7/8/2022 4:27:35 PM
Markets saw continued volatility as they absorbed a mixed basket of data and some shocking political news this week. The government of British Prime Minister Boris Johnson collapsed as his fellow Tories resigned in droves, unable to tolerate his mounting list of scandals any longer. The GBP/USD plumbed its lowest levels since the early days of the pandemic as Johnson at first resisted resigning, but then rebounded after he agreed to step down after the party selects his replacement in October. The other political shock of the week was the assassination of former Japanese PM Abe at an outdoor campaign rally on Friday, which prompted President Biden to say he did not think the killing will lead to political instability in Japan.
China continued to battle Covid outbreaks, most recently in Macau, but still managed to post the first expansion in the Caixin PMI Services index in four months. Shanghai port data showed throughputs are still down by high single digits versus year ago in June, even as the White House continues to deliberate whether to withdraw some Trump-era tariffs on China trade. Beijing is concerned enough that it is said to be considering a large new stimulus package via a bond offering.
The US jobs market showed no signs of cooling off, as Friday’s employment report printed a better than expected payroll number and the jobless rate remained at a very healthy 3.6% for the fourth month in a row. The June labor force participation rate slipped one tenth to 62.2%, even as the May JOLTS data earlier in the week indicated higher than expected job openings still hovering near record levels. Some welcome inflation relief came from the energy market which saw crude oil prices tumble early in the week, as WTI and Brent crude futures fell below $100/bbl amid some weak growth data, particularly out of Europe. Still a Goldman analyst suggested energy and metals commodities could rebound through the rest of the year and a JP Morgan analyst theorized oil could surge as high as $380/bbl if Russia should dramatically cut production in response to the latest sanction efforts targeting Russian oil. In the Treasury market, some key yield curve pairs inverted, including the 2-/10-year spread, which may have added to recession concerns. Stocks remained constructive for most of the week and the S&P gained 1.9%, the DJIA edged up 0.8%, and the Nasdaq was up 4.6% as largecap tech attracted some bargain hunters.
In corporate news this week, Samsung notched a larger-than-expected jump in revenue for Q2, lifting semiconductor names. Levi’s assured investors by posting a beat on earnings and affirming its FY outlook. Amazon signed a partnership with GrubHub to give its Prime members $0 food delivery fees for a year, and as part of the agreement Amazon has the option to take a 2% stake in the food delivery company. Elon Musk’s plan to buy Twitter reportedly is in “serious jeopardy” amid the dispute over bots on the platform, though Twitter management said it still intends to close the deal at agreed upon terms. GameStop shares were boosted by a stock split announcement, but then dropped a day later after announcing layoffs across the company and a CFO exit.
SUN 7/3
(RU) JP Morgan predicts oil could reach up to $380/bbl if Russia imposes maximum crude oil production cut of 5Mbbs/day
MON 7/4
*(CH) SWISS JUN CPI M/M: 0.5% V 0.3%E; Y/Y: 3.4% V 3.1%E (5th month above target and fastest annual pace in 29 years)
(CN) President Biden could announce decision to cut some Chinese tariffs during week of July 4th
(HK) Macau authorities to test its 600K residents three times this week for Covid, as city is facing its worst outbreak to date
*(CN) CHINA JUN CAIXIN PMI SERVICES: 54.5 V 49.6E [first expansion in 4 months]
TUES 7/5
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -4.1% v -1.3% prior
ASML.NL US govt said to push co to stop selling key chipmaking gear to China - press
(UK) Chancellor of the Exchequer (Fin Min) Sunak tenders his resignation; Notes the public rightly expect government to be conducted 'properly, competently and seriously'
(UK) Nadhim Zahawi named new Chancellor of the Exchequer (Fin Min) following resignation of Sunak
(CN) China prelim June Vehicle Sales Y/Y: +20.9% y/y v -17.1% prior; H1 Vehicle Sales at 12.0M -7.1% y/y - CAAM
WED 7/6
OPEC Sec Gen Barkindo has passed away
TKWY.NL Amazon signs partnership with Just Eat's Grubhub; Amazon has option to take 2% stake in Grubhub, could grow to 15%
UMC Reports Jun (NT$) Rev 24.8B, +43.2% y/y; H1 Rev 135.5B, +38.2% y/y
(CN) Beijing official: To require vaccination for entering public venues from July 11th; Will resume direct international commercial flights in an orderly way
EDF.FR (FR) France Prime Minister Borne: State wants to own 100% of EDF
1810.HK Xiaomi notes it has produced first batch of smartphones in Vietnam; Did not provide details on the production capacity of the new plant
*(US) JUN ISM SERVICES INDEX: 55.3 V 54.0E
*(US) MAY JOLTS JOB OPENINGS: 11.254M V 10.900ME
(US) June preliminary Class 8 truck orders 15K, +13% m/m, -36% y/y - FTRintel.com
(US) Association of American Railroads weekly rail traffic report for week ending July 2nd: 500.3K total units, -2.5% y/y
*(US) FOMC JUNE MEETING MINUTES: MANY FOMC MEMBERS SAW SIGNIFICANT RISK OF 'ENTRENCHED INFLATION'; 'EVEN MORE RESTRICTIVE' POLICY IS POSSIBLE IF ELEVATED INFLATION PERSISTS
005930.KR Reports prelim Q2 (KRW) Op 14.0T [highest Q2 profit since 2018] v 14.5Te (v 12.6T y/y); Rev 77.0T v 76.9Te (v 63.7T y/y)
THURS 7/7
(CN) Shanghai Port: Processed 3.8M containers during June; June Throughputs -7.4% y/y
066570.KR Reports prelim Q2 (KRW) Op 791.7B v 1.11T y/y; Rev 19.5T v 17.1T y/y
SHEL.UK Q2 update: Q2 Production expected 930-980Kbbl of oil equivalent per day; Sees extra $200M write-off; $8.5B share buyback completed for H1
*(UK) JUNE HALIFAX HOUSE PRICE INDEX M/M: 1.8% V 1.0% PRIOR; Y/Y: 13.0% V 10.5% PRIOR (12TH STRAIGHT INCREASE AND HIGHEST ANNUAL PACE SINCE 2004)
*(UK) PM JOHNSON SAID TO BE PLANNING TO RESIGN; Official statement expected within hours; Johnson plans to stay on as caretaker PM until new party leader is appointed in Oct 2022
(CN) China said to be considering $220B stimulus via bond sales - press
(RU) Russia Defense Ministry spokesperson: Russian units that carried out combat missions in Ukraine got rest and are taking measures to replenish their combat capabilities
(RU) Russia govt spokesperson Peskov: Pres Putin will decide on the format of participation in the G20 summit in Nov 2022 closer to the date of this event
FUN Reports YTD through July 4th Rev $704M +20% v 2019 levels; Notes early-season trends indicate that consumer demand remains healthy
BKE Reports Jun SSS -1.7% y/y
*(EU) ECB PUBLISHES ACCOUNT OF JUNE POLICY MEETING (MINUTES): Revised medium term inflationary outlook required further steps to be taken in normalizing monetary policy
*(UK) PM JOHNSON CONFIRMS TO RESIGN FROM POSITION; To stay on as caretaker until a new leader is in place
(UK) PM Johnson: Process of choosing a new leader should begin now; Confirms to serve as caretaker PM until new leader in place - resignation speech
(US) Bank of America estimates June US credit and debit card spending +11% y/y; Comments on strength of the underlying consumer momentum
*(US) INITIAL JOBLESS CLAIMS: 235K V 230KE (highest in 6 months); CONTINUING CLAIMS: 1.38M V 1.33ME
(US) Freddie Mac: US mortgage rates drop to 5.3% from 5.7% w/w (largest drop since 2008)
(US) Atlanta Fed GDPNow: Raises Q2 GDP forecast from -2.1% to -1.9%
(US) Fed’s Bullard (voter, hawk): Would make sense to go by 75bps in July; It won't surprise me if we have a cool-off in the housing market; Possible rate cuts could follow once inflation moderates
COST Reports June total SSS +13% (ex-gas and FX)
TWTR Elon Musk’s plan to buy Twitter reportedly is in serious jeopardy; Musk team has 'stopped engaging in certain discussions around funding' for the deal - Wash Post
(JP) Japan May BoP Current Account: ¥128.4B v ¥172.0Be; Adjust Current Account: ¥8.2B v ¥154.9Be
(JP) Former Japan PM Abe shot while giving campaign speech in Nara - Japanese media
FRI 7/8
2330.TW Reports June (NT$) Rev 175.9B +18% y/y, -5.3% m/m; H1 Rev 1.03T +39.6% y/y
EUR/USD Declines over 0.5% below 1.01 as parity approaches
(CN) China prelim June Retail Passenger Vehicle Sales at 1.97M units +22% y/y - PCA
(JP) Former Japan PM Abe pronounced dead following shooting - press
(EU) Daily 3-month Euribor Fixing: -0.087% v -0.141% prior (highest since end-2015)
(HK) Macau authorities said to add more rounds of citywide nucleic acid testing - press
(RU) German govt said to expect Canada to release Nord Stream turbine - press
(CN) Reportedly US actively considering the possibility of banning exports of chipmaking tools to those Chinese factories, including SMIC that make advanced semiconductors at the 14nm node and smaller - press
UN01.DE Applies to German govt for stabilization measures; Proposal provides for additional debt funding through an increase in KfW credit facility and contains equity components for German govt participation in Uniper
*(CA) CANADA JUN NET CHANGE IN EMPLOYMENT: -43.2K V +22.5KE; UNEMPLOYMENT RATE: 4.9% V 5.1%E
*(US) JUN UNEMPLOYMENT RATE: 3.6% V 3.6%E
*(US) JUN AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.3%E; Y/Y: 5.1% V 5.0%E
*(US) JUN CHANGE IN NONFARM PAYROLLS: +372K V +265KE (matches the top end of all analysts estimates range)
June Manheim Used Vehicle Value Index: -1.3% M/M; +9.7% Y/Y; Saw larger declines over the last two weeks than the prior two weeks
(US) Atlanta Fed GDPNow: Raises Q2 GDP forecast from -1.9% to -1.2%
(US) MAY CONSUMER CREDIT: $22.3B V $30.9BE
