Newsquawk European Market Wrap - 26th July 2024

26th July 2024

• Europe traded mostly firmer as earnings dictated price action in an otherwise quiet session in the continent.


• US PCE printed slightly hotter than expected but only spurred a notable reaction in bonds.


• In FX, risk currencies performed better against the Dollar while traditional havens fared worse.

EQUITIES

• 
  European bourses, Stoxx 600 (+0.5%) opened mixed and on either side of the unchanged mark, though sentiment picked up as the session progressed and generally resided near session highs.


• 
  European sectors hold a strong positive bias; Construction and Materials topped the pile, propped up by post-earning strength in Vinci (+3.6%) and Saint Gobain (+4.7%). Basic Resources benefitted from strength in Anglo American (+5.6%). Chemicals was found near the foot of the pile, after BASF (-3%) and Wacker Chemie (-2%) both reported weak earnings.


• European post-earning movers: EssilorLuxottica (+7.5%), NatWest (+6.5%), thyssenkrupp (-7.5%), Capgemini (-5.7%)


• 
  US equity futures (ES +0.7%, NQ +0.9%, RTY +1.3%) traded entirely in the green, with the NQ and ES regaining their composure after being the subject of heavy selling pressure amid the recent rotation play, which has seen the RTY outperform in the past week. Today’s US Core PCE M/M today printed at 0.2% vs exp. 0.1%, with Pantheon noting that “data are exactly consistent with the national accounts published yesterday”. As such, the bulk of the move was seen in the bond complex, with equities little changed following that release.


• In terms of post-earning movers, 3M (+10%) beat on its headline metrics and raised guidance, and Colgate-Palmolive (+1.7%) benefits after upgrading its FY organic sales growth. Elsewhere, CrowdStrike (+2.5%) is propped up on commentary that 97% of Windows sensors are back online after the global outage.

FX

• 
  USD - USD mixed vs. peers with price action a reversal of recent sessions, with the dollar faring worse against risk-sensitive currencies and better against havens. The slightly hotter-than-expected US PCE data did not faze the USD (with Fed pricing also broadly unchanged) which remained within yesterday's 104.08-45 range - after matching yesterday's high with today's range between 104.24-45. The index was broadly contained this week despite some of the volatility elsewhere in the FX space.


• 
  EUR - EUR/USD respected yesterday's 1.0826-69 parameters throughout the European session, with yesterday's base holding above a slew of DMAs; 200 @ 1.0818, 50 @ 1.0810, 100 @ 1.0796. Fresh EZ fundamentals are lacking in today's session with the ECB's SCE seeing the 12-month and 3-year projections held at prior levels. PCE data failed to spur much action.


• 
  GBP - GBP was a touch firmer vs. the USD after a session of losses yesterday which dragged the pair from a 1.2913 peak to a 1.2849 low. 1.2873 was the high watermark today with a quiet UK calendar. On the fiscal front, it looks like Chancellor Reeves is paving the way for a tax hike announcement, however, this will serve as little "surprise" to anyone who has been paying attention.


• 
  JPY - USD/JPY saw a choppy session on either side of the 154 handle after yesterday's wild ride which saw the pair slump as low as 151.93 before recovering alongside the higher-than-expected US GDP and core PCE metrics. Overnight saw an uptick in Tokyo CPI (ex-fresh food) in the run-up to next week's BoJ policy announcement, which has seen bets of potential action increase throughout the week. A 15bps hike is currently priced @ 46%. US monthly PCE data today spurred little action.


• 
  Antipodeans - Both antipodeans attempted to atone for recent heavy losses alongside a pick-up in risk sentiment. Yesterday marked 9 consecutive sessions of losses for AUD/USD with the low @ 0.6513, the lowest since early May. If AUD/USD is to launch a meaningful recovery, the next hurdle to clear will be the 200DMA @ 0.6588 (vs today's 0.6536-66 range). Next week's CPI data could be crucial for the RBA outlook. NZD/USD is showing similar price action but is only holding modestly above yesterday's 0.5881 trough. For now, 0.59 is acting as resistance with today's range between 0.5884-0.5904.

FIXED

• 
  USTs spent the first half of the European morning at the unchanged mark in narrow parameters as we awaited PCE. The Fed’s preferred gauge came in broadly in-line with expectations though the core 3dp coming in below 0.2% was enough to spur a dovish move.


• Specifically, USTs rallied to a 111-08+ session high, briefly settled back on the 111-00 mark but then began to lift once more seemingly as short-end action intensified. Fed pricing saw a slight dovish reaction, but nothing that fundamentally changes the narrative into next week’s FOMC.


• A release which was sufficient to nudge Bunds to an incremental new session high of 132.83, but not sufficient to price back in two more 2024 cuts (currently 48bps easing implied).


• To recap, the first half of the session saw contained/modestly bearish trade for EGBs though Bunds remained over 20 ticks clear of Thursday’s 131.95 base at worst.


• Amidst this, Gilts have been following suit but not lifting quite as much as USTs/EGBs post-PCE; potentially as the complex is mindful of Monday’s speech from Chancellor Reeves, which is expected to outline a GBP 20bln funding gap, before Thursday’s BoE which is essentially a coin-flip.

COMMODITIES

• 
  Crude - Softer intraday following consolidation in early European hours and after yesterday's rise, which was facilitated by stronger-than-expected US GDP. Macro newsflow in Europe was light and US PCE did little to spur any action in the complex. Geopolitics remains an uncertainty for the sector with the latest reports suggesting Israel is seeking changes to a plan for a Gaza truce and the release of hostages by Hamas which complicates a final deal, according to sources cited by Reuters. WTI Sep resided in a USD 81.59-82.71/bbl while its Brent counterpart sat in a USD 77.55-78.60/bbl.


• 
  Precious Metals – Mixed trade across precious metals despite a steady USD, with a modest upside seen in spot gold whilst spot silver and palladium lagged, with the former underperforming and the latter reversing earlier gains. Prices were largely unfazed by the US PCE metrics. Spot gold sat in a USD 2,355.87-2,379.48/oz intraday parameter and within yesterday's USD 2,353.19-2,401.31/oz parameter. Spot silver sits inside a USD 27.58-28.08/oz intraday range after printing a weekly low of USD 27.42/oz yesterday against a weekly high of USD 29.45/oz earlier in the week.


• 
  Base Metals - Base metals traded somewhat mixed after a downbeat week overall as ongoing Chinese demand woes continue to remain a cloud over the complex following a string of downbeat Chinese economic data last week alongside an underwhelming Plenum, whilst this week's surprise PBoC rate cuts (RRR, LPR, SLF, and MLF) did little to alleviate fears. 3M LME copper resided in a narrow USD 9,073.50-9,179.50/t at the time of writing (vs ~USD 9,700/t at the start of the month).


• 
  Citi says by Q4, it sees copper back at USD 9,500/t and rallying further to USD 11k/t by early 2025.


• 
  Traders at Pemex reportedly told suppliers that it planned to significantly cut imports of diesel and gasoline, via Reuters citing sources; Mexico is reportedly looking to import additional motor fuels for 2025 vs previous. plans due to new refinery delays.


• 
  Lukoil ramped up oil exports via sea ports by 680k tonnes in July amid Druzhba supply suspension, according to Reuters sources; Rosneft and Gazpromneft add additional 300k tonnes of URals oil to Russian Baltic loading plan for July

EUROPEAN DATA

• French Consumer Confidence (Jul) 91.0 vs. Exp. 90.0 (Prev. 89.0, Rev. 90)


• Spanish Unemployment Rate (Q2) 11.27% vs. Exp. 11.4% (Prev. 12.29%)


• Spanish Retail Sales YY (Jun) 0.3% (Prev. 0.2%)


• Italian Consumer Confidence (Jul) 98.9 vs. Exp. 98.0 (Prev. 98.3)


• Italian Mfg Business Confidence (Jul) 87.6 vs. Exp. 87.0 (Prev. 86.8, Rev. 86.9)


• Swedish Unemployment Rate SA (Jun) 8.2% (Prev. 8.2%)


• Swedish Trade Balance (Jun) 8.7B (Prev. 11.9B, Rev. 10.4B)


• Swedish Total Employment (Jun) 5.429M (Prev. 5.187M)


• Swedish Unemployment Rate (Jun) 9.4% (Prev. 8.7%)


• Norwegian Retail Sales Ex. Auto (Jun) -5.1% (Prev. 3.2%)

CENTRAL BANKS

• 
  Japan's Ministry of Finance reportedly wants the BoJ to cut bond purchases gradually; wants the BoJ to consider bank capacity in the bond plan, according to Bloomberg sources.


• 
  Russian Federation Central Bank Key Rate (Jul) 18.0% vs. Exp. 18.0% (Prev. 16.0%); returning inflation to target requires considerably tighter monetary conditions than previously thought. Will consider hikes at upcoming meetings.

GEOPOLITICS

• "Israeli Foreign Minister: Based on our information, the Iranians are planning to launch terrorist attacks on the Israeli delegation and all participants in the Olympic Games", according to Sky News Arabia.

NOTABLE NORTH AMERICAN NEWS

• 
  Former US President Barack Obama and Michelle Obama announce their support for Kamala Harris' candidacy for the US presidency of the Democratic Party

NORTH AMERICAN DATA

• 
  US Core PCE Price Index MM (Jun) 0.2% vs. Exp. 0.1% (Prev. 0.1%); Unrounded 0.1818% (prev. 0.0828%)


• 
  US PCE Price Index YY (Jun) 2.5% vs. Exp. 2.5% (Prev. 2.6%)


• 
  US PCE Price Index MM (Jun) 0.1% vs. Exp. 0.1%; Unrounded 0.0788% (prev. -0.0081%)


• 
  US Core PCE Price Index YY (Jun) 2.6% vs. Exp. 2.5% (Prev. 2.6%); Annualised - - 3-month: 2.3% (prior 2.7%, revised up to 2.9%), 6-month: 3.4% (prior 3.2%, revised up to 3.3%)


• 
  US Personal Income MM (Jun) 0.2% vs. Exp. 0.4% (Prev. 0.5%, Rev. 0.4%)


• 
  US Consumption, Adjusted MM (Jun) 0.3% vs. Exp. 0.3% (Prev. 0.2%, Rev. 0.4%)


• 
  US Personal Consump Real MM (Jun) 0.2% (Prev. 0.3%, Rev. 0.4%)


• US U Mich Sentiment Final (Jul) 66.4 vs. Exp. 66.0 (Prev. 66.0)


• US U Mich Expectations Final (Jul) 68.8 (Prev. 67.2)


• US U Mich Conditions Final (Jul) 62.7 (Prev. 64.1)


• US U Mich 5-Yr Inf Final (Jul) 3.0% (Prev. 2.9%)


• US U Mich 1Yr Inf Final (Jul) 2.9% (Prev. 2.9%)

NOTABLE APAC HEADLINES

• 
  China reportedly weighs a tenfold fee increase on high-frequency trades, according to Bloomberg sources; the final plan is still under revision. China Securities Regulatory Commission and Chinese stock exchanges have consulted some market participants on draft plans to raise a CNY 0.1 (1.4%) fee on buy and sell orders to at least CNY 1 if the transactions meet the threshold of high-frequency trading, sources stated. Accounts with a monthly turnover rate below four times their total holdings may be exempt, to avoid negatively impacting mutual funds using automated trades.

26 Jul 2024 - 15:03- MetalsData- Source: Newsquawk