Newsquawk US Market Wrap: Stocks post marginal gains in pre Fed/CPI trade

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Stocks ultimately largely traded in the green despite risk-off in Europe following the EU Parliamentary elections over the weekend which saw the Far-Right parties make notable gains, with French President Macron ultimately calling a snap election. US Equities clawed back earlier losses once cash trade got underway in quiet trade with attention turning to the Apple (AAPL) WWDC event, which ultimately confirmed its partnership with OpenAI, but only briefly supported AAPL stock which sold off over 2% on Monday. T-notes bear steepened with weakness following on from JGB and EGB pressure overnight and in the European morning but lows in T-notes were seen in the wake of the weak 3yr auction before paring slightly into settlement. There was little reaction to the mixed NY Fed Survey of Consumer Inflation expectations, which saw the 1yr ease, 3yr unchanged, and 5yr rise. Crude prices were bid throughout the session on geopolitics and optimism around Summer fuel demand while gold and silver attempted to recover some of the steep losses incurred on Friday in the wake of the hot NFP. Attention now turns to the US CPI and FOMC on Wednesday.



T-notes see marginal pressure from JGBs and EGBS overnight and early morning while a soft 3yr auction pushes T-notes to lows. At settlement, 2s +1.3bps at 4.883%, 3s +1.6bps at 4.674%, 5s +2.8bps at 4.480%, 7s +3.0bps at 4.472%, 10s +3.9bps at 4.467%, 20s +4.6bps at 4.686%, 30s +4.6bps at 4.594%

INFLATION BREAKEVENS: 5yr BEI +0.7bps at 2.298%, 10yr BEI +1.0bps at 2.318%, 30yr BEI +0.9bps at 2.324%.

THE DAY: T-notes saw very quiet trade on Monday, tracking global peers in the aftermath of the hot NFP on Friday with attention turning to US CPI and the FOMC with accompanying dot plots later in the week. T-notes were marginally lower to start the week with downside ensuing out of Asia as the nation reacted to the NFP report with JGBs sold at the open ahead of the BoJ later this week. Further pressure was seen in the European morning after EGBs were hit in the wake of EU parliament elections that saw the far-right make significant gains, which saw French President Macron announce a snap election. The US highlights meanwhile was the NY Fed Survey of Consumer Inflation expectations and the 3yr auction. The NY Fed Survey saw 1yr ahead expectations ease to 3.2% from 3.3%, the 3yr ahead unchanged at 2.8%, with the 5yr at 3.0%, up from 2.8%. Meanwhile, the 3yr T-Note auction was soft, seeing a chunky tail, beneath average B/C and a larger dealer uptake than usual. The weak auction adds to the slew of soft front-end belly supply seen recently in the 2yr, 5yr, and 7yr. 

3YR: The US sold USD 53bln of 3yr notes at a high yield of 4.559%, tailing the When Issued by 1.1bps, much larger than the six auction average of a tail of 0.1bps and prior stop-through of 0.3bps. The B/C was also weak at 2.43x, beneath the 2.63x prior and 2.57 six auction average. The soft reception was led by a drop in direct demand which came in beneath the prior average, but indirect demand was relatively stable at 64%, albeit not enough to offset the drop in direct demand, seeing dealers take a chunky 20% of the auction. The soft 3yr auction added to the soft 2yr, 5yr, and 7yr supply recently, with participants perhaps sitting on the sidelines ahead of key risk events like the US CPI and FOMC on Wednesday.

THIS WEEK'S SUPPLY: US to sell USD 39bln of 10yr notes (vs. exp. USD 39bln) on Tuesday, USD 22bln 30yr (vs. exp. USD 22bln) on Thursday, all to settle on June 17th.




WTI and Brent settled well in the black on a mix of geopolitics and upcoming summer fuel demand. Geopolitical tensions remain rife with Russia/Ukraine after a Ukrainian warplane struck targets in Russia for the first time (they had previously used drones). This saw a response from a Russian Senior Lawmaker, who noted that F-16 jets and their bases beyond Ukraine will be legitimate goals for Russian forces if they take part in combat missions. Meanwhile, Israel rescued four hostages from Gaza in a military operation. Do note that some analysts were suggesting the crude gains were due to higher summer fuel demand hopes, PVM stated there is growing conviction that demand will be buoyant as the Summer driving season approaches, leading to considerable stock draws. The early crude poll for the private inventory data this week has crude stocks expected to draw by 1.8mln bbls. Other stories of note in the crude space, Reuters reported the Iraq Oil Minister reporting progress in talks with Kurdish officials on a deal to resume oil exports via a pipeline to the Turkish port of Ceyhan.

Elsewhere, nat gas prices were choppy but ultimately lower on the session, with losses advancing once Europe left for the day. Reports via Bloomberg also suggested that European officials are reportedly in talks to keep gas flowing through a key Russia-Ukraine pipeline. Meanwhile, in the US, Mountain Valley confirmed that project facilities are mechanically complete. The MVP project is a nat gas pipeline system from Northwestern West Virginia to Southern Virginia and is expected to provide up to 2 bcf/day of firm transmission capacity to markets in the mid-and South Atlantic regions of the US. 


CLOSES: SPX +0.26% at 5,361, NDX +0.39% at 19,075, DJI +0.218% at 38,868, RUT +0.25% at 2,032.

SECTORS: Utilities +1.28%, Materials -0.11%, Real Estate +0.45%, Communication Services +0.61%, Consumer Staples -0.22%, Energy +0.71%, Consumer Discretionary +0.51%, Industrials +0.29%, Health +0.3%, Technology +0.29%, Financials -0.39%.

EUROPEAN CLOSES: DAX: -0.37% at 18,488, CAC 40: -1.35% at 7,894, PSI: -0.11% at 6,729, FTSE 100: -0.20% at 8,228, IBEX 35: -0.42% at 11,357, FTSE MIB: -0.34% at 34,542, SMI: -1.03% at 12,128, Euro Stoxx 50: -0.71% at 5,015.



The Dollar initially continued to strengthen in Monday’s session following its surge on Friday in the wake of the hot NFP report. The Euro weakness, driven by growing political uncertainty within France, helped to support the DXY move upwards amid a lack of fresh US data releases aside from a mixed NY Fed Survey of consumer inflation expectations. Attention turns toward Wednesday's US CPI release, the Fed rate decision, and SEPs. Note, DXY did pare its initial strength once Europe had left for the day and is heading into the APAC session flat.

The Euro is the biggest decliner within the G10FX space as President Macron called for a snap election on Sunday (scheduled for June 30th) in response to performing poorly in the European parliamentary elections, that is, Macron’s party obtained just 15% of the vote. Markets fear possible shifting of support for Ukraine from the opposition Le Pen’s party. The Euro gapped lower as the week started, below its 200DMA (1.0787) with losses extending throughout the European session. However, weakness pared just after the European close, with gains somewhat supported by comments from ECB’s Lagarde saying "it is possible the ECB will hold rates for longer than a single meeting”.

Cyclical currencies mainly perform to the upside against the buck in Monday’s session, tracking US equities higher. The Aussie and Kiwi both outperformed in the space; the Pound started the session weak like the Euro but reversed losses ahead of Tuesday’s April Jobs data; CAD is flat.

Haven currencies (Yen and Franc) performance against the buck was mixed with the Yen underperforming while CHF was flat. The US CPI and FOMC will be key for the funding currencies on Wednesday, ahead of the BoJ rate decision on Friday.

The NOK and SEK appreciated against the greenback and Euro following fresh data releases in the region. The NOK strengthened slowly throughout the session, with EUR/NOK below its 200 DMA (11.5437) after a hotter Core Inflation print on both a monthly and yearly basis and a hot PPI; money markets continue to forecast a c. 95% chance that the Norges Bank holds rates in June. The upside in crude prices was also supportive of NOK gains. Meanwhile, the EUR/SEK still managed to make new 3-monthly lows despite sluggish data, which revealed the Swedish economy contracted 0.7%, its second consecutive month of negative GDP growth; also New Orders declined 15.4% Y/Y, the largest amount since August 2009, furthering growth concerns within the country. The movement in EUR/SEK was predominantly Euro-based, however, while the Viking Cross (NOK/SEK) saw notable upside.

EM currencies performance was mixed against the dollar, as HUF underperforms following softer CPI Y/Y although NBH’s Virag did state that “service sector inflation and high wage dynamics pose a challenge”; ZAR outperforms in the green, buoyed by firmer gold prices; MXN trades choppy, ultimately finished stronger, ahead of current President Obrador and President-elect Sheinbaum’s meeting on Monday to discuss the transition; CZK was flat ahead of Czech Republic’s Inflation print on Tuesday (exp. 2.8% Y/Y).

10 Jun 2024 - 21:24- Research Sheet- Source: Newsquawk

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