Daily Market Outlook, July 11, 2023

Munnelly’s Market Commentary…

Asian equity markets experienced positive performance, driven by modest gains on Wall Street. Cyclicals benefited from promising inflation indicators ahead of the upcoming US CPI data, while market participants also considered China's support measures. The Nikkei 225 remained flat and struggled to maintain its early momentum due to a stronger currency. However, Sumco stood out as it outperformed other stocks following reports that the government would potentially provide the company with a subsidy of up to USD 530 million to enhance wafer capacity. Nonetheless, Industry Minister Nishimura later denied these reports. In contrast, the Hang Seng index and the Shanghai Comp. posted gains. This positive sentiment was primarily driven by developers who benefited from the news that China would extend two financial policies supporting the stable and healthy growth of the real estate market until the end of 2024.

This morning, the latest UK employment market report was released, providing crucial insights into domestic inflationary pressures. The report revealed that regular wage growth (excluding bonuses) for the three months up to May exceeded expectations, standing at 7.3%. This figure is likely to be viewed as too hot by most Bank of England policymakers. While employment growth slowed, it was not as significant as anticipated. However, the unemployment rate rose from 3.8% to 4.0%, partly due to previously "economically inactive" individuals reentering the job market. This influx is expected to alleviate some of the tightness in the employment market. Nonetheless, the headline read on the report is the stronger-than-expected wage growth.

For European investors the German ZEW survey will give an early indication of economic trends for July. Although this survey targets financial experts rather than businesses, it aims to gauge both current economic conditions and expectations for the next six months. For the July ZEW survey, it is anticipated that both the current situation will print -63 and expectations -19. Other surveys have indicated a slowdown in activity in Germany, particularly in manufacturing, as companies grapple with rising interest rates.

Stateside, the NFIB small business optimism index is expected to show a slight increase from 89.4 to 89.9, according to consensus forecasts. However, all attention will be focused on tomorrow's Consumer Price Index (CPI) inflation report, which is expected to indicate a decline in the headline measure but reveal more persistent underlying "core" inflation.

CFTC Data As Of 07-07-23

USD net spec short pared in Jun 28-Jul 3 period, $IDX +0.58% in period
EUR$ -0.77% in period, specs -2,191 contracts into dip, now +142,837
$JPY +0.3% in period, specs -5,050 contracts on diverging rates now -117,920
GBP$ -0.29%, specs -1,729 contracts, now +50,265; less-dovish Fed lifts USD
$CAD +0.21% specs +7,374 contracts flip position to +4,527
AUD$ +0.09% in period, specs -5,158 contracts now -44,582
BTC +0.5% in period specs +18 contracts now short 2,076 contracts(Source: Reuters)

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0890-1.0900 (2BLN), 1.0925 (466M), 1.0950-55 (1BLN)
1.0970-80 (691M), 1.1050 (307M)
USD/CHF: 0.8980-0.8900 (458M)
GBP/USD: 1.2720-25 (312M), 1.2760-70 (358M)
USD/JPY: 142.50 (250M), 143.00 (420M)

Overnight News of Note

Australia June Business Conditions Steady In Sign Of Resilience
China To Accelerate Policy Roll-Out To Aid Property Sector - CSJ Citing Analysts
Japan FinMin Suzuki: Arranging G7 Meet On Sidelines Of G20
Fed’s Williams Says He Does Not Have A Recession In His Forecast
Fed’s Bostic: Should Wait Before More Interest-Rate Hikes
Fed's Mester: More Hikes Needed To Bring Inflation Back Down To Target
ECB's Nagel Sees Hard Landing Avoided Though Growth May Slow
UK Chancellor Hunt Says Government And BoE Will Tame Inflation
French Central Bank Keeps Forecast For 0.1% Q2 Growth
USD/JPY Plummets To Fresh Multi-Week Low, Amid Broad-Based USD Weakness
Microsoft Confirms More Job Cuts On Top Of 10K Layoffs Announced In Jan
Wall Street Banks Court Sovereign Funds For Syngenta’s Mega IPO
Uber CFO To Step Down In Most Senior Executive Exit Since IPO
TSMC To Start Building Second Japan Plant In April