Global Market Quick Take: Asia

Key Points:

• Equities: US markets ended on a high note, with Tesla making a notable leap of 5.9%.
• FX: Rising US yields pushed the USD higher while the JPY fell.
• Commodities: Crude oil soared to a 9-week peak, while US natural gas dipped to a 6-week low.
• Fixed Income: The US 10-year bond yield reached a 4-week high of 4.48%.
• Economic Data: Germany’s June CPI slowed, with Euro-area CPI data up next.

In the News:

• Tesla’s deliveries are expected to decline for the second consecutive quarter (Reuters).
• Chewy shares dropped nearly 7% as the boost from Roaring Kitty’s new stake diminished (CNBC).
• Salesforce shareholders rejected the compensation plan for CEO Marc Benioff (CNBC).
• Trump Media was included in the Russell Indexes after the annual refresh (Reuters).

Macro:

The US ISM manufacturing PMI for June unexpectedly fell to 48.5 from 48.7, below the 49.1 forecast. Subcomponents showed prices paid dropping to 52.1 from 57.0, the lowest in 2024, while employment fell to 49.3 from 51.1. New orders rose to 49.3 from 45.4, indicating a slowdown at a slower rate than in May. We discussed the broadening weakness in the US economy in yesterday’s Saxo Market Call podcast, with today’s focus on US JOLTS job openings.

Germany’s headline inflation for June came in lower than expected, driven by lower fuel costs, dropping to 2.5% YoY from 2.8% in May. Today’s focus shifts to Euro-area inflation data.

Former President Trump received relief from the Supreme Court’s ruling that the President should have broad immunity, likely reducing the chances of prosecution from January 6, giving him more time to focus on the election.

Macro Events:
RBA Minutes (June), Australian & Canadian Manufacturing PMI Final (June), EZ Flash CPI (June), Unemployment Rate (May), US JOLTS Job Openings (May). Speakers: Fed’s Powell, ECB’s Lagarde.

Earnings: N/A

Equities:
US stocks rose as the second half of the year began. The S&P 500 climbed 0.3%, the Dow Jones increased 0.1%, and the Nasdaq surged 0.8%, driven by tech giants like Apple (+2.9%), Amazon (+2%), and Microsoft (+2.2%). Nvidia rebounded by 0.6%, while AMD (-2.8%) and Arm (-2.9%) fell. Tesla soared 5.9%, and Meta saw slight gains despite regulatory concerns in the EU over its ad-free services model on Instagram and Facebook. The CAC 40 rose 1.1% to close at 7,561 on Monday after initially surging up to 2.8%, as investors processed election results and anticipated continued political instability.

Fixed Income:
The US 10-year bond yield hit a 4-week high of 4.48% due to fiscal risk concerns and Fed policy outlook. Expectations of a Trump presidency and expansionary fiscal policies increased inflation worries. ISM data showed significant manufacturing contraction and slowing prices. About 65% of the market expects a Fed rate cut in September, with over 60% predicting two or more cuts this year. The German 10-year Bund yield rose to 2.57% at the start of July, the highest in over two weeks, amidst political uncertainty in France and investor analysis of recent domestic price data for ECB policy insights. The UK’s 10-year Gilt yield climbed to 4.24%, reaching a three-week high ahead of upcoming parliamentary elections.

Commodities:
Oil prices increased due to summer demand expectations and Middle East conflict concerns. Brent prices rose 6% in June, supported by OPEC+ extending output cuts until 2025. Hurricane Beryl’s approach to the Caribbean’s Windward Islands could impact oil and gas production and consumption in the Americas. US natural gas futures dropped roughly 5% to a six-week low of $2.47/MMBtu on Monday, due to higher production, reduced demand forecasts, and an excess of gas in storage. Silver surged more than 1% from its daily low of $28.95, and gold gained 0.22% to above $2,330.

FX:
European markets felt relief following the first round of French elections, indicating Marine Le Pen may not secure an absolute majority. The euro rose, while the Swiss franc underperformed. US bond yields increased late in the overnight session with markets considering the potential for another Trump presidency after last week’s debate and Supreme Court ruling limiting the chance of Trump facing trial before the November election. The US Dollar strengthened, while the Japanese yen hit record lows again. The New Zealand dollar and the Australian dollar also slipped, with the latter focusing on the Reserve Bank of Australia’s June policy meeting minutes, where a rate hike was still on the table. For more on our FX view, refer to the Weekly FX Chartbook published yesterday.

For all macro, earnings, and dividend events, check Saxo’s calendar.

Quarterly Outlook 2024 Q3: Sandcastle Economics

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