
DSY.FR Cuts Q2 Rev €1.50B v €1.55Be (prior €1.53-1.56B); Notes large transaction delays and observed cautiousness in customer signings in a complex geopolitical environment; cuts FY23 guidance
(G7) Saudi Arabia warns G7 against Russia seizures with threat to sell debt - press [**Note: Saudi Arabia holdings of euro and French bonds may amount to tens of billions of euros]
(IE) Ireland Finance Ministry: To introduce €8.3B budget package for 2025; 6.9% proposed increase breaks 5% rule
(US) According to AP-NORC poll, support for legal abortion has risen since Supreme Court eliminated protections - press (update)
(US) Fed Chair Powell: Most recent labor market data sends a signal of cooling; We're well aware of two-sided risks; Won't send signals about timing of future Fed actions today - Q&A
(US) FED CHAIR POWELL: LABOR MARKET CONDITIONS HAVE COOLED, WHILE REMAINING STRONG - PREPARED REMARKS
(US) The Department of Commerce issued a NOI to open a competition for new research and development (R&D) activities that will establish and accelerate domestic capacity for semiconductor advanced packaging anticipating $1.6B in funding across five R&D areas
(US) June Manheim wholesale used vehicle Index: 196.1 v 196.8 prior; --0.06% m/m, -8.9% y/y
005930.KR *Samsung's main South Korea labor union (~30K workers, about 25% of Samsung total): Plans strike for an 'indefinite period' [**Note: prior intent was to be only three days]
MNOD.UK Reportedly in talks with China Copper to form a JV that would allow Nornickel to move its entire copper smelting base to China - press [**Note: would mark Russia's first uprooting of a domestic plant since the U.S. and UK banned metal exchanges from accepting new aluminium, copper and nickel produced by Russia]
HELE Reports Q1 $0.99 v $1.59e, Rev $416.8M v $446Me; Cuts outlook citing "increasingly stretched consumer"; battled an unusual number of internal and external challenges with "many of these challenges became more pronounced toward the end-Q1 and some continue to evolve"
PAGE.UK Q2 Trading update; Q2 Group gross profit £224.3M, -12.0% y/y, Op £60M v £90Me; Exited June -18% y/y; Softening in activity levels through the quarter and macro-economic uncertainty in the majority of its markets
WED 07-10
(NZ) New Zealand sells total NZ$500M vs. NZ$500M indicated in 2029, 2034 and 2037 bonds
(TW) US Top Diplomat in Taiwan: Highlights US commitment to supporting Taiwan's ability to defend itself – statement
(UK) BOE Chief Economist Huw Pill: "When-rather-than-if" characterization of prospective bank rate cuts still seems appropriate, but BOE should remain cautious
(US) Fed Chair Powell: Monetary policy helping bring supply and demand into balance - Semi-Annual testimony
(US) Adobe Analytics June Digital Price Index (DPI) -0.3% m/m v -0.6% prior (update)
(US) Former US Pres Trump said to consider plans to cut US intel sharing with NATO - US press, citing foreign officials informed of Trump's NATO plans
(US) MAY FINAL WHOLESALE INVENTORIES M/M: 0.6% V 0.6% PRELIM
(US) Sen Michael Bennet (D-Colo.): Donald Trump is on track, I think, to win this election and maybe win it by a landslide; Trump could take with him the Senate and the House if he wins in Nov - Axios [**Note: the first Senate Democrat to publicly criticize Biden's bid] (update)
(US) TREASURY'S $39B 10-YEAR NOTE REOPENING DRAWS 4.276% V 4.438% PRIOR; BID-TO-COVER RATIO: 2.58 V 2.67 PRIOR AND 2.48 OVER LAST 8 REOPENINGS
OPEC Monthly Oil Report (MOMR)
TTN Reminder: US share buyback blackout period set to end next week on Fri, July 19th
TTN Research Alert: Yesterday. Fed Chair Powell said most recent labor market data sends a signal of cooling; Ahead of Q2 earnings season start this week, we collected comments made various global firms on current economic conditions
2330.TW Reports June (NT$) Rev 207.9B, +32.9% y/y v +30.1% prior (v 229.6B m/m); Q2 Rev 673.5B v 654.3Be; YTD Rev 1.27T +28% y/y v +27% prior
AA Reports prelim Q2 $0.08-0.19 v -$0.01e, Rev $2.85-2.93B v $2.82Be, adj EBITDA ex-items $310-330M; Reflects "market improvements"
COST Reports June Total SSS +6.9% y/y (ex-gas and FX) v +6.5% prior; US SSS +6.3% (ex-gas and FX) v +5.7% prior; Plans to increase annual membership fees by ~8% (first increase since 2017)
MSFT *Reportedly ditched its non-voting board observer seat at OpenAI amid regulatory concerns; Notes it is not necessary after OpenAI's significant progress and growing customer base; Apple will Not take up observer role on OpeaAI board - press
THRS 07-11
(JP) Reportedly Japan govt and BOJ intervened in FX market for 1st time since early May - press
(JP) Bank of Japan (BOJ) said to have conducted a rate check related to EUR/JPY on Jul 12th, prepping for currency intervention - Nikkei [**Note: Japan markets will be on holiday on Mon, July 15th]
IEA Monthly Oil Report (OMR): Iran’s crude oil production rises to six-year high; China oil consumption contracted in Q2
(SG) SINGAPORE Q2 ADVANCE GDP Q/Q: 0.4% V 0.4%E; Y/Y: 2.9% V 2.7%E
(US) US Pres Biden reiterates he has no plans to leave the race noting his job as President is a proof of mental acuity; Notes VP Harris is qualified to be President; Mistakenly refers to VP Harris as "Vice President Trump" at his first solo Press Conference in 2024
(US) BOFA INSTITUTE: JUNE TOTAL CARD SPENDING -0.5% Y/Y (FIRST DROP SINCE JAN 2024) V +0.7% AVERAGE IN MAY; The weakness was broad based; While softening, there is still some momentum behind consumer spending.
(US) TREASURY $22B 30-YEAR BOND REOPENING DRAWS 4.405% V 4.403% PRIOR; BID TO COVER 2.30 V 2.49 PRIOR AND 2.41 OVER LAST 8 REOPENINGS
(US) Atlanta June Sticky-CPI annualized 2.6% v 2.4% m/m, Core 2.4% v 2.2% m/m (update)
(US) INITIAL JOBLESS CLAIMS: 222K V 235KE; CONTINUING CLAIMS: 1.852M V 1.860ME (1st drop in Continuing Claims in 10 weeks)
(US) JUN CPI M/M: -0.1% V +0.1%E; Y/Y: 3.0% V 3.1%E (1st negative M/M print since May 2020; lowest annual pace since Apr 2021)
(US) Atlanta Fed GDPNow: Raised Q2 GDP forecast to 2.0% from 1.5% (update)
(US) ABC News/Washington Post/Ipsos poll: Biden continues to run evenly with Trump, with no meaningful post-debate change, but two-thirds of Americansm including a majority of Biden’s own supporters, say he should step aside as his party’s presumptive nominee for president given his debate performance two weeks ago
(US) Goldman Sachs analysts: Equity investors are becoming more skeptical about companies that are investing heavily to monetize AI and generate productivity gains
(US) Tier1 week-to-June 27th US Truckload Demand Indicator at 52.8 v 53.1 prior (below 54 avg freight recession level) [**Note: indicator has 81% correlation in leading ISM by a month]
9983.JP Reports Q3 Net ¥116.9B v ¥85.1B y/y, Op ¥144.7B v 110.3B y/y ; Raises FY25 Net ¥365B, Op ¥475B, Rev ¥3.07T
AAPL Settles EU antitrust probe and avoids fine over tap-and-pay tech (as speculated); EU accepts Apple pledge to open up payment tech to rivals - press citing EU's Commission VP Vestager
CAG Reports Q4 $0.61 v $0.56e, Rev $2.91B v $2.94Be; Guides FY25 below estimates; Expects consumers to adapt and establish new reference prices
DAL CEO: Excess supply has led to heavy discounting; What you see happening is the impact in the domestic marketplace to the lower fare discounting that’s been going on this quarter - press interview
DAL Reports Q2 $2.36 v $2.37e, Rev $16.7B v $16.2Be; Guides Q3 well below estimates, but notes peak summer travel demand remains strong ; Announced a 50% increase to dividend payment beginning in Sept quarter;
HAS.UK Issues Q4 Trading Update: Net fees -15% y/y (LFL) with a June exit rate of -18%; Overall, expect near-term market conditions will remain challenging. Activity levels are sequentially stable in ANZ, Asia and the Americas
LIT International Battery Metals reportedly becomes the first company to commercially produce lithium with version of a direct lithium extraction (DLE) technology, a novel type of filtration technology - press
PEP *CEO: US consumer "clearly more challenged, wants more value"; Seeing price sensitive consumers across All income groups - post earnings comments
PFE Advances development of danuglipron, once-daily formulation of Oral GLP-1 Receptor Agonist; Plans to conduct dose optimization studies in 2H24
FRI 07-12
(CN) China Foreign Ministry again sanctions some US military firms and senior executives over Taiwan arms sales - press [**Note: China has already sanctioned and fined many US firms for Taiwan arms sales several times earlier]
(JP) BANK OF JAPAN (BOJ) ACCOUNTS DATA SUGGESTS ~¥3.5T (~$22B) OF FX INTERVENTION ON THURS, JULY 11TH - PRESS
(US) Follow up: Former US Pres Trump meets with Hungary PM Orban at Mar-a-Lago, Florida, post-NATO Summit (Washington DC)
(US) JULY PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 66.0 V 68.5E
(US) JUN PPI FINAL DEMAND M/M: 0.2% V 0.1%E; Y/Y: 2.6% V 2.3%E
(IN) INDIA JUN CPI Y/Y: 5.1% V 4.8%E
(US) Tier1 week-to-July 11th US Truckload Demand Indicator for shippers' 0- to 3-month freight demand outlook decreased to 50.0 v 52.8 prior (30-weeks low and well below freight recession average)
BK Reports Q2 $1.51 v $1.43e, Rev $4.60B v $4.54Be
EMSN.CH Reports H1 (CHF) EBIT 291M v 285Me, Net Rev 1.09B v 1.13Be; Cuts Rev outlook citing no sign of any growth impulse in global manufacturing
ERICB.SE Reports Q2 (SEK) adj EBIT 3.23B v 2.69Be, Rev 59.9B v v 58.5Be; Sees market conditions to stay challenging this year
FAST Raises FY24 Capex $235-255M (prior $225-245M v ~$161M y/y); Customer sentiment remains challenging and regional leadership is seeing more layoffs, shift reductions, and planned plant shutdowns - earnings slides
FAST Reports Q2 $0.51 v $0.51e, Rev $1.92B v $1.93Be; Notes customers are consuming less inventory as they adjust production to address soft demand; Experienced modest deflation in its inventory
JPM Affirms FY24 NII ex-CIB markets $91B, adj expense outlook $92B (prior: $91B, adj expense outlook $92B) - earnings slides
JPM Reports Q2 $4.40 adj v $4.19e, Managed Rev $51.0B** v $45.7Be; CEO Dimon reiterates his stance that inflation and interest rates may stay higher than the market expects
LHA.DE Reports prelim Q2 Net €213M v €515M y/y; Cuts FY24 adj EBIT €1.4-1.8B (prior: €2.2B), adj FCF to be significantly below €1B (prior: at least €1B); Notes negative impact from market-related decline in yields in all traffic regions, especially in Asia
T Discloses update on incident from Apr 19th with threat actor accessing call logs and AT&T workspace on a third-party cloud platform; Data does Not contain the content of calls or texts, personal information such as Social Security numbers, dates of birth;. AT&T does not believe that this incident is reasonably likely to materially impact AT&T’s financial condition or results of operations - filing
WFC Reports Q2 $1.33 v $1.27e, Rev $20.7B v $20.3Be; Notes credit performance was consistent with its expectations
X.IPO EU Commission finds X in breach of Digital Services Act; If findings confirmed, X could get fine of up to 6% of total annual Rev – press