Quarter End, Mid-year End, price discovery overnight Nonexistent. Powell and Mnuchin testify in front of congress today at 11:30/Powell comments released yesterday
From Quill Intelligence
Positive data from the Dallas Fed’s Manufacturing Survey echo other regional Fed surveys’ V-shaped recoveries; also echoing other regions, employment, hours worked and the backlog of unfinished work, a gauge of future demand, have not yet turned positive
The majority of respondents to the Dallas Fed survey do not expect revenues will retake pre-COVID levels for at least a year from now; company outlooks remain at depressed levels and tellingly, current capital expenditures fell to a fresh record low
Energy sector players are even more despondent with 8 in 10 cutting production tied to stubbornly low crude prices; unless crude holds steadily above $35bbl, the string of shale bankruptcies will continue curtailing Texas capital expenditures further
..”reiterates the path of economy is dependence on path of virus; the path forward for the Economy is extraordinary uncertain, says we have entered an important new phase & have done so sooner than expected… economic bounce back is welcome but presents new challenges, how to keep the virus in check https://bit.ly/2Af2pTE
-US Tsy Sec Mnuchin: The US is in a strong position to recover; possible to work further with Congress on aid in July (ITC markets)
PBOC: sets USDCNY ref at 7.0795 vs 7.0808 prev
-China Jun Manf PMI: 50.9 vs 50.4 cons
-China Jun Non Manf PMI: 54.4 vs 53.5 cons
-Japan Jun Ind Prod: -8.4% vs -5.6% cons
-Japan May Unemployment Rate: 2.9% vs 2.8% cons
-Japan May Housing Starts: -12.3% y/y vs -14.4% cons
-NZ Jun Biz Conf: -34.4 vs -41.8 prev
A bit of China Stats and news:
Five months after the outbreak started, China’s tourism revenue during the Dragon Boat Festival last week was down 69% from last year – Bloomberg. China’s steelmaking sector slipped back into contraction in June, with the PMI for the sector falling to 49.3% from 50.9% a month earlier, according to China steel logistics professionals committee. The index rose above 50 in May for the first time in a year(mizuho)
Hong Kong News:
HK Leader Lam: HK will not be frightened by any US sanctions because of their revocation of HK’s special status
-Sof S Pompeo: the US will impose the same defense export restrictions on HK that it applies to China ; The Chinese Communist Party’s threats to restrict visas for U.S. citizens is the latest example of Beijing’s refusal to accept responsibility for breaking its commitment to the people of Hong Kong. We will not be deterred from taking action to respond.
-US Commerce Sec Ross: preferential treatment of HK is suspended, further actions to eliminate preferential treatment are being considered
The Trump administration on Monday made it harder to export sensitive American technology to Hong Kong, suspending regulations allowing special treatment for the territory over dual-use technologies like carbon fiber used to make both missile components and golf clubs.(ITC and pro farmer)
Rates news from IFR”
Currently, the 2- and 3-year, according to Eikon, yield 0.149% and 0.168%. Three and 6-month T-bills yield 0.145% and 0.16%. The 1-year T-bills yields 0.16%. Thus, his (Powell)commentary has driven a 24- and 36-month Treasuries to nearly even to Funding levels and current T-bill yields. Feds’ daily repo rate is .15%
U.S. treasuries are on track for the best first half in 25 years. Apple has bought back $338 billion in stock over the past 7 years, which is greater than the market cap of 492 companies in the S&P 500. Mizuho
Companies continue to pull marketing dollars from FB, Puma<Chipotle and Pfizer some of the latest companies to do so
Micron and Xilinx reported better than expected earnings after close
Per Bloomberg bets on yield curve control are showing up sooner rather than later as 5-year yields touched a record low yesterday
Biden to donors: “I’m going to get rid of most of Trump’s tax cuts ‘and a lot of you may not like that” …
China halts meat imports from three Brazilian plants amid coronavirus concerns (pro farmer)
Spoos trading into yesterdays range targeting Fridays Highs of 3082 dax +1.5% as it appears the German Constitutional Court will back Up ECB bond Buying scheme.Boeing +10% as test flight of 737 taking place as i type,Airlines index +7% Hotels +5.6% so far today our Virus proxy’s signaling all clear I guess
From the most recent CEO’s business roundtable Economic outlook for the next 6 months
In a series of special questions asked with this quarter’s survey, CEO responses show companies are taking strong action to keep employees and customers safe.
100% of CEOs have adopted or plan to adopt physical distancing measures at their facilities.
Nearly all CEOs have adopted or plan to adopt routine cleaning and disinfecting, are promoting face coverings, are actively encouraging sick employees to stay home, and are protecting vulnerable employees through supportive policies and practices.
Over two-thirds of CEOs have expanded wellness support and behavioral health services for their employees.
95% of CEOs have expanded flexible work arrangements within their companies.
More stock news ….Blackrock downgrades U.S. equities to “neutral” on risks of fading fiscal stimulus, extended coronavirus pandemic and renewed U.S.-China trade tensions. Blackrock downgraded emerging market equites to “underweight” on coronavirus concerns and the limited room for policy(reuters)
NDX beaten up a bit today on the FB news but also could be a bit of position squaring leading into quarter end tomorrow…Boeing carrying the Dow as it trades +7% on positive 737 news Airlines index +4% ETF FDN down 1.3% need this to turn positive to give Nasdaq another lift
Nat Gas + 13% possibly something to do with Hedges being lifted due to CHK bankruptcy filling?last week so one of the largest daily declines this year today we could see one of the best days for gas this year
The tug of War between Central bank stimulus and the Virus continues today
A very Busy week of data compressed into 4 trading days, Payrolls, ISM, Chicago PMI FOMC minutes, comment from Chairman Powell and Quarter End. Add to this Scheduled data release is daily updates on the Virus on paper this could be a volatile week. Also, EZ inflation data to be released and if it is not lower than last month might be seen as a small positive for the Euro. German Cpi to be released today and so far, Individual German states are reporting slightly higher than expected numbers.
For Spoos and Stoxx both gapped open lower but since have trended higher in choppy fashion .Spoos +15 handles, Stoxx +.5% Dax +.7% banks leading the wat higher +1.5% as a sector, A speech over the weekend from the ECB’s Schnabel drove home the point that ECB is not looking to cut rates further as they do not want to harm saver and that cheap loans is the way to go. This is the main reason for the strength in banks so far today.
The US appears to be taking a meaningful step backwards in trying to flatten out the Covid-19 pandemic. Indeed, 33 states are currently experiencing a rise in the number of new cases with the sunbelt states of Florida and Texas (two of the nation’s largest populated states) seeing an exponential rise in cases. The good news is that even with this surge in confirmed cases the number of new deaths continues to fall on a percentage basis.
China’s Industrial profits rose 6% in May the first increase this year
German CPI day did beat expectations
2 fracking companies have filled for Bankruptcy over weekend lilis Energy & Chesapeake Energy
A Massive short covering in Spoos last week as speculators tapped out of there short play-BBG
Face book continues to see advertisers flee
Regulators have approved of Boeing of test flights for Boeing 737-BBg
The economic sentiment indicator in the Euro Area rose by 8.2 points to 75.7 in June, recovering further from an 11-year low of 64.9 hit in April as countries across the region continued to reopen their economies following weeks of lockdowns. Still, the index came well below market expectations of 80.
PBOC pledges stronger fiscal and Monetary Support
Current Predict It odds put Biden at 62% of winning US election in Nov from a low of 4% in Feb while Trump sits at 38% down from a high of 57% in Feb.
◘ The Fed on Sunday identified 794 companies whose bonds it will be buying directly to support the market for investment-grade corporate debt. Automakers, Technology Firms Are Largest Components of Fed’s Corporate-Bond Purchases – WSJ
Hedge funds’ net longs in the e-mini Russell 2000 index futures fell 35.7% to a 65-week low. Currently net long 5.7k, down 3.2k. Large speculators net longs in gold futures rose 123% to an 8-week high. Currently net long 252k, up 27.6k. Fixed Income. Large specs switched to net long in 10-year note futures. Currently net long 6.5k, up 17.4k. Large specs net shorts in the 30-year bond rose 1.5%. Currently net short 73.4k, up 1.1k.-Mizuho
Markets Dollar down Gold and Silver down hmmm.Bunds and bonds show yields a touch higher NKY closed down >2%.nat gas after touching a 25 year bouncing a bit today +4% above normal tempos are forecast for next 2 weeks it can’t hurt prices Oil +1% just making new session highs over last 30 minutes or so/Platinum and palladium both higher and Copper with some help due to production shutdown in Chile due to the virus continues to move higher smartly.
Yields Lower 10s below trend line down some 5 bps today 30s likewise down 4-5bps .Teflon Don Spoos still fighting to stay above yesterdays lows of 3005.00.bad news from All fronts Virus,China,banks,FB and twitter just cant escape it today.NY Fed now cast continues to show Improvement in Q2 GDP forecast so that is one positive. Oh I forgot are old friend Brexit starting to become a topic again as EU-UK struggling to agree on a trade agreement.Most commodities heavy as well so no reflation trade either lets see if Spoos can hold the line at yesterdays lows and nasdaq can hold 9843
Sleepy Friday so Far today…Russell annual Reconstitution today, likely to cause a bit of volatility around the close
A bit of” not so” good news:
A past 48 hours tally – Oyo, the Softbank-backed lodging firm, informed most of the staff it had furloughed in April that they would be permanently laid off. Macy’s cut 3,900 of its corporate staff. And both Harley Davidson and General Motors will be laying off factory workers as the pent-up demand that was due to accompany reopening refuses to manifest. As per Cuneyt Kazokoglu, head of oil demand at Facts Global Energy in a Financial Times interview, “About 40% of U.S. gasoline demand is from states that are seeing the biggest surge in Covid-19 cases.” (quill Intelligence)
Yesterday’s Bank stress tests resulted in the Fed telling the US biggest banks that they can’t increase dividends or resume buybacks through at least the third quarter as uncertainty over the course of pandemic weighs on lenders(BBG),….Banks a touch weaker Some of the weakness contained though “ The Federal Deposit Insurance Commission and Office of the Comptroller of the Currency said Thursday they are planning to loosen some of the restrictions that were put in place via the Volcker rule, shifting to allow banks to make large investments into venture capital and related funds.” Pro farmer
Virus news still dominating news flows one item of Note “notably new in the news flow with Covid-19 still dominating. The virus continues to surge across the sunbelt rendering a record number of new infections cases and now most notably among a younger cohort (20-40-year-old) of the population. The good news is that given this heartier contingent death rates are falling even as the infections surge. The bad news is that this group is more apt to spread the virus” IFR news
Even though plenty of bad News out there SPX MTD is +1.3%,Dow +1.4% Nasdaq +5.5% Stoxx 50 +7%.Dax +6%.NKY +2.9% the rationale is that the “fed has our backs” and that Stimulus will be increased if markets become nervous A fed put as it Is known. Bond markets also lackluster as they to worry about the Fed, Short term yields tied to Zero cant fluctuate too much, Long end can’t sell of too much regardless of any news, Increased Auctions as the Fed will adjust their QE duration a bit and Focus on buying the long end to tame any fire up in yields. Dollar index Steady to higher But Strong against peso +.7% and +.9% vs Real. A bit of Good news I guess LME Copper, traded above 6000 for the first time in a few months. MTD Lme copper +10%, Shanghai Steel +6% And Gold +2%
Second tier Data points today Likely to be a sideways choppy trade as Summer Friday’s have arrived. Next week is chock full of Economic data, Quarter end so traders may lie in wait for next week’s action. Gold sideways, Nat Gas trying to bounce after yesterdays Sell off, Today is last day to trade July gas, Oil a touch heavy, treasuries and Bunds a bit higher.
Chart of 10-year yields, a break of the uptrend but lacking momentum
missed this one , corn just no Love anywhere.talk that China Has Plenty of Corn and may not need to be such a big Importer,exports shipments 26% below last years pace(DTN) and no weather threats in near term forecast. Weekly Z corn below higher volume and higher open interest on trend line break not good for bears.
natural gas 25 year lows everyone throwing in towel,weekly Storage numbers beat consensus by a few standard deviations Deflationary=nat Gas prices . August -8% today
A central theme forming around latest Virus Data average age of New Cases is in mid 30s thus fatalities not as Extreme,so even though Cases numbers are alarming fatalities still trending lower.
Illinois: Coronavirus 7-day case rate up 3% vs. 2% a day ago
Plenty of news regarding banks today so let us watch not just the big boys but also the smaller players…. Big day for big banks— Bank regulators this morning will reveal the final details of two major rollbacks that Wall Street has been seeking for years. One would scale back investment restrictions under the so-called Volcker Rule. The other would relax rules around internal derivatives trades that banks set up across their affiliates. Then later in the afternoon the Federal Reserve will shed light on the health of the big banks when it releases annual stress test results. -Politico Yesterday BKX Bank Index down over 4%
Continued Virus worries the driver of sentiment the last two days this from twitter showing you they these are front and center …@carlquintanilla The #Covid19 surge leads page one in Kansas City, Miami, San Francisco, Houston.
–Nevada Gov: signs order requiring face masks be worn in public from tomorow
-Texas Gov: a massive C-19 outbreak is sweeping the state; new cases set daily record +4.6% , hospitalizations +7.3% https://bloom.bg/31iL1sf
-Houston (overnight news): on track to exceed ICU capacity by today
-BBC(overnight news): NY, New Jersey & Connecticut have asked travelers from states where C-19 numbers are increasing to go into self-isolation for 14 days; these states include Texas, Alabama, Florida, Utah, N & S Carolina, Arkansas & Arizona
A nice break yesterday in the Teflon Don Spoos but let us see if it can repeat today. From mizuho this may prevent this from happening Dry powder earning a very negative real interest rate…”Assets in money-market mutual funds are still at a near-record $4.68 trillion, after soaring from $3.7 trillion in early March as the spreading virus battered stocks. At its peak, more than three-quarters of that was parked in Treasury-only”. Will this in fact Limit the downside Time will tell.
Long end German yields having a nice day the reason is that per IFR news as that yesterday 100-year Austrian bond Auction left some hedges open so thus buying in long end Germany to cover them. Ultras +2 handles and bonds higher by 20+ ticks… You Know the drill Stronger Dollar Lower commodities Nat Gas A Stones throw from multi year lows. Spoos traded below yesterday’s lows earlier this morning lets see if Downside is in play today. Traders need Nasdaq to break and that likely will bring down the house of cards.
News: From ITC Markets
-FT: EU warns the US their threat of tariffs on $3.1b of Euro products is very damaging & will harm both sides https://on.ft.com/37ZQNjP
–Sources: The Indian gvt are contemplating stricter rules & tariffs on 372 Chinese products
-FBI Director Wray (Fox): China is conducting IPO theft & cyber intrusion in the US; there is insufficient info to know how the virus started from Wuhan
-Axios: the US defense Dept is making public a list of Chinese firms that operate in the US that are tied to Chinese military; the firms inc Huawei, Hangzhou Hikvision, China railway Construction, China Telecoms Corp https://bit.ly/3hZjrWO
-Pres Trump: Will only be satisfied when all NATO countries are paying their fair share; looking fwd. to signing a defense co-operation agreement with Poland; sends a strong signal to Russia; we expect to get along with Russia; doing very well on work on agreeing an arms control agreement with Russia
-NYC: Expands open streets program with 23 more miles
-Ana Swanson: Lighthizer was asked whether the US can really decouple from China, he says “I don’t want to speculate.” He emphasizes China is a huge potential and current ag market, and that the trade deal is opening barriers for a lot of new U.S. facilities to ship to China.
support is needed; would be surprised if Fed adopted negative rates; need more fiscal especially for local and state gvts
-GS: initial recovery expects to be V shaped after that initial v recovery will take a while
-Marquette: Biden has widened lead over Trump in Wisconsin
–piq @priapusiq: Exclusive – Pentagon clears for publication list of Chinese companies owned or controlled by China’s military; pentagon designation includes China’s Huawei, Hikvision, China Mobile and other China Telecoms – document seen by Reuters; Pentagon designation lays the groundwork for further U.S. financial sanctions – Source