Weekly Market Update: Political developments draw focus as data continue to show ‘cooling but not cool’ economy
Former President Trump’s campaign got another boost from the US Supreme Court this week, which decided his various immunity claims were either valid or needed further deliberation in the lower courts, virtually assuring none of the pending trials against him will go forward before the election. US Treasury yields continued backing up as the odds of him regaining the White House remained much higher in wake of Biden’s poor debate showing. Speculation continued to swirl that pressure was mounting for Biden to step aside, with betting markets beginning to favor VP Harris as his replacement. Also, the UK election was a drubbing for the Torries as expected, with Keir Starmer set to lead the first Labour government since Tony Blair lost to the Conservatives in 2007. Finally, heading into the second round of the French election, polls indicate that Le Pen's National Party is projected to win 190-240 seats, much less than 289 seats needed for an absolute majority.
Eurozone core CPI remained sticky and was addressed in depth by key central bankers meeting in Portugal. Fed Chair Powell reiterated that the labor market was cooling as expected before Jolts jobs openings data unexpectedly rose in May, but April was revised lower. Stocks continued to make fresh all-time highs after decidedly weak ISM services data. New orders contracted for only the second time since the pandemic and business activity contracted for the first time since 2020. Also Non-farm payroll growth remained strong in June, but wages moderated and the unemployment ticked up to 4.1%, a level not seen since late 2021. Those readings were just the latest in a series of US economic markers indicating the Fed's restrictive stance is finally starting to put real downward pressure on the economy. Following surprise, large weekly drawdowns in EIA energy inventories, WTI crude prices stayed near a 2-month high and remains the one glaring indicator that is not cooperating with what the Fed wants to see to pull the trigger on rate cuts. After the jobs data on Friday, Fed fund futures were fully pricing in two rate cuts, for September and December. For the week, the S&P gained 2%, the DJIA added 0.7%, and the Nasdaq surged 3.5% on the backs of Apple, Alphabet, Meta, and Microsoft all reaching fresh record highs.
In corporate news this week, auto manufacturer reported monthly and quarterly results, some new questions were raised about the GLP-1 weight loss drugs, and M&A was sparking up among retailers. Tesla reminded the market that it is the king of EVs, producing 411K units and selling more than expected, far eclipsing 24K units sold by Ford, which proudly declared it’s the No. 2 EV-brand, even as its F-series truck sales sagged. Novo Nordisk shares were dented by a study that suggested a potential link between Ozempic and Wegovy and a serious eye condition. Macy’s led brick and mortar retailers higher on Friday after a report said Arkhouse and Bridgade had boosted their offer for the department store chain by more than 3%, to $24.80/share. Meanwhile, reports circulated that the owner of Saks Fifth Ave is near a deal to purchase Neiman Marcus Group for ~$2.65B, with Amazon expected to take a minority interest in the combined company. And finally, Boeing managed to reach an agreement to reintegrate Spirit Aerosystems that it hopes can meet antitrust guidelines, giving away some assets to rival Airbus for a song.
MON 07-01
DTN Weather's Sam Lillo: Hurricane Beryl intensified from a tropical depression to a 105kt (120mph) category-3 in 42 hours on June 30th, and 115kt (130mph) category-4 in 48 hours [**Note: The earliest date in history such a fast intensification into category-3 was achieved was early Sept]
(DE) GERMANY JUN FINAL MANUFACTURING PMI: 43.5 V 43.4E (confirms 24th straight contraction); Destocking of inputs and finished goods gathers pace
(IT) ITALY JUN MANUFACTURING PMI: 45.7 V 44.3E (3rd straight contraction); The rate of input price inflation the strongest for one-and-a-half years
(US) NHC update on Hurricane Beryl: Potentially a catastrophic Category 5 Hurricane in the Eastern Caribbean; Now officially the first Cat 5 Hurricane in the Atlantic [**Note: the earliest Category 5 hurricane known on record in the Atlantic basin; last time Atlantic Hurricane season saw Cat 5 Hurricane in July was Hurricane Emily on July 16th, 2005]
(US) Atlanta Fed GDPNow: Cuts Q2 GDP forecast to 1.7% from 2.2%
(US) JUN ISM MANUFACTURING: 48.5 V 49.1E; PRICES PAID: 52.1 V 55.4E
(US) JUN FINAL S&P MANUFACTURING PMI: 51.6 V 51.7E
(US) Tier1 analysts: Demand for Air Cargo remained "extremely, unseasonally strong" in June with double digit growth supported by surging tech shipments, eCommerce demand and the Red Sea
(US) Redfin: Less than half (47% v 60% y/y) of newly constructed apartments that were completed in Q4 2023 were rented within three months
(US) SUPREME COURT PARTIALLY BACKS TRUMP'S IMMUNITY CLAIM; Vote 6-3; Mixed ruling will potentially further delay any federal trial
000660.KR Reportedly plans to invest KRW103T (~$74.8B) through 2028, with ~80%, or KRW82T, will be allocated to investing in high-bandwidth memory (HBM) chips - press (update)
AIR.FR Reportedly June deliveries ~67 v 50 m/m; YTD deliveries ~320 (Note: FY24 guidance of 770) – press
MAERSKB.DK CEO: Higher rates we are seeing now are of a temporary nature; Coming months will be challenging for carriers and businesses alike as Red Sea situation stretches into Q3 2024
SPR Boeing confirms to purchase Spirit AeroSystems for $37.25/shr in all stock deal (30% premium to last close); Also Spirit to continue to negotiate in good faith to enter into definitive agreements for Airbus to acquire certain Spirit assets that serve Airbus programs, concurrently with the closing of Spirit's acquisition by Boeing
TUES 07-02
(EU) EURO ZONE JUN ADVANCE CPI ESTIMATE Y/Y: 2.5% V 2.5%E; CPI CORE Y/Y: 2.9% V 2.8%E
(PH) Philippines Foreign Ministry: Philippines and China re-commit to de-escalate tensions
(US) Fed Chair Powell: Labor market is still strong; Have made quite a bit of progress toward getting inflation back toward target - Sintra Forum
(US) Judge in NY case postpones Trump's sentencing to Sept 18th
(US) June preliminary NA Class 8 Net Orders 13.1K, -33% m/m - FTRintel.com
(US) Reportedly Democratic National Committee is considering formally nominating Joe Biden as early as mid-July to ensure that the president is on Nov ballots (update) [**Note: Ohio law requires the party’s candidates to be determined by Aug 7th; Democratic National Convention on Aug 19-22nd]
NVO (US) Pres Biden: Calls on Novo Nordisk to cut Ozempic and Wegovy prices - press
TSLA Reports Q2 deliveries 444K v 441Ke, 386.8K q/q, (466.1K y/y); production 411K vehicles, +2% y/y
M Reportedly Arkhouse and Bridgade increase offer 3.3% from $24/shr to $24.80/shr - WSJ
WED 07-03
(NZ) New Zealand sells total NZ$494M vs. NZ$500M indicated in 2031, 2034 and 2041 bonds
(IL) Axios' reporter Barak Ravid: Qatar and Egypt conveyed to the Israeli negotiations team Hamas' updated response to the proposal for a hostage and ceasefire deal, the Mossad says in a statement. The Mossad said Israel is studying the response and will give its answer to the mediators
(IT) ITALY JUN SERVICES PMI: 53.7 V 53.8E (6th straight expansion)
(US) Atlanta Fed GDPNow: Cuts Q2 GDP forecast to 1.5% from 1.7%
(US) BOFA INSTITUTE: WEEK-TO-JUNE 29TH TOTAL CARD SPENDING +1.4% Y/Y V +0.7% AVERAGE IN MAY
(US) Democrat Governors upon meeting Pres Biden: "We have Biden's back" – press
(US) MAY FACTORY ORDERS: -0.5% V 0.2%E
(US) MAY FINAL DURABLE GOODS ORDERS: 0.1% V 0.1%E; DURABLES (EX-TRANSPORTATION): -0.1% V -0.1%E
(US) FOMC MAY MINUTES: Some officials said need to be ready to respond to unexpected weakness; Several members said might need to raise rates if inflation persists
(US) INITIAL JOBLESS CLAIMS: 238K V 235KE; CONTINUING CLAIMS: 1.858M V 1.840ME (highest since early March; 9th straight week of rise)
(US) JUN FINAL S&P SERVICES PMI: 55.3 V 55.1E
(US) JUN ISM SERVICES INDEX: 48.8 V 52.7E; First business activity contraction since May 2020
(US) JUN ADP EMPLOYMENT CHANGE: +150K V +165KE; Notes June would have been a downbeat month without rebound in hiring in leisure and hospitality
(US) Reportedly several current and former officials and others who encountered Pres Biden behind closed doors in weeks and months before debates noticed that he increasingly appeared confused or listless, or would lose the thread of conversations; The lapses seemed to be growing more frequent, more pronounced and more worrisome – NYT
(US) VP HARRIS SAID TO BE THE TOP ALTERNATIVE TO REPLACE US PRES BIDEN IF HE DECIDES NOT TO CONTINUE HIS REELECTION CAMPAIGN - PRESS CITING SEVEN SENIOR SOURCES AT THE BIDEN CAMPAIGN
(US) Reportedly Pres Biden told a confidant that he is considering whether to stay in the race – NYT
AMZN Reportedly Saks Fifth Ave owner is close to a deal to purchase Neiman Marcus Group for ~$2.65B with Amazon set to take a minority interest in the combined company; Merger will be known as Saks Global - WSJ
NVO Potential link between Ozempic and Wegovy and a serious eye condition revealed in new study - NY Post
HLAG.DE CEO: Seeing solid global shipping demand in an uncertain environment, noting spot rates have risen in the last 2 months
RHM.DE Italy said to be planning €20B order from Rheinmetall for >550 tanks - press (would be record order by >5.5x)
STO.AU Reportedly Aramco and Adnoc are considering bids for Santos in the early stages of evaluating the company - press
THRS 07-04
BTC/USD Bitcoin -5% to $55,000, to levels not seen since Feb; ETH -8%
(CN) China seen to have higher bond volatility as PBOC intervenes in bond market; PBOC started to borrow medium and long-term notes from lenders - Chinese press
(IL) Israel’s military killed a senior Hezbollah commander in an airstrike in south Lebanon – press
(UK) ACCORDING TO UK EXIT POLLS, LABOUR IS SEEN WINNING 410 SEATS IN THE 650 SEAT PARLIAMENT; INDICATIONS OF BLAIR-LIKE LABOUR LANDSLIDE MAJORITY, NOT LABOUR ‘SUPERMAJORITY’ - PRESS [**Note: UK voter turnout estimated below 60% v 67% in 2019 (lowest in 20 years)]
(US) US Pres Biden: "I'm not going anywhere" - remark made during U.S. Independence Day festivities at the White House
(US) Citi Early-July Economic Surprise Index drops to -47.5 v -28.1 prior (lowest since Aug 2022); Bloomberg Economic Surprise Index at -0.563 (lowest since early 2016)
005930.KR Reports prelim Q2 (KRW) Op 10.4T v 8.6Te (+1,452% y/y), Rev 74.0T v 73.6Te (+23% y/y)
066570.KR Reports prelim Q2 (KRW) Op 1.20T v 997.5Be; Rev 21.7T v 21.3Te y/y
TTN Research Alert: Percentage of ISM Services respondents expecting higher new orders at lowest since GFC; “Mel Rule” recession indicator was triggered mid-spring; Goldman Sachs sees US jobs market at a potential inflection point, while, on average, NASDAQ-100 tends to peak in July more than during any other month due to gradual increase in volatility and strongest period of summer rally usually lasts until mid-July
AIXA.DE Reports prelim Q2 order intake €176M v €134Me; Cuts FY24 Rev and EBIT margin guidance, cites current market developments and the planned exchange rate; Q2 prelim EBIT €13.0M v €44.6M y/y, Rev €132M v €173.5M y/y; Notes momentum in SiC and GaN power continues
Ocean Demand remains strong, but slightly decreased compared to previous weeks; Equipment shortages and port congestion in Asia are improving but still can’t fully support current demand, with blank sailings expected in July and August - Flexport
TSLA Reportedly India does not expect Tesla to move forward with an investment in the country any time soon after executives at Tesla stopped contacting them; Indian govt said to be given to understand that Tesla has capital issues - press
FRI 07-05
(CA) CANADA JUN NET CHANGE IN EMPLOYMENT: -1.4K V +25.0KE; UNEMPLOYMENT RATE: 6.4% V 6.3%E
(DE) Germany Chancellor Scholz: Confirms supplementary budget for 2024; Also to sign off on 2025 budget plan at next meeting on July 17th - news conf comments
TTN Research Alert: In June, persons unemployed 15 weeks or longer, as a percent of US civilian labor force, rose to the highest % this year; Share of persons unemployed 15 weeks or longer v those unemployed for less than 5 weeks reached highest since pandemic
(RU) Russia Pres Putin on July 4th said "I take Trump's plan to end the war with Ukraine very seriously although Trump has not detailed how exactly he's going to do that; We support the idea and have no doubt that he says it sincerely" (update)
(RU) Russia Pres Putin to Hungary PM Orban: I know you arrived to Moscow to discuss nuances about Ukraine; Asks Orban to talk of position of European partners [*Note: first official trip to Russia and meeting with Putin by any EU leader since the start of the full-scale invasion more than two years ago]
(TR) Turkey bill authorizes wealth fund to issue special bonds – press
(UR) Hungary PM Orban confirms he has landed in Moscow to meet with Russia Pres Putin - X post [*Note: first official trip to Russia and meeting with Putin by any EU leader since the start of the full-scale invasion more than two years ago]
(UR) Hungary PM Orban reportedly to visit Moscow today, July 5th to meet with Russia Pres Putin - press [*Note: first official trip to Russia and meeting with Putin by any EU leader since the start of the full-scale invasion more than two years ago]
(US) Reportedly Sen Mark Warner (D-VA) is working to gather a group of Democratic senators to ask Biden to exit the race - press
(US) JUN AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.3%E; Y/Y: 3.9% V 3.9%E
(US) JUN UNEMPLOYMENT RATE: 4.1% V 4.0%E (highest since end-2021; second straight increase)
(US) JUN CHANGE IN NONFARM PAYROLLS: +206K V +190KE; Two-Month Payroll Net Revision -111K v -15K prior
(US) NYT: Growing number of rental properties, especially in the South and Southwest, are in financial distress; Owners of some rental buildings are starting to struggle because of rising interest rates and waning demand in some once booming Sun Belt cities (update)
7203.JP Concludes investigation into certification issues; Notes it did Not find any new issues over last 10 years
SHEL.UK Reports prelim Q2 integrated gas production 940-980K bpd; Sees up to $2B in impairments in Q2 related to a delayed biofuels plant under construction in the Netherlands and its chemicals facility in Singapore