EXECUTIVE SUMMARY
- HARRIS LEADS TRUMP 44% TO 42% IN US PRESIDENTIAL RACE, REUTERS/IPSOS POLL FINDS
- TECH FALLS IN LATE HOURS AS EARNINGS UNDERWHELM
- NETANYAHU TO ADDRESS A CONGRESS DEEPLY DIVIDED OVER HIS LEADERSHIP
- GERMAN FLASH PMIS WEAKER-THAN-EXPECTED IN JULY
MNI (LONDON) - Figure 1: NZD/JPY extends sharp sell-off from July highs
Source: MNI/Bloomberg
NEWS
US (RTRS): Harris Leads Trump 44% to 42% in US Presidential Race, Reuters/Ipsos Poll Finds
Vice President Kamala Harris opened up a marginal two-percentage-point lead over Republican Donald Trump after President Joe Biden ended his re-election campaign and passed the torch to her, a Reuters/Ipsos poll found. That compares with a marginal two-point deficit Biden faced against Trump in last week's poll before his Sunday exit from the race. The new poll, conducted on Monday and Tuesday, followed both the Republican National Convention where Trump on Thursday formally accepted the nomination and Biden's announcement on Sunday he was leaving the race and endorsing Harris.
US (BBG): Tech Falls in Late Hours as Earnings Underwhelm
The start of the “Magnificent Seven” earnings season failed to impress investors after a powerful rally that drove the US stock market to a record-breaking run. A $290 billion exchange-traded fund tracking the Nasdaq 100 (ticker: QQQ) dropped in late hours. Alphabet Inc. retreated despite posting revenue that beat expectations. The company’s chief signaled investors will have to be patient to see concrete results from artificial-intelligence investments. Tesla Inc. slid after profit fell short of estimates and the electric-vehicle giant delayed its Robotaxi event to October.
US (WSJ): Tesla’s Profit Falls for Second Straight Quarter
Net profit tumbled 45% in the second quarter as the electric-vehicle leader continued to feel the impact of slower demand and stiffer competition.
US (WSJ): Google Parent’s Ad Sale Growth Slows as AI Investments Soar
Shares fall after Alphabet warns third quarter margins will be crimped.
US (BBG): Democrats Finalize Plan for Virtual Roll Call to Nominate Harris
A panel of Democratic stalwarts will meet Wednesday to complete a rule change to allow Vice President Kamala Harris to accept her party’s nomination for president weeks in advance of the party’s convention in Chicago. The virtual roll call would take place the first week of August and formalize the result of a remarkable 32-hour blitz in which Harris won the support of a majority of delegates without a single challenger emerging.
US/ISRAEL (NYT): Netanyahu to Address a Congress Deeply Divided Over His Leadership
When Prime Minister Benjamin Netanyahu of Israel arrives on Capitol Hill on Wednesday afternoon to address a joint meeting of Congress, he will confront a legislative body divided over his leadership in the face of international censure over the war in Gaza, with some showing open hostility to the government of a country that is supposed to be among the United States’ closest allies. “I will seek to anchor the bipartisan support that is so important for Israel,” Mr. Netanyahu said before departing Israel for his visit to Washington. In reality, his visit will underscore the rifts in Congress, particularly among Democrats, over the Israel-Hamas war at a moment when the party is seeking to unite around Ms. Harris as its presumptive presidential nominee.
UK (MNI): PM Starmer Faces Down First Backbench Rebellion, Suspends 7 MPs
Prime Minister Sir Keir Starmer has faced the first backbench rebellion of his tenure in office after seven of his Labour party MPs voted in favour of a motion put forward by the pro-independence Scottish National Party (SNP) to end a policy that denies parents access to claiming certain child welfare benefit payments for more than two children. Former Shadow Chancellor John McDonnell, Richard Burgon, Ian Byrne, Rebecca Long-Bailey, Imran Hussain, Apsana Begum and Zarah Sultana - all from the far-left of the Labour party and most associated with former leader and now independent MP Jeremy Corbyn - voted for SNP motion. They have subsequently had the Labour whip withdrawn for six months, meaning they will sit as independent MPs.
UK (FT): Investors Warm to UK Equities in ‘Turning of Tide’ for Unloved Market
Big investors are positioning themselves for “a turning of the tide” for London’s unloved stock market, hoping that an improving economy, lower interest rates and political stability will finally boost cheap British shares. International asset managers including BlackRock and Allianz have joined UK fund houses such as Ruffer and Rathbones in raising their exposure to UK-listed stocks in recent months. After years of disappointing performance compared with European and US markets, investors now see UK valuations as attractive.
JAPAN (BBG): Kishida Calls for More Money to Develop Domestic Chip Sector
Prime Minister Fumio Kishida’s administration is drafting legislation to propel further investment in chipmaking capacity at home. The government plans to submit “as soon as possible” a bill to the Diet that would support research and development of next-generation chips and their mass production, Kishida told reporters. “Domestic investment in AI and semiconductors needs to expand and continue,” Kishida said during a visit to state-backed Rapidus Corp.’s foundry in Chitose, Hokkaido on Wednesday. “The government will secure the necessary financing to provide large-scale and systematic support for priority investments that include mass production and R&D over multiple years.”
EUROPE/CHINA (BBG): China’s Slowdown Is Taking a Rising Toll on European Profits
From luxury brands to car makers, European companies are taking a hit from China’s slowdown, and more trouble is coming for businesses heavily reliant on demand in the Asian economic giant. Hugo Boss AG, Burberry Group Plc, and Daimler Truck Holding AG are among the high-profile names whose bottom line has been hurt by customers there turning more cautious. LVMH joined the growing list late Tuesday, reporting that sales in the region that includes China dropped 14% in the second quarter.
CHINA/COMMODITIES (BBG): Aluminum at Four-Month Low as Traders Shrug Off China Curbs
Aluminum fell to the lowest in four months as traders shrugged off China’s new emissions reduction plan for domestic smelters, which could lead to capacity cuts. China will support aluminum producers to use more renewable energy and no longer approve any new coal-fired power generators for smelting, according to a government plan issued Tuesday evening. The strategy also requires capacity to be below baseline energy-efficiency levels, meaning some plants will need to undergo technical upgrades or be phased out by the end of 2025.
CHINA/COMMODITIES (BBG): China Steel Market Jolted as New Quality Standards Trigger Sales
China’s steel market faces a turbulent period as new quality standards force traders to offload stockpiles, pressuring prices of the alloy and driving iron ore lower. Fresh quality standards for steel rebar published by China’s State Administration for Market Regulation last month will kick in on Sept. 25, and traders are rushing to clear their existing inventories that adhere to old rules. The summer lull, with steel futures in Shanghai down 16% this year on weak demand, poses a challenge for sellers, said Xu Xiangchun, an analyst with Mysteel Global.
N.KOREA/S.KOREA (NYT): North Korean Trash Balloons Hit South Korean President’s Compound
Weeks into North Korea’s campaign of launching balloons loaded with trash across the world’s most heavily armed border, some of them hit a symbolically significant target in South Korea on Wednesday: the presidential office in the heart of Seoul, the capital. North Korea has released more than 3,000 of the trash balloons since May, many of which have reached the South after floating across the Demilitarized Zone between the two nations. So far, they have been a nuisance but have posed no danger. They have landed on trees, farms and urban side streets, their payloads bursting and spilling out waste paper, used cloth, cigarette butts and compost.
DATA
EUROZONE DATA (MNI): Germany and France Underperform Wider EZ Again in July Flash PMI
- EUROZONE JUL FLASH MANUFACTURING PMI 45.6 (FCST 46.1); JUN 45.8
- EUROZONE JUL FLASH SERVICES PMI 51.9 (FCST 52.9); JUN 52.8
The Eurozone-wide July flash PMI was weaker-than-expected for both manufacturing and services components – unsurprising given the already-released German data. As such, Bunds saw little additional reaction, but are still +26 ticks today at 132.56, just short of the first resistance at 132.66 (Jul 17 high). Key themes to note are (1) the Eurozone ex-France and Germany continues to outperform the two largest economies, but (2) services cost pressures across the region remain elevated, even as pricing power limits some of the pass-on to end consumers.
GERMANY DATA (MNI): Weaker-Than-Expected July Flash PMI Helps Bunds to Intraday Highs
- GERMANY JUL FLASH MANUFACTURING PMI 42.6 (FCST 44.0); JUN 43.5
- GERMANY JUL FLASH SERVICES PMI 52.0 (FCST 53.3); JUN 53.1
The German July flash PMI was weaker than expected across both services and manufacturing, helping Bund futures push towards new intraday highs and retrace the sell-off seen following the French data, and weighing on the EUR in tandem. The manufacturing sector has been in contractionary territory since June 2022, printing at 42.6 in July (vs 44.0 cons, 43.5 prior). Services meanwhile registered its 5th consecutive month in expansion at 52.0 (vs 53.3 cons, 53.1 prior). The price paid/charged components suggest firms struggled to pass-on cost increases to end consumers.
FRANCE DATA (MNI): July Flash Services PMI Beats, But Inflation Pressures Evident
- FRANCE JUL FLASH MANUFACTURING PMI 44.1 (FCST 45.9); JUN 45.4
- FRANCE JUL FLASH SERVICES PMI 50.7 (FCST 49.7); JUN 49.6
The French services PMI rose back into expansionary territory in the July flash round, at 50.7 (vs 49.7 cons, 49.6 prior). In contrast, manufacturing was weaker-than-expected at 44.1 (vs 45.9 cons, 45.4 prior). These dynamics add strength to the ongoing narrative that services activity is driving the Eurozone's (gradual) economic recovery, while industry remains weak. Key note from the release: "Weak sales performances and delays from customers drove the slump in factory production, anecdotal evidence showed. On the other hand, business activity at services companies rose for the first time since April. The Olympic Games, as well as the end of the election period, were given as reasons for higher output".
UK DATA (MNI): PMIs Indicate Solid Growth; Less Cost Pressures from Wage Increases
- UK JUL FLASH MANUFACTURING PMI 51.8 (FCST 51.0); JUN 50.9
- UK JUL FLASH SERVICES PMI 52.4 (FCST 52.5); JUN 52.1
An upward surprise to the manufacturing PMI but services and the composite output PMIs were broadly in line with expectations. Note that this is the first notable firms' survey since the election - so the increase in confidence could be partly explained by further political stability - but on the growth picture the UK seems to be still doing well, culminating in increased services employment. Note that on cost passthrough, some of the pressures from wages seem to be receding but on the manufacturing side there are increasing pressures from supply chain delays.
UK APR-JUN MEDIAN PAY AWARDS +4.9% :Brightmine (MNI)
FOREX: JPY Spot TWI Nears 5% Rally Off Lows, EUR Sinks on PMIs
- Once again, broad JPY strength was evident across the European open, with JPY the best performing currency across G10 for a third consecutive session. JPY got a boost from a further flight-to-quality, a poor showing from global equity futures markets and a continued unwind of the carry trade fuelled USD/JPY rally. Cross-selling against antipodean currencies continues to stand out.
- After the key technical breaks in AUD/JPY earlier in the week, NZD/JPY is following suit Wednesday as price breaks the 200-dma support for the first time since June last year. Slippage through 90.82 would mark a total reversal of the rally off the early May lows, and could come into contention on an extension lower - the cross has traded lower in 10 of the past 11 sessions - helping trigger a technically oversold signal in the 14-day RSI.
- EUR similarly trades poorly on the back of a soft set of PMIs from France, Germany and the Eurozone-wide reading. EUR/USD was pressured to a new pullback low at 1.0826 on heavy volumes - making for the busiest session of the week so far. Interestingly, the protracted spot weakness off last week's high has worked against the formation of a 'golden cross' in DMA space (50-dma > 200-dma), denying markets a possible positive technical signal to slow the decline and build a base for a recovery.
- Focus turns to the remaining flash PMI prints today, aswell as the Bank of Canada rate decision, at which markets are split between a hold and a back-to-back 25bps rate cut, which would put the base rate at 4.50%. OIS pricing has another easing step priced at ~90% probability. New home sales data are then set to follow for June.
US TSYS: Off Highs But Still Firmer Amidst Equity Weakness and Mixed to Softer EU PMIs
- Treasuries pulled away from highs aided by a beat for the flash UK mfg PMI, but mostly keep to earlier strength following equity futures weakness (yesterday’s after-market earnings) before subsequent support from net softer than expected Eurozone flash PMIs (German miss offset a French beat).
- Energy and industrial commodity prices offer a less clear-cut driver today after yesterday’s continuation of broad declines.
- Yesterday’s 2Y auction was particularly strong as investors currently see the Fed cutting in September: largest stop through in recent years (2.1bp), highest bid-to-cover since Aug 2023 (2.85x) and highest non-primary dealer take-up in data going back to 2003.
- The long-end meanwhile reverses yesterday’s late sell-off linked to corporate debt issuance.
- Cash yields are 1-2bp lower on the day, whilst 2s10s sees a mechanical shunt higher to -20bps for fresh highs since January on the new 2Y benchmark, an extension of yesterday’s steepening seen after the auction results.
- TYU4 at 110-29 (+01) is off an earlier high of 110-31 but has remained within yesterday’s range overnight.
- There’s some reluctance to push much higher, after Monday’s low of 110-18+ probed support at the 20-day EMA (110-21+) to open the 50-day EMA (110-08+).
- US flash PMIs at 0945ET come after a particularly light start to the week for data, but with greater on focus on GDP/PCE data over the next two days. The BoC decision at the same time could see some spillover with a second consecutive cut almost fully priced and the broader tone watched.
BONDS: Bunds Fall From Post-PMI Highs
Bund futures have fallen ~30 ticks from intraday highs as markets digest the July flash PMI round, now performing similarly to Gilts.
- The German PMI in particular allowed Bunds to rally to intraday highs at 132.66 (Jul 17 high and first resistance), though indications of continued services inflation persistence helped futures back to current levels at 132.38.
- 10-year Bund supply will have also weighed into the 1030BST bidding deadline.
- Although strong growth signals from the UK PMI weighed on Gilts, a solid 30-year auction helped stabilise futures to the middle of today’s range (currently +10 ticks today at 98.02).
- The German cash curve has bull steepened with yields flat to 3bps lower, while the Gilt curve sees 2/5-year yields slightly lower but the mid/long-end of the curve little changed.
- Continued equity market weakness (spurred by last night’s earnings from Tesla and Alphabet in the US) sees 10-year peripheral spreads to Bunds widen, with the BTP/Bund spread back above 133bps.
- ECB Chief Economist Lane appears on a panel at 1300BST/1400CET, while the BoC decision provides some spillover potential this afternoon (1445BST).
EQUITIES: E-Mini S&P Returns Lower Following Poor After-Market Earnings
A bull cycle in Eurostoxx 50 futures remains intact, despite the pullback in prices into the Friday close. Prices recovered well across the Monday and Tuesday sessions, however the move lower last week undermines the bullish theme somewhat, with price having tested the bear trigger at 4860.00, the Jun 14 low. Clearance of this level would expose 4846.00, the Apr 19 low and a key reversal point. For bulls, a move higher and a break of 5087.00, the Jul 12 high, would again highlight a bullish theme. E-mini S&P prices returned lower early Wednesday on the back of poor after-market earnings, pressuring the Jul 19 lows at 5542.00. Any renewed weakness through here would challenge the 50-day EMA and key support of 5501.50. The broader trend condition in S&P E-Minis remains bullish and the slip lower into last week’s close appears to be a correction. MA studies are in a clear bull-mode set-up, highlighting positive market sentiment. Sights are on 5741.34, a Fibonacci projection.
- Japan's NIKKEI closed lower by 439.54 pts or -1.11% at 39154.85 and the TOPIX ended 40.27 pts lower or -1.42% at 2793.12.
- Elsewhere, in China the SHANGHAI closed lower by 13.416 pts or -0.46% at 2901.952 and the HANG SENG ended 158.31 pts lower or -0.91% at 17311.05.
- Across Europe, Germany's DAX trades lower by 186.6 pts or -1.01% at 18370.92, FTSE 100 lower by 37.07 pts or -0.45% at 8130.01, CAC 40 down 124.28 pts or -1.64% at 7474.35 and Euro Stoxx 50 down 62.17 pts or -1.26% at 4854.63.
- Dow Jones mini down 201 pts or -0.49% at 40414, S&P 500 mini down 42.25 pts or -0.75% at 5556.5, NASDAQ mini down 213.25 pts or -1.07% at 19711.
Time: 09:50 BST
COMMODITIES: WTI Futures Recover from Yesterday's Multi-Week Lows
Weakness through Tuesday and the broad commodity sell-off resulted in a new low for WTI futures 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 faded across the second half of last week, resulting in new pullback lows of $2383.99 on Monday. 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. Initial support is at $2392.2, the 20-day EMA.
- WTI Crude up $0.56 or +0.73% at $77.52
- Natural Gas down $0.04 or -1.87% at $2.145
- Gold spot up $2.56 or +0.11% at $2412.64
- Copper down $0.7 or -0.17% at $415.15
- Silver down $0.01 or -0.04% at $29.241
- Platinum up $10.56 or +1.11% at $959.29
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 24/07/2024 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 24/07/2024 | 1200/1400 |  EU | ECB's Lane at ECB/IMF conference | |
| 24/07/2024 | 1345/0945 |  CA | BOC Monetary Policy Report | |
| 24/07/2024 | 1345/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 24/07/2024 | 1345/0945 | *** | US | S&P Global Services Index (flash) |
| 24/07/2024 | 1345/0945 | *** | CA | Bank of Canada Policy Decision |
| 24/07/2024 | 1400/1000 | *** | US | New Home Sales |
| 24/07/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 24/07/2024 | 1430/1030 | CA | BOC Governor Press Conference | |
| 24/07/2024 | 1530/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 24/07/2024 | 1700/1300 | * | US | US Treasury Auction Result for 5 Year Note |
| 25/07/2024 | 0600/0800 | ** |  SE | PPI |
| 25/07/2024 | 0645/0845 | ** |  FR | Manufacturing Sentiment |
| 25/07/2024 | 0800/1000 | ** | EU | M3 |
| 25/07/2024 | 0800/1000 | *** |  DE | IFO Business Climate Index |
| 25/07/2024 | 1000/1100 | ** |  GB | CBI Industrial Trends |
| 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 |