The State of Markets

A brief review of all key upcoming events across the major regions of the globe & an overview of key recent market trends.

Jul 06, 2024

The State of Markets: A Goldilocks Market For Equities?

Evidence for a slowdown in the US economy continued to build this week. In particular, Monday’s ISM manufacturing print was disappointing; Wednesday’s ADP employment and ISM services were both weaker than expected; and, while headline payrolls beat expectations yesterday (by 16k), there were significant downward revisions in May (-54k) and April (-57k). With that, the unemployment rate was higher than expected (4.1% vs. 4.0%).

Unsurprisingly, therefore, US yields moved lower across the curve (e.g. with US 10 year yields down 20bps since Monday’s close, see chart below). As such, and with the dollar lower (DXY: 0.94% last week), US equities performed well (especially the tech/growth heavy parts of the market). Most notably, both the S&P500 and NASDAQ100 broke out of their recent trading ranges and made new record highs.

The key question, therefore, is whether next week’s CPI release will add to that emerging theme (i.e. of weaker growth and inflation – and therefore expectations of looser Fed policy). All eyes will be on that CPI data (due Thursday at 1:30pm London time). Other key US data points will include NFIB small business optimism (Monday) as well as PPI inflation and the University of Michigan Sentiment (both on Friday). Elsewhere Powell will be giving his (second) semi-annual testimony to Congress (on Monday & Wednesday). Tomorrow is the second round of French elections and earnings season gets going this week (please see below for a full list of key data, events, and earnings reports).

Fig A: US 10 year Treasury yield (%), shown with 50, 90, & 200 day moving averages

(All in London time BST)

Events: N/A

Data: US consumer credit (May, 8pm).

Earnings: N/A

Events: N/A

Data: Japanese M2 & M3 money supply (Jun, 12:50am); US NFIB Small Business Optimism (Jun, 11am).

Earnings: N/A

Events: N/A

Data: Chinese headline CPI & PPI (Jun, 2:30am).

Earnings: N/A

Events: N/A

Data: US headline & core CPI (Jun, 1:30pm).

Earnings: PepsiCo, Progressive.

Events: N/A

Data: US Michigan sentiment (July first estimate, 3pm).

Earnings: JPMorgan, Well Fargo&Co, Citigroup.

Monthly Global Asset Allocation No. 42, 3^rd July 2024:

“OIL: Uptrend Ongoing (for now)”

Oil price swings have been relatively large in the past 18 months. Those swings are a consequence of the oil market doing its job as a forward looking, discounting machine (i.e. pricing in key events ahead of time).

In April, for example, oil prices, having rallied 24% from their December lows, topped on the news of the Iran/Israel conflict (i.e. in mid-April). That is, by the time missiles were launched, LONG positioning was already crowded, and our models had moved back to SELL (for detail see 4^th April “OIL: SELL Case Brewing”).

Events: Speeches by the Fed's Powell testifying to Senate Banking (5:15pm).

Data: US consumer credit (May, 8pm); US New York 1 year inflation expectations (Jun, 4pm).

Earnings: N/A

Events: N/A

Data: US NFIB Small Business Optimism (Jun, 11am).

Earnings: N/A

Events: Speeches by the Fed's Powell testifying to House Financial Services (3pm), Goolsbee & Bowman give opening remarks at Childcare Event (7:30pm).

Data: US wholesale trade sales (May, 3pm); US wholesale inventories (May, 3pm).

Earnings: N/A

Events: Speeches by the Fed's Bostic in moderated Q&A (4:30pm) & Musalem in Q&A on the Economy (6pm).

Data: US headline & core CPI (Jun, 1:30pm); US weekly jobless claims (1:30pm); US monthly budget statement (Jun, 7pm).

Earnings: PepsiCo, Progressive.

Events: N/A

Data: US building permits (May, 1:30pm); US headline & core PPI (Jun, 1:30pm); US existing home sales (Jun, 2pm); US Michigan sentiment (July first estimate, 3pm).

Earnings: JPMorgan, Well Fargo&Co, Citigroup, Bank of NY Mellon, Fastenal.

**Fig B:** US CPI Services and Services less rent of shelter (M-o-M %)

Events: N/A

Data: German imports/exports & trade balance (May, 7am); Eurozone Sentix investor confidence (Jul, 9:30am).

Earnings: N/A

Events: N/A

Data: N/A

Earnings: N/A

Events: Speech by the ECB's Nagel in Germany (9am); Istat publishes note on the Italian economy (10am).

Data: Italian industrial production (May, 9am).

Earnings: N/A

Events: N/A

Data: German headline CPI (June final estimate, 7am).

Earnings: N/A

Events: N/A

Data: French headline CPI (June final estimate, 7:45am); German wholesale price index (Jun, 7am).

Earnings: N/A

**Fig C:** Eurozone Sentix investor confidence (index)

Events: Speech by the Bank of England's Haskel on ‘What’s done and what’s to come’ (5:15pm).

Data: N/A

Earnings: N/A

Events: N/A

Data: BRC retail sales (Jun, 12:01am).

Earnings: N/A

Events: Speech by the Bank of England's Pill at Asia House (2:30pm).

Data: N/A

Earnings: N/A

Events: N/A

Data: RICS house price balance (Jun, 12:01am); monthly GDP, industrial & manufacturing production, goods trade balance & construction output (May , 7am).

Earnings: N/A

Events: N/A

Data: N/A

Earnings: N/A

**Fig D:** UK RICS house price balance (index) against Rightmove house prices (Y-o-Y %)

Events: N/A

Data: Japanese cash earnings (May, 12:30am); Japanese bank lending (Jun, 12:50am); Australian home loans value (May, 2:30am).

Earnings: N/A

Events: N/A

Data: Japanese M2 & M3 money supply (Jun, 12:50am); Australian Westpac consumer confidence (Jul, 1:30am); Australian NAB business confidence (Jun, 2:30am); Japanese machine tool orders (June first estimate, 7am).

Earnings: N/A

Events: RBNZ policy decision (3am).

Data: Japanese PPI (Jun, 12:50am); Chinese headline CPI & PPI (Jun, 2:30am).

Earnings: N/A

Events: N/A

Data: Australian household spending (Jun, 12am); Japanese machinery orders (May, 12:50am).

Earnings: Fast Retailing, Seven & i Holdings.

Events: N/A

Data: Japanese industrial production & capacity utilisation (May final estimate, 5:30am); Chinese imports/exports & trade balance (Jun, Sunday time tentative).

Earnings: N/A