Rising Rates Hold Investors' Focus

TradeTheNews.com Weekly Market Update: Rising Rates Hold Investors' Focus
Fri, 07 Jul 2017 16:10 PM EST

- For the second straight week rising interest rates continued to overshadow global trading and geopolitical developments. North Korea's successful test of an ICBM on the July 4th holiday may have spurred some risk off sentiment when trading resumed on Wednesday, but most pointed to a sustained rise in Treasury yields as the culprit. The European economic data continued to surpass expectations broadly, resulting in the German 10-year Bund yield moving back above 0.5% to levels not seen since early last year. US rates tracked European yields higher and in a move that appeared justified by the release of another robust June jobs report on Friday. The Euro moved to a 1-month high while the Pound suffered after UK economic releases significantly lagged that of continental Europe's. The Dollar also rose to the highest level since early May against the Yen, and buyers were rewarded on Friday when the BOJ was forced to offer an unlimited amount of bids in its fixed-rate bond operation to stem the rise in JGB bond yields. Crude oil prices rolled over mid-week giving back half of gains seen since the June 21st low while by Friday gold prices dropped to levels not seen since March likely hurt by the back up in rates.
- Banks and financials maintained a leadership role as higher rates and steepening curves kept demand strong. The XLF closed the week above 25 for the first time since late 2007 heading into next week's Q2 bank earnings reports. The Dow Jones Transports hit a fresh all time highs for the first time since early March though Dow theorists were quick to point out the Industrials were unable to confirm with a new high of its own. The energy complex largely served as a headwind slipping along with oil prices. The NASDAQ maintained entrenched in a notably skittish trading pattern. After under performing early in the week technology shares exhibited significant relative strength to close out trade. For the week the S&P was up less than 0.1%, the Dow gained 0.3% and the NASDAQ rose 0.2%.
- In terms of corporate news during this holiday-shortened week, the auto industry reported another drop in sales for the month of June, though GM said it expects the second half of 2017 will be stronger than the first. Tesla disappointed investors with Q2 deliveries that came in below consensus estimates, though CEO Musk forecasts Model 3 production at 20K vehicles per month in December. Volvo said it plans to completely phase out vehicles with conventional engines, moving towards production of hybrid and battery-powered models only by 2019. Berkshire Hathaway announced it would acquire Energy Future Holdings, the parent company of Oncor Electric, in a $9B all-cash transaction, which would give Berkshire control of one of the largest electricity transmission firms in the US.

SUNDAY 7/2
*(JP) JAPAN Q2 TANKAN LARGE MANUFACTURING INDEX: 17 V 15E; MANUFACTURERS OUTLOOK: 15 V 14E; ALL-INDUSTRY CAPEX: 8.0% V 7.2%E
(HK) Macau Jun casino revenue 19.99B Patacas, y/y: 25.9% v 30%e (update)

MONDAY 7/3
(DE) GERMANY JUN FINAL MANUFACTURING PMI: 59.6 V 59.3E (31th month of expansion)
(UK) JUN MANUFACTURING PMI: 54.3 V 56.3E (11th month of expansion, 3-month low)
(EU) EURO ZONE MAY UNEMPLOYMENT RATE: 9.3% V 9.3%E
(UK) FSB Chairman Carney: Calls on G20 to 'Urgently' complete new Basel Bank Capital rules; Reform fatigue poses threat to crisis response
GM Reports June US sales -4.7% y/y, to 243.2K units v 250.7Ke
*(US) JUNE FINAL MARKIT MANUFACTURING PMI: 52.0 V 52.1 PRELIM (lowest since Sep 2016)
(US) Atlanta Fed raises Q2 GDP to 3.0% from 2.7% on 6/30
TSLA Reports Q2 deliveries just over 22.0K v 24.2Ke v just over 25.0K q/q (update)
(HK) Macau Monetary Authority says Unionpay cardholders can only get cash at KYC ATMs in Macau, effective from July 4th
(HK) Hong Kong Jun Homes Sales (HK$): 59.1B v 32.6B y/y

TUESDAY 7/4
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50% (AS EXPECTED)
(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.50%; AS EXPECTED; MAINTAINS QE BOND BUYING PROGRAM (As decided in April)
(CN) China PBoC: Economic downward pressure remains large in 2017; Affirms to pursue prudent neutral monetary policy - PBOC 2017 report
*(CN) CHINA JUN CAIXIN PMI SERVICES: 51.6 V 52.8 PRIOR (13-month low)

WEDNESDAY 7/5
*(TH) THAILAND CENTRAL BANK (BOT) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 1.50%; AS EXPECTED
*(FR) FRANCE JUN FINAL SERVICES PMI: 56.9 V 55.3E (confirms 12 months of expansion)
(ZA) South Africa ANC party leader Godongwana: proposal to make SARB state-owned is not imminent; there is no fiscal space to pay SARB owners
*(US) MAY FINAL DURABLE GOODS ORDERS: -0.8% V -1.0%E; DURABLES EX TRANSPORTATION: -0.3% V +0.1% PRELIM
(US) Association of American Railroads weekly rail traffic report for week ending July 1st: 546.4K carloads and intermodal units, +3.2% y/y (25th straight week of gains)
VOLVA.SE Plans all post-2019 vehicle models to be either hybrid or battery powered - press (update)
*(US) FOMC MINUTES FROM JUNE 14 MEETING: OFFICIALS DIVIDED OVER WHEN TO START BALANCE SHEET RUNOFF
(JP) 30-yr JGB yield highest since late Feb at 0.875%
*(AU) AUSTRALIA MAY TRADE BALANCE (A$): +2.47B V +1.0BE (7th consecutive surplus)

THURSDAY 7/6
*(ES) SPAIN DEBT AGENCY (TESORO) SELLS TOTAL €3.65B VS. €3.0-4.0B INDICATED RANGE IN 2022, 2040 AND 2046 BONDS
*(EU) ECB ACCOUNT OF THE MONETARY POLICY MEETING (JUN) MINUTES: ECB OFFICIALS DISCUSSED DROPPING QE EASING BIAS IN JUNE, BUT DECIDED PRUDENCE REMAINED WARRANTED
*(US) JUN ADP EMPLOYMENT CHANGE: 158K V 188KE
*(US) MAY TRADE BALANCE: -$46.5B V -$46.3BE
*(US) JUN FINAL MARKIT SERVICES PMI: 54.2 V 53.0E (highest since Jan)
(US) Atlanta Fed lowers Q2 GDP to 2.7% from 3.0% on 7/3
(US) Illinois House overrides Gov veto of budget bills; enacting $5B tax hike into law; passes budget for first time in over two years
005930.KR Guides Q2 Op profit KRW14.0T (quarterly record) v KRW13.0Te, Rev KRW60.0T v KRW58.4Te
(JP) BoJ Offers to buy unlimited amount in fixed-rate bond operation, gets No Bids again; Details amounts to buy in upcoming QE operation

FRIDAY 7/7
*(FR) FRANCE MAY INDUSTRIAL PRODUCTION M/M: 1.9% V 0.6%E; Y/Y: 3.2% V 1.4%E
*(UK) JUN HALIFAX HOUSE PRICE M/M: -1.0% V +0.2%E; 3M/Y: 2.6% V 3.1%E
*(CN) CHINA JUN FOREIGN RESERVES: $3.057T V $3.061TE (5th straight increase)
(UK) MAY INDUSTRIAL PRODUCTION M/M: -0.1% V 0.4%E; Y/Y: -0.2% V 0.2%E
*(US) JUN UNEMPLOYMENT RATE: 4.4% V 4.3%E
(US) JUN CHANGE IN NONFARM PAYROLLS: +222K V +178KE
*(CA) CANADA JUN NET CHANGE IN EMPLOYMENT: +45.3K V +10.0KE; UNEMPLOYMENT RATE: 6.5% V 6.6%E
*(US) JUN AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.3%E; Y/Y: 2.5% V 2.6%E; AVERAGE WEEKLY HOURS: 34.5 V 34.4E
(MX) MEXICO JUN CPI M/M: 0.3% V 0.3%E; Y/Y: 6.3% V 6.3%E; CORE CPI Y/Y: 0.3% V 0.3%E
(US) FED RELEASES JULY 2017 MONETARY POLICY REPORT: FURTHER GRADUAL REMOVAL OF ACCOMMODATION IS APPROPRIATE
(US) New York Fed Nowcast: raises Q2 GDP forecast to 2.0% from 1.9% on 6/30; raises Q3 GDP forecast to 1.8% from 1.5% on 6/30