US EARLY MORNING: Index futures slightly lower ahead of NFP; focus will start shifting onto next week's CPI and start of Q2 corporate reporting

US index futures were largely horizontal following a four-day win streak for cash markets. YM -0.2%, RTY -0.3%, ES -0.3%, NQ -0.4%. Futures are currently trading a little beneath neutral, but are off lows, ahead of today’s key US labour market data, that will form part of the case in setting expectations around the July 27th FOMC meeting; the data, in combination with next week’s CPI report, will help shape the debate on whether the Fed will raise rates by a 50bps or a 75bps increment. The data releases could also be influential in determining the course for rate hikes through the rest of this year; a recent dovish repricing of the trajectory of Fed rate hikes (on the back of recession fears) has been unwinding, and money markets now assign an approximately 50% chance rates will rise to 3.25-3.50% by year-end. (Newsquawk’s NFP preview can be accessed here). Elsewhere, the day features remarks from ECB President Lagarde; while there will not be a text release accompanying her comments, traders will be looking for any clues on the size of the July rate hike, after recent meeting minutes suggested a larger than 25bps increment is a possibility, although traders still think the central bank will start off with a smaller rate rise; additionally, any commentary around the upcoming anti-fragmentation tool will be of note. NY Fed President Williams is also due to make comments later today in wake of the jobs data. The docket is thin for other events/speakers, and attention will begin pivoting onto next week’s CPI data and the start of corporate reporting when major banks start releasing their numbers. The consensus expects earnings growth to rise 5.6% in Q2, according to Refinitiv and revenues are seen rising 10.4%. Taking the energy sector out of the equation, earnings growth is seen -2.4% in Q2, while revenue growth is estimated to rise 6.7%. Heading into Q2 reporting, Refinitiv notes that there have been 77 negative pre-announcements by S&P 500 companies, and 45 positive pre-announcement. Many analysts have suggested that stocks will only bottom out after corporates lower optimistic guidance, with some arguing that those that can demonstrate earnings stability in Q2 may be rewarded with outperformance. Full Day Ahead here.

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08 Jul 2022 - 09:31- Data- Source: Newsquawk

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