US EARLY MORNING: US equity futures are softer; FOMC minutes ahead

US equity futures are a little below neutral (ES -0.3%, NQ -0.3%; RTY -0.3%; YM -0.3%), Treasuries are little changed, and the Dollar Index is a touch softer. Crude futures are higher after Tuesday’s plunge. Recession fears drove yields lower on Tuesday, but ultimately buoyed duration sensitive sectors like technology, leaving the equity complex mixed by the close. Overnight, equity futures slipped, but picked-up after a constructive European cash equity open. However, the European price action has been choppy too, leaving US futures softer. Treasury yields are around flattish, with a slight steepening bias. Crude benchmarks are also trading with gains after a rough session on Tuesday, where WTI slid over USD 8, settling below USD 100/bbl, while its Brent counterpart slumped by more than USD 10. Goldman Sachs told its clients that it views Tuesday's moves as being driven by growing recession fears in the face of low trading liquidity, with technicals exacerbating the sell-off. "The declines in prices and refining margins since mid-June are now equivalent to the oil market pricing in an 1.1% downward revision to 2H22-2023 global GDP growth expectations," the bank wrote, "we believe this move has overshot - while risks of a future recession are growing, key to our bullish view is that the current oil deficit remains unresolved, with demand destruction through high prices the only solver left as still declining inventories approach critically low levels." Meanwhile, the US Day Ahead has the ISM Services PMI data, JOLTs, and FOMC meeting minutes (our primer is here). Fed’s Williams is also on the speaker’s docket, but the subject of his talk suggests he may stay clear of monetary policy remarks. After the US close, the API will report weekly crude inventories. Full Day Ahead here.

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06 Jul 2022 - 09:45- Research Sheet- Source: Newsquawk

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