Daily Market Outlook, July 10, 2024

Munnelly’s Macro Minute…

“Markets Hit Record Highs As Fed Chair Powell Strikes A Dovish Tone”

US stocks hit new highs, leading to volatile swings in Asian markets as traders assessed Fed Chairman Powell's remarks on the US economic outlook. Australian and Chinese stocks fell, while those in Hong Kong and Japan rose. China's consumer prices barely increased in June, indicating ongoing deflationary pressures. The S&P 500 rose for a sixth straight session, while the Nasdaq 100 set another record. In Asian trade, European and US equity futures saw gains.

Central bankers around the world are becoming more confident that markets may be moving towards a period of lower interest rates, as they have struggled to control inflation for a long time. The Reserve Bank of New Zealand (RBNZ) recently announced that they expect headline inflation to return to the target range of 1% to 3% in the second half of this year, signaling a less aggressive stance compared to their previous outlook in May. This led to increased speculation of rate cuts in New Zealand, causing the kiwi to decline by 0.7%. Federal Reserve Chair Jerome Powell also indicated that the U.S. economy is no longer overheated and the job market has cooled, hinting at a potential easing cycle in the future. Market expectations for a Fed rate cut in September have risen significantly, although a surprise increase in U.S. inflation could change this outlook. Japan, on the other hand, is an exception to the trend, as an uptick in wholesale inflation has kept alive expectations of a near-term rate hike by the central bank. The Bank of Japan is expected to lower its economic growth forecast but maintain its inflation target. In China, consumer prices grew for the fifth consecutive month but fell short of expectations, while producer prices continued to decline due to weak domestic demand despite government support measures.

Overnight Newswire Updates of Note

RBNZ Maintains OCR At 5.50%, Suprises With Dovish Statement
China’s Inflation Numbers Miss Expectations, Rising 0.2% In June
China PPI Y/Y Jun:- 0.8% (est -0.8%; prev -1.4%)
BoJ To Trim Growth Forecast, Inflation Projected To Move Nearer Target
Japan PPI Y/Y Jun: 2.9% (est 2.9%; prev 2.4%)
Biden Forcefully Defends NATO As He Hosts Summit Leaders
ECB McCaul: Alarms Rising Risks From Shadow Banking
Dow, Texas Gulf Coast Petrochemical Producers Restart After Hurricane
VW Group Lowers Forecast On Possible Closure Of Brussels Site
Samsung Labour Union Plans Indefinite Strike
Microsoft Give Up Non-Voting Board Observer Seat At OpenAI
Yemen's Houthis Targeted Maersk Sentosa Ship In Arabian Sea

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0775-70 (2.7BLN), 1.0795-1.0800 (1.1BLN), 1.0835 (236M),
1.0875-80 (1.5BLN), 1.0900 (1.3BLN)
GBP/USD: 1.2750 (201M). EUR/GBP: 0.8455 (422M)
AUD/USD: 0.6595-0.6600 (1.4BLN), 0.6710 (359M), 0.6750 (426M)
0.6770 (1BLN), 0.6795-0.6810 (1.1BLN)
NZD/USD: 0.6175 (435M). AUD/NZD: 1.1000 (344M)
USD/CAD: 1.3660-65 (1BLN)
USD/JPY: 160.00 (2.9BLN), 161.00 (834M), 161.15-20 (950M), 161.50 (1.2BLN)

CFTC Data As Of 5/7/24

JPY: -184,223 contracts
EUR: -9,519 contracts
GBP: 62,041 contracts
CHF: -43,443 contracts
Bitcoin: -912 contracts
Equity fund managers cut S&P 500 CME net long position by 24,005 contracts to 953,130
Equity fund speculators trim S&P 500 CME net short position by 5,025 contracts to 293,675