TradeTheNews.com Weekly
Market Update: June Jobs Report Tempers Case for July Rate Cut
Fri, 05 Jul 2019 16:04 PM EST
It was a tale of two tapes this July 4th shortened trading week. Ahead of the
break, stock markets continued to chug higher, and in many cases notching fresh
all time highs, helped predominantly by lower interest rates. Global economic
data remained largely soft, fanning expectations for supportive central bank
policies. Those expectations likely got a boost from the news IMF’s Lagarde was
being put forward to replace Draghi to head up the ECB, rather than the
Bundesbank's Weidmann. The President and his advisors continued to call on the
Fed to cut rates while confirming that the US and China trade talks were
continuing. Government bond yields plumbed to fresh cycle lows and the S&P
futures were knocking on the door of 3K by the time trading was closed early on
Wednesday. Gold moved back towards the highs of the year and the dollar stayed
soft.
Friday’s employment report probably didn’t take a July rate hike off the table,
but certainly seems to make it more questionable. Payrolls snapped back from
the poor May reading in a big way, easily surpassing expectations. The
unemployment rate ticked higher along with the participation rate, suggesting
the US labor market is continuing to absorb some slack. Some market
participants noted that if there are additional positive surprises in either
the inflation data next week or the regional factory surveys over the remainder
of the month, a quarter-point cut could be in doubt. Rates moved up quite
aggressively following the report, stocks sold off while gold prices dropped
more than 2% and the dollar appreciated globally. The VIX jumped 14% and stocks
sold off broadly as rate cut expectations were dented. For the week, the Dow
rose 1.2%, S&P added 1.7% and the NASDAQ finished up 1.9%.
In corporate news, Tesla shares rose after reporting record Q2 production and
delivery numbers, placating some investors who have seen the stock fall 30%
year to date. Broadcom was said to be in advanced deal discussions to acquire
Symantec for over $15B, a strategy shift after its failed attempt to acquire
Qualcomm last year. Delta boosted its guidance, citing strong passenger demand,
raising Q2 expectations for the overall airline sector. Genesee & Wyoming
announced it would be acquired by Brookfield at $112/shr in a ~$8.4B go-private
deal.
SUNDAY 6/30
(JP) JAPAN Q2 TANKAN LARGE MANUFACTURING INDEX: 7 V 9E (near 3-year low) ;
OUTLOOK SURVEY: 7 V 6E; LARGE ALL INDUSTRY CAPEX: 7.4% V 8.1%E
MONDAY 7/1
*(ES) SPAIN JUN MANUFACTURING PMI: 47.9 V 49.5E (confirms move back into
contraction and lowest reading since Apr 2013)
(DE) GERMANY JUN UNEMPLOYMENT CHANGE: -1.0K V 0.0KE; UNEMPLOYMENT CLAIMS RATE:
5.0% V 5.0%E
(IR) Iran said to suspend its nuclear commitments from July 7th - financial
press
(UK) JUN PMI MANUFACTURING: 48.0 V 49.5E (2nd straight contraction and lowest
since Feb 2013)
(US) JUN ISM MANUFACTURING: 51.7 V 51.0E; PRICES PAID: 47.9 V 53.0E (lowest
manufacturing since Sept 2016)
*(US) MAY CONSTRUCTION SPENDING M/M: -0.8% V 0.0%E
TUESDAY 7/2
*(AU) RESERVE BANK OF AUSTRALIA (RBA) CUTS CASH RATE TARGET BY 25BPS TO 1.00%;
AS EXPECTED (2nd consecutive cut)
(EU) ECB policy makers said not to be in any rush into a July rate cut and
preferring instead to wait for more data on the economy - press
GM Reports Q2 deliveries 746.7K, -1.5% y/y
EU reaches deal on new leaders: Christine Lagarde nominated for ECB presidency;
Belgium's Charles Michel proposed as EU Council president; Germany's Ursula Von
Der Leyen proposed as EU Commission head
TSLA Reports Q2 total deliveries 95.2K v 84Ke (guided 90-100K)
(US) President Trump: To nominate current Executive Vice President of Saint
Loius Fed Christopher Waller to be member of Fed; Also intends to nominate
economic advisor Judy Shelton to serve on Fed board
(JP) Japan said to consider additional export restrictions on South Korea -
Japanese Press
WEDNESDAY 7/3
*(SE) SWEDEN CENTRAL BANK (RIKSBANK) LEAVES REPO RATE UNCHANGED AT -0.25%; AS
EXPECTED; maintains rate path outlook and forward guidance
*(DE) GERMANY JUN FINAL SERVICES PMI: 55.8 V 55.6E (confirms 72nd month of
expansion)
*(EU) EURO ZONE JUN FINAL SERVICES PMI: 53.6 V 53.4E (confirms 72nd month of
expansion)
*(UK) JUN SERVICES PMI: 50.2 V 51.0E (3rd straight expansion)
*(US) JUN ADP EMPLOYMENT CHANGE: +102K V +140KE
(IT) European Commission: Decided not to open disciplinary action against Italy
(as speculated); to explain conclusion to Euro Group ministers next week on
Italy
*(US) JUN ISM NON-MANUFACTURING INDEX: 55.1 V 56.0E (lowest since July 2017)
(US) Association of American Railroads weekly rail traffic report for week
ending June 29th: 533.2K, -5.5% y/y (has fallen for 20 consecutive weeks)
THURSDAY 7/4
3382.JP Reports Q1 Net ¥52.1B v ¥42.9B y/y; Op ¥90.3B v ¥86.4B y/y; Rev ¥1.6T v
¥1.6T y/y
(US) Magnitude 6.5 earthquake reported earlier today in central/southern
California (said to be the largest quake in over 20 years), followed by several
smaller ones
005930.KR Reports Prelim Q2 (KRW) Op 6.5T v 6.0Te (-56.3% y/y), Rev 56.0T v
54.5Te (-4.2% y/y)
(CN) China wants clarity on Huawei situation before making agricultural
purchases from US - SCMP
FRIDAY 7/5
066570.KR Reports prelim Q2 (KRW) Op 652.2B v 774.4Be, Rev 15.6T v 15.7Te
(CN) Reportedly China and the U.S. could reach a preliminary trade agreement as
soon as this September - pres
*(US) JUN CHANGE IN NONFARM PAYROLLS: +224K V +160KE
