US EARLY MORNING: Equity futures are lower and Treasury yields are higher in wake of 'hawkish' Fed minutes; we now enter a key window for labour market releases

US PRE-MARKETS: US equity futures are lower following FOMC minutes that were judged as hawkish, but didn’t add too much new information to the narrative (a recap is below), while Sino-West tensions continue to linger as Treasury Secretary Yellen begins her three day tour of the world’s second largest economy. Treasury yields are higher with the belly coming under the most pressure after the Fed minutes, while the influential NY Fed President Williams also said that the June meeting skip was the correct move, and we can expect further rate rises ahead. We are now entering a window of key labour market data, with ADP’s gauge of payrolls, the Challenger layoffs data for the month, JOLTs data, as well as the weekly jobless claims data all on the docket for release today, ahead of Friday’s nonfarm payrolls data. Analysts expect that the rate of payrolls growth will cool, though many note that the labour market has been resilient in the face of Fed rate hikes, and the last time we saw a downside surprise relative to the consensus was in March last year. We also get the ISM's services gauge today. Elsewhere, crude futures are trading lower despite the larger than expected draw reported by the API on Wednesday, with the complex more focussed on the weak risk tone ahead of key data releases. The dollar Index is a shade beneath neutral.

RECAP - FOMC MINUTES: The FOMC meeting minutes from the June meeting revealed most participants favoured leaving the target rate unchanged, but some supported a rate hike due to a tight labour market and stronger economic activity. Participants suggested a moderation in the pace of tightening and emphasised the need to observe the effects of previous tightening. "Some participants" favoured another 25bps hike, but "most" believed that a pause "would allow them more time to assess the economy's progress." The minutes stated that "almost all" "judged that additional increases in the target federal funds rate during 2023 would be appropriate." Most participants observed that post-meeting communications, including the SEPs (which pencilled in two more hikes this year), would help clarify their assessment regarding the stance of monetary policy. Ahead of the NFP reading on Friday, "some" pointed out that payroll gains had remained robust but noted that some other measures of employment—such as those based on the BLS' household survey, the Quarterly Census of Employment and Wages, or the Board staff's measure of private employment using data from the payroll processing firm ADP—suggested that job growth may have been weaker than indicated by payroll employment. A couple of participants also drew attention to the subdued growth in hours worked. Overall, the minutes contained no major surprises, and the market's outlook for policy was unchanged in wake of the release: there is an 85% implied probability of a July hike, and markets are pricing the terminal rate at 5.40% in November.

PREVIEW - MICROSOFT (MSFT)-ACTIVISION (ATVI) RULING EXPECTED SOON: A judge's ruling on the FTC preliminary injunction could come as soon as this week. If the FTC preliminary injunction is granted, it would mean MSFT/ATVI cannot complete the deal while the FTC antitrust review is ongoing. The deal has a deadline of 18th July 2023, and the FTC antitrust hearing is not until August 2nd. If the preliminary injunction is granted to the FTC, the deal cannot close by the deadline and MSFT would be required to pay ATVI a USD 3bln break-up fee, or renegotiate the deal. If the FTC injunction is not granted (ruling in favour of MSFT), it would clear the path for the deal to close in the US, and providing it is completed before the July 18th deadline, MSFT will not have to pay the USD 3bln break-up fee. Barron's highlights the FTC would also likely withdraw its antitrust complaint, as it did when a judge declined to grant the regulator an injunction blocking the acquisition of Within Unlimited by Meta (META). Regulatory hurdles remain, however; despite the EU approving the deal, the UK CMA has rejected it, with MSFT currently appealing that decision.

TODAY’S AGENDA:

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06 Jul 2023 - 09:30- MetalsData- Source: Newsquawk

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