Weekly Macro Matters
Macro Matters – Weekly review, w/c June 26
Hawkish central banks, disappointing flash PMIs, and strained US-China relations are weighing on market sentiment. However, US housing indicators and tech stocks show resilience, while upcoming data on inflation and consumer confidence could drive market direction.
TradeDay Macro Matters
Macroeconomic / Geopolitical Developments
• Central Bank Hawkishness: The Bank of England’s unexpected hike, alongside hawkish tones from the Fed and ECB, is inverting yield curves and weighing on risk appetite.
• Economic Slowdown: Flash PMIs globally signal tepid expansion or contraction, reflecting continued economic pressure.
• US-China Tensions: Biden’s remarks referring to Xi as a dictator have dampened hopes for improved relations, affecting market sentiment.
United States
Fed Rate Expectations:
Fed Chair Powell reiterated the possibility of two rate hikes in 2023. However, markets remain skeptical, pricing in just one hike and delaying expectations for cuts into Q1 2024. The US 2-year yield hovers in consolidation under 4.80%, with upcoming ISM and Nonfarm Payrolls data likely to influence direction.
Housing Market Resilience:
Despite high mortgage rates and weak demand, US housing is showing signs of stabilization. New Home Sales have risen, and improving builder sentiment could shift the sector from an economic drag to a contributor in H2 2024.
US Index Futures:
While European indices falter, US markets are buoyed by tech stock strength. The NASDAQ 100 futures show resilience, with bullish momentum likely to resume if broader market sentiment stabilizes.
Europe
Bank of England’s Surprise Hike:
A surge in UK core inflation drove a larger-than-expected BoE rate hike, with markets now pricing rates above 6%. However, slow mortgage renewal cycles could overextend the BoE’s tightening impact, challenging GBP stability.
Eurozone Inflation:
The ECB’s hawkish stance contrasts with weak economic data, as flash PMIs indicate a downturn. Core inflation is forecast to rise slightly, but any downside surprises could dampen EUR performance.
Asia
RBA Rate Pause Likely:
Weak Australian PMIs and slowing inflation suggest the Reserve Bank of Australia may pause hikes. Meanwhile, a tepid 10bps PBoC rate cut has underwhelmed markets, with broader Chinese stimulus measures anticipated.
Commodities
Oil Futures:
Oil remains range-bound, with $72.75/$75.00 resistance intact. Strategic Petroleum Reserve purchases below $70 provide support, but global recession fears cap upside potential.
Gold Futures:
Gold trends lower, with resistance at $1940/$1963. An unusual positive correlation with USD has emerged, echoing patterns seen during previous geopolitical crises.
On the Calendar
• US: Durable Goods Orders, Consumer Confidence, housing data, and Core PCE inflation.
• Europe: Eurozone flash HICP for June and ECB President Lagarde’s speeches.
• Asia: Australian CPI and China’s official PMIs.
Macro Data:
• June 26, 2023: German Ifo Business Climate
• June 27, 2023: Canada CPI; US Durable Goods Orders; S&P/Case-Shiller House Prices Index; US Consumer Confidence; US New Home Sales
• June 28, 2023: Australian CPI; central bank governors of the Fed, ECB, BoJ, and BoE speak
• June 29, 2023: US Final GDP; Weekly Jobless Claims; Pending Home Sales
• June 30, 2023: China Official PMIs; Eurozone Flash HICP Inflation; US Core PCE; Canada GDP
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