Futures Sharply Lower Overnight, Cash Earnings Much-Stronger-Than Expected

In post-Tokyo trade, JGB futures are sharply weaker, closing +74 compared to settlement levels, after yesterday’s blockbuster gains.

• Just released, Labor & Real Cash Earnings for June print much stronger than expected at +4.5% y/y and +1.1% y/y respectively versus estimates of +2.4% and -0.9%% and revised priors of +2.0% and -1.3%.
• Overnight, US tsys finished mixed, well off the session’s best levels after mildly higher-than-expected ISM Services.
• In July, the Services Index showed 51.4 (cons 51.0), confirming a return above 50 after the lowest since early in the pandemic. Coupled with firmer underlying details, imminent recession concerns that appeared to have been priced in cooled.
• Global investor risk aversion saw the US 2-year yield reach a low of 3.65%, before finishing at 3.92%, 4bps higher.
• The S&P, which was down more than 4% at one point managed to pare some of its losses but still ended down ~3%.
• Looking ahead to today the US calendar will see Trade Balance data and a Tsy 3Y Note Sale. There is no scheduled Fed speak. Markets will also be watching for VP Harris Democratic nominee's choice of Vice President no later than Tuesday.
• Today, the local calendar will also see 10-year supply.