EXECUTIVE SUMMARY
- EUROPEAN STOCKS HIT BY WEAK EARNINGS ON BUSIEST REPORTING DAY
- BIDEN SAYS TIME FOR ‘YOUNGER VOICES’ IN OVAL OFFICE SPEECH
- NETANYAHU GIVES FIERY DEFENSE OF GAZA WAR IN SPEECH TO CONGRESS
- PBOC UNEXPECTEDLY CUTS ONE-YEAR MLF RATE BY 20BP
MNI (LONDON) - Figure 1: Eurostoxx 50 futures through key support at 4,848/46
Source: MNI/Bloomberg
NEWS
EARNINGS (BBG): European Stocks Hit by Weak Earnings on Busiest Reporting Day
European stocks tumbled on the busiest day of the corporate earnings season following underwhelming reports from a slate of companies including Kering SA and Nestle SA. The Stoxx Europe 600 Index was down 1.6% by 9:25 a.m. in London, its biggest intraday slide since April. France’s CAC 40 Index sank 1.9%, bringing total declines since a May peak to over 10%. The technology and media sectors were the biggest decliners. Personal care was the only sector in the green.
US (BBG): Biden Says Time for ‘Younger Voices’ in Oval Office Speech
President Joe Biden framed his momentous decision to drop out of the 2024 race as a bid to unify the nation under a new generation of leaders, in his first speech since ending his reelection campaign and political career. Biden sought to define his legacy on Wednesday with an 11-minute Oval Office address — one that he has staked on defending US institutions from Republican Donald Trump. He cast his exit from the race, made under intense pressure from fellow Democrats, as an act of self-sacrifice because “nothing can come in the way of saving our democracy.”
US (BBG): Democrats Will Nominate Kamala Harris, Running Mate by Aug. 7
Delegates to the Democratic National Convention will meet virtually within the next two weeks to confirm Vice President Kamala Harris as their nominee for president - and her yet-to-be-named running mate. The convention’s rules committee on Wednesday overwhelmingly approved the process for a virtual roll call, clearing the final hurdle to solidifying the ticket before the convention convenes in Chicago Aug. 19. The exact date of the vote - some time between Aug. 1 and Aug. 7 - will be decided by the convention’s co-chairs, Jaime Harrison and Minyon Moore.
US/ISRAEL (BBG): Netanyahu Gives Fiery Defense of Gaza War in Speech to Congress
Prime Minister Benjamin Netanyahu gave a fiery defense of his nation’s war against Hamas in a speech to Congress, inserting himself into a super-charged moment in American politics and mocking thousands of demonstrators outside protesting his handling of the conflict in Gaza. The Israeli leader urged the US to fast-track military aid and dismissed concerns about the war’s mounting civilian death toll, saying his troops should be commended for their actions. He framed his nation’s fight against Hamas as a battle against its backer Iran, which he said wants to destroy the US as well.
SECURITY (BBG): US, Canada Jets Intercept Russia, China Aircraft Near Alaska
North American Aerospace Defense Command fighter jets from US and Canada intercepted two Russian and two Chinese military aircraft operating in the Alaska Air Defense Identification Zone on July 24, according to a Norad statement. Russian and Chinese aircraft remained in international airspace and their activity is not seen as a threat.
G7 (BBG): G-7 Warns Against Unilateral Actions That Might Undermine Trade
The finance chiefs of the Group of Seven economies warned against “unilateral actions” that might undermine global trade, according to a statement by the Italian delegation. The G-7 highlighted the need to protect international commerce, “particularly given China’s enormous industrial capacity, including in sectors of strategic importance,” according to the statement sent by Italy’s finance ministry. US presidential candidate Donald Trump has pledged to raise tariffs on goods from China and elsewhere if he wins this year’s US election.
FRANCE (MNI): Rejection of NFP PM Candidate Hints at Further Political Paralysis
President Emmanuel Macron's rejection of hitherto low-profile civil servant Lucie Castets for the position of prime minister could prove a harbinger of things to come, with little sign of how the current impasse in France's political situation comes to an end. On 22 July, Castets, the director of financing and purchasing for the city of Paris, was put forward as PM candidate by the leftist New Popular Front (NFP, which emerged from the legislative election as the largest bloc in the National Assembly.
UK (BBG): Rachel Reeves Says UK ‘Open for Business’ in First Overseas Trip
Chancellor of the Exchequer Rachel Reeves will tell international counterparts that Britain is “open for business” on her first overseas trip since taking office, as she continues the new Labour government’s push for growth. Reeves will attend the G-20 finance ministers’ meeting in Rio de Janeiro this week and will urge business leaders to “take another look at Britain,” the UK Treasury said in a statement. She will also stress her government’s commitment to fighting climate change and maintaining support for Ukraine. “My message to international leaders is simple: after years of uncertainty and instability, Britain is open for business once again,” Reeves said.
CHINA (MNI): PBOC Cuts One-year MLF Rate by 20bp
MNI (Beijing) The People’s Bank of China unexpectedly cut the one-year medium-term lending facility rate by 20 basis points to 2.3%, its first cut since August 2023, and injected CNY200 billion via the tool into the interbank market on Thursday, according to a statement on the Bank’s website. The PBOC kept the rate unchanged on July 15 when it conducted its regular monthly MLF operations. The reduction, however, came after the six state-own banks announced cuts to their deposit interest rates. From July 25 demand deposit rates will fall 5bp, while one-year, and two-year and above rates will reduce by 10 and 20bp respectively, according to the banks' announcement.
CHINA/RUSSIA (MNI): Joint Air Patrols Skirt Alaska After US Warns of Arctic Co-op
MNI (London) Chinese and Russian defence ministries have both confirmed that joint patrols took place between the nations' air forces in the Chukchi and Bering Seas close to the Alaskan coast. The Chinese Defence Ministry says that 'The patrols deepened strategic mutual trust and coodination between the two militaries', and claimed that they 'did not target any third parties' and 'have nothing to do with the current international situation'. NORAD command confirmed that none of the Chinese or Russian aircraft entered US or Canadian airspace, with a statement saying 'This Russian and PRC activity in the Alaska ADIZ [air defence identification zone] is not seen as a threat'.
JAPAN (MNI): Japan Govt Keeps Econ View, Cuts Exports
Japan’s government left its economic assessment in July for the sixth straight month, but lowered its view on exports for the first time since January, the Cabinet Office said on Thursday. The Japanese economy is recovering at a moderate pace, although it recently appears to be pausing, the government repeated. It noted exports “are almost flat.” The previous view held exports “appear to be pausing for picking up.” Assessment of other components, such as private consumption, capital investment and industrial production, remained unchanged.
JAPAN (BBG): Nikkei Tumbles Most in Three Years on Concerns of AI Bets, BOJ
Japan’s Nikkei 225 Stock Average entered a technical correction as an AI-driven rally in technology shares went into reverse and concerns grew that the Bank of Japan may be poised to hike interest rates. The Nikkei declined 3.3% on Thursday, the most since June 2021, taking its drop to about 10% from an all-time peak hit just two weeks ago. Renesas Electronics Corp. led declines following disappointing earnings. The broader Topix slipped 3%, with exporters including Hitachi Ltd. and Nissan Motor Co. retreating.
INDIA (BBG): Warnings Pile Up as Indian Authorities Seek to Curb Stock Frenzy
The explosion in retail participation in India’s booming stock market is raising alarms from both the government and the regulator as concerns grow about household savings being redirected to speculative activities. A study released by the Securities and Exchange Board of India on Wednesday revealed that seven out of 10 intraday trades in the cash equity market made losses in the year ended March 2023. These findings are consistent with the regulator’s study last year, which found that nine out of 10 active retail traders lose money on derivatives. The regulator has repeatedly urged small investors to resist their instinct to make a quick buck from trading.
COMMODITIES (BBG): Copper Sinks Below $9,000 Threshold as Metals Selloff Deepens
Copper tumbled - falling below the $9,000 a ton threshold for the first time since early April - on increasing pessimism on the global, and particularly the Chinese, demand outlook. The industrial metal is down by around a fifth from a record in mid-May on rising global inventories, weak Chinese consumption, and profit-taking by funds. The LMEX Metals Index, which tracks six major base metals on the London Metal Exchange, fell to the lowest since early April.
CORPORATE (BBG): Stellantis Shares Plunge as Earnings Fall by Nearly Half
Stellantis NV’s shares plummeted as much as 10% after the carmaker said it was bringing back old models and mulling price cuts to cope with a massive drop in sales during the first six months of the year. Net income fell 48% to €5.6 billion ($6.1 billion) in the first half, the manufacturer said, missing the €7 billion average estimate in a Bloomberg survey of analysts.
CORPORATE (BBG): STMicro Cuts Forecast as Slump in Automotive Chips Persists
STMicroelectronics NV cut its annual revenue outlook for the second consecutive quarter after an inventory glut and lower sales to carmakers depressed demand. Sales this year will fall to $13.2 billion to $13.7 billion, the Franco-Italian semiconductor company said in a statement on Thursday. That’s down from a previous range of $14 billion to $15 billion. In January, the chip manufacturer forecast annual revenue of as much as $16.9 billion.
CORPORATE (BBG): Universal Sinks 30% After Subscription Growth Misses Estimates
Universal Music Group NV’s shares fell as much as 30%, the biggest decline since the company’s initial public offering, after its subscription and streaming revenue growth disappointed investors. The world’s biggest record label, which represents artists including Taylor Swift and Drake, said its subscription revenue in recorded music grew 6.9% in constant currency terms in the second quarter, in a statement late on Wednesday. That missed estimates for a growth of 11% in a Bloomberg survey of analysts.
DATA
GERMANY DATA (MNI): Broad-Based IFO Weakness Reinforces Narrative of Recovery Stall
- GERMANY JUL IFO BUSINESS CLIMATE INDEX 87
Germany's IFO Business Climate Index fell in July for the third consecutive time to 87.0, weaker than both expectations of 89.0 and June's 88.6. This is the lowest overall print since February, and mirrors the July flash PMIs, which also saw a decline in sentiment across sectors. The data reinforces the narrative of a stall of the gradual recovery in Germany, and the weaker business expectations in particular also lower expectations of that recovery going forward. Both main subindices fell: current assessment came in at 87.1 (vs 88.5 cons; 88.3 prior), and expectations underperformed even more, at 86.9 (vs 89.3 cons; 89.0 prior).
FRANCE DATA (MNI): France Manufacturing Sentiment Lowest Since Dec 2020
- FRANCE JUL MANUF SENTIMENT AT 95
France Manufacturing Sentiment disappointed printing at 95 in July (vs consensus and prior of 99), the lowest since December 2020. It deviated significantly from its long term average of 100 and remains below the pre-covid (2014-19) average of 103.7. Of particular note, 'Personal Production expectations' subcomponent fell over 3 points to -5.4 - the lowest since July 2023, and the 'Demand and export order books' subcomponent deteriorated to -18.5 (vs -8.6 prior) - the lowest since May 2021. Similarly, the subcomponent 'General Production Expectations decreased to -18 from -11.6 in June, and therefore remained at the lowest levels since November 2020.
JAPAN DATA (MNI): Japan June Services PPI Rises 3.0% vs. May's 2.7%
- JAPAN JUNE SERVICES PPI +3.0% Y/Y; MAY REV +2.7%
- JAPAN JUNE SERVICES PPI 0.0% M/M: MAY REV 0.0%
Japan's services producer price index rose 3.0% y/y in June, accelerating from May's revised 2.7% and marking the highest level since March 2015 when it gained 3.1%, showing corporate pass-through of cost increases continued steadily, preliminary data released by the Bank of Japan on Thursday showed. The June index was driven by advertising (+6.9% vs. +2.1%) and other services, including hotels, (+4.0% vs. 3.6%), although transportation and postal services (+2.7% vs. +3.0%) weakened.
FOREX: JPY Rally Shows No Sign of Stopping, AUD Fallout Accelerates
- The JPY surge continues as the aggressive short-covering rally persists, putting the currency higher against all others (again) in G10. The Y152.00 handle is under pressure, and perhaps notably a print below Y151.95 would mark a full 1,000 pip reversal for USD/JPY off the pre-intervention high from early July. This keeps the 200-dma at 151.54 under pressure over the medium-term. A break below would be thje first since December of last year.
- Global growth and industry concerns are top of mind for markets, after a set of particularly poor earnings results from the Autos sector drove prices lower. Stellantis' >10% sell-off has undermined the Stoxx Autos&Parts Index, which has now fully erased all YTD gains that had hit 20% in mid-April. This risk-off driver has filtered into US yields, which are trading under pressure into the NY crossover and weighing on the greenback.
- Growth and risk proxy currencies lead declines, with AUD the poorest performer once more. AUD/JPY has broken below not only the key psychological Y100 level, but also the 200-dma at 99.83. The extended momentum-driven decline in the AUD/JPY 14-day RSI shows oversold technical measures are unlikely to reverse near-term trends, despite the signal printing below 20 today for the first time since 2019.
- US weekly jobless claims numbers and the advance US GDP print for Q2 are the data headlines Thursday, although prelim durable goods orders could also prove key on an out-of-consensus reading. ECB's Nagel and Lagarde are both set to speak, although Nagel's appearance is more likely to be policy-oriented as he appears in Rio at the G20.
BONDS: Curves Bull Steepen as Global Growth Concerns Build
The German and UK cash curves have bull steepened alongside US Treasuries this morning, as a confluence of factors support core FI.
- A surprise 20bp MLF cut from the PBoC overnight set the tone, before weak UK and European earnings (particularly in Autos) sparked a broader risk-off.
- Soft European survey data from France and Germany (IFO) alongside a continued unwind of JPY carry trades helped exacerbate the moves.
- Bund futures reached a high of 132.78 but now trade at 132.69 (+35 ticks today) as equity markets stabilise somewhat. Gilts are similarly +29 ticks at 98.11, down from a high of 98.21.
- The German and UK 2s10s curves have steepened almost 2bp today, with the latter challenging March 2023 steeps at typing.
- 10-year peripheral spreads have widened again amid the equity market weakness.
- Italy issued the new 3.10% Aug-26 BTP Short Term today (alongside a re-opening of two BTPei’s), which attracted a bid-to-cover ratio of 1.50x.
- Focus now turns to commentary from Bundesbank’s Nagel at 1200BST/1300CET, before today’s US macro data (Q2 GDP prelim, jobless claims).
EQUITIES: Eurostoxx 50 Futures Through Key Support at 4,848/46
Eurostoxx 50 futures have started Thursday trade poorly, with the contract breaking through several supports in early earnings-driven weakness. 4,848/46 have now both broken, giving way to a new pullback low at 4822.00. These levels mark key reversal points, opening round number support of 4800.00 initially, ahead of 4762.00 and the 200-dma. For bulls, a move higher and a break of 5087.00, the Jul 12 high, would argue for a return to the bullish theme. E-Mini S&P prices ebbed to a new pullback low early Thursday, building on the weak Wednesday close and souring the S/T outlook. Price has traded through the 50-day EMA as well as key support at 5501.50. This opens for further losses toward 5433.55, the 3.0% 10-dma envelope - a level pierced only three times since the beginning of 2023 and a decent reversal indicator. Sights to the upside are on 5741.34, a Fibonacci projection.
- Japan's NIKKEI closed lower by 1285.34 pts or -3.28% at 37869.51 and the TOPIX ended 83.26 pts lower or -2.98% at 2709.86.
- Elsewhere, in China the SHANGHAI closed lower by 15.21 pts or -0.52% at 2886.742 and the HANG SENG ended 306.08 pts lower or -1.77% at 17004.97.
- Across Europe, Germany's DAX trades lower by 216.44 pts or -1.18% at 18170.66, FTSE 100 lower by 71.88 pts or -0.88% at 8081.49, CAC 40 down 119.12 pts or -1.59% at 7393.37 and Euro Stoxx 50 down 64.98 pts or -1.34% at 4795.92.
- Dow Jones mini up 114 pts or +0.28% at 40221, S&P 500 mini down 3 pts or -0.05% at 5468.75, NASDAQ mini down 50.25 pts or -0.26% at 19153.25.
Time: 09:50 BST
COMMODITIES: Further Weakness in Gold Pulls Spot Through 20-Day EMA
WTI Future weakness through Tuesday and the broad commodity sell-off resulted in a new low for the contract at $76.40, breaking the Monday low in the process. Vol band based support undercuts from here at 76.52, ahead of key support at the Jun 4 low of 72.23. Initial key resistance to watch is $83.58, the Jul 5 high, and a break and close above this level is needed ahead of any test on the 84.36 bull trigger. Gold prices are heavy early Thursday, pushing spot below the 20-day EMA support to new pullback lows. Nonetheless, the broader gains last week reinforce current conditions, and keep the M/T trend pointed higher. The yellow metal has breached key resistance and the bull trigger at $2450.1, the May 20 high. This confirms a resumption of the medium-term uptrend and opens the $2500.00 handle next. Moving average studies are in a clear bull-mode set-up, highlighting a rising trend. Support shifts to $2320.1, the 50-day EMA.
- WTI Crude down $0.61 or -0.79% at $77.02
- Natural Gas up $0.01 or +0.33% at $2.123
- Gold spot down $21.29 or -0.89% at $2376.8
- Copper down $1.45 or -0.35% at $409.45
- Silver down $0.9 or -3.1% at $28.016
- Platinum down $7.69 or -0.81% at $943.48
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 25/07/2024 | - |  EU | ECB's Cipollone at Rio de Janeiro G20 Fin min/central bank meeting | |
| 25/07/2024 | 1230/0830 | *** |  US | Jobless Claims |
| 25/07/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 25/07/2024 | 1230/0830 | *** | US | GDP |
| 25/07/2024 | 1230/0830 | * |  CA | Payroll employment |
| 25/07/2024 | 1230/0830 | ** | US | Durable Goods New Orders |
| 25/07/2024 | 1230/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 25/07/2024 | 1300/1500 | ** |  BE | BNB Business Sentiment |
| 25/07/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 25/07/2024 | 1500/1100 | ** | US | Kansas City Fed Manufacturing Index |
| 25/07/2024 | 1500/1700 | EU | ECB's Lagarde attends Paris Summit | |
| 25/07/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 25/07/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 25/07/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 7 Year Note |
| 26/07/2024 | 2330/0830 | ** |  JP | Tokyo CPI |
| 26/07/2024 | 0600/0800 | ** |  SE | Unemployment |
| 26/07/2024 | 0645/0845 | ** |  FR | Consumer Sentiment |
| 26/07/2024 | 0800/1000 | ** |  IT | ISTAT Business Confidence |
| 26/07/2024 | 0800/1000 | ** | IT | ISTAT Consumer Confidence |
| 26/07/2024 | 0800/1000 | ** | EU | ECB Consumer Expectations Survey |
| 26/07/2024 | - | EU | ECB's Cipollone at Rio de Janeiro G20 Fin min/central bank meeting | |
| 26/07/2024 | 1230/0830 | ** | US | Personal Income and Consumption |
| 26/07/2024 | 1400/1000 | ** | US | U. Mich. Survey of Consumers |
| 26/07/2024 | 1500/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) | |
| 26/07/2024 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |