MNI US OPEN - Stocks Tumble Ahead of US Payrolls Report

EXECUTIVE SUMMARY

• MNI US PAYROLLS PREVIEW - HURRICANE BERYL TO ADD A LAYER OF CONFUSION
• JAPAN STOCKS TUMBLE IN BIGGEST TWO-DAY ROUT SINCE 2011 TSUNAMI
• INTEL’S SALES SLUMP THREATENS BIGGEST SHARE DROP IN 24 YEARS 
• SWISS HEADLINE CPI REMAINS AT 1.3%, SERVICES MODERATE

MNI (LONDON) - Figure 1: Nikkei 225 closes at lowest level since Jan 

Source: MNI/Bloomberg

NEWS

MNI US PAYROLLS PREVIEW: Hurricane Beryl to Add a Layer of Confusion

Nonfarm payrolls are expected to moderate further in July after the slight beat in June was more than offset by large negative revisions to the prior two months. Hurricane Beryl is likely to have the largest impact on the establishment survey, clouding the underlying trends with expected negative impacts on payrolls and hours worked but some upside for AHE growth. This hurricane impact adds asymmetrical risk to reaction in payrolls surprises: a 20-30k miss could easily be faded whilst a beat would be an outright positive surprise. Revisions will be particularly important.

US/ISRAEL (MNI): Biden to PM: Accept Ceasefire Deal; Says Haniyeh Killing Doesn't Help

US President Joe Biden called on Israeli PM Benjamin Netanyahu to accept the current ceasefire-for-hostages deal on the table to end the war in Gaza. In a call on 1 August between the two, Biden said that he told Netanyahu “We have the basis for a cease-fire,” adding that “He should move on it and they should move on it now.” Biden also said that the killing of Hamas' political leader Ismail Haniyeh in the Iranian capital, Tehran, had “not helped" the situation. The entire region remains in a state of heightened alert, with the likelihood of an Iranian-orchestrated retaliation likely in the coming days. This could come directly from Iran, from its proxies in the 'Axis of Resistance', or a combination of both.

US (NYT): Trump Escalates Race Attacks on Harris, Worrying Some Republicans

A day after telling Black journalists that Vice President Kamala Harris had recently decided to become “a Black person,” Mr. Trump shared a photo of Ms. Harris in traditional Indian clothing. Donald J. Trump continued to raise false and incendiary questions about Vice President Kamala Harris’s racial identity for a second day on Thursday, as Republicans watched the former president drive his campaign into a divisive and potentially damaging direction.

CHINA (BBG): PBOC Adviser Gives Rare Critique of China Economic Policies 

An influential Chinese central bank adviser delivered a rare critique of his nation’s economic policy, urging the government to set a compulsory target for inflation and step up spending to address weak consumption. Authorities should change their strategy of “focusing on investment and neglecting consumption,” said Huang Yiping, a member of the People’s Bank of China’s monetary policy committee, according to an article published this week, which cited his earlier speech in May.

JAPAN (BBG): Japan Stocks Tumble in Biggest Two-Day Rout Since 2011 Tsunami

What started as a nasty drop in Japanese stocks on Thursday turned into a full-blown rout on Friday as the Topix index posted its biggest two-day decline since the 2011 tsunami. It’s a stark turnaround from the record high set in July, when Japanese equities were being celebrated as one of the world’s best-performing markets. The Topix sank 6.1% Friday, completing a two-day drop of 9.2% in the wake of Bank of Japan’s earlier-than-expected rate hike Wednesday and Governor Kazuo Ueda’s hawkish messaging. The Topix joined the Nikkei 225 Stock Average in entering a technical correction.

RBA (MNI): Board to Hold, Await Further Inflation Insight

The Reserve Bank of Australia looks set to hold the cash rate at 4.35% at its Aug. 5-6 meeting, while maintaining its hardline message that inflation, particularly market services, remains persistent. The RBA will also release updated forecasts within its Statement of Monetary Policy, which will likely change little from May’s publication. Q2 inflation fell largely inline with the RBA’s predictions, which will give the board encouragement the cash rate remains restrictive and its timeline aiming to pull CPI back to the 2-3% target by 2026 remains on track. Mixed employment, retail sales and housing data will also drive the board's caution.

VENEZUELA (BBG): Venezuela Opposition Calls Protests as US Backs Transition 

Banned opposition leader Maria Corina Machado called for protests across Venezuela to defend what her party sees as its rightful electoral victory, as President Joe Biden’s top diplomat said the US backs a transition of power. “We will all gather with our family, with our kids, our grandchildren, our grandparents in all of Venezuela’s cities” on Saturday morning, Machado said Thursday in a video posted on X. The US has said Machado’s stand-in candidate, Edmundo Gonzalez, defeated authoritarian President Nicolas Maduro in last Sunday’s vote. 

INDIA (BBG): JPMorgan to Monitor India Bond Liquidity on Investor Curbs 

JPMorgan Chase & Co. will more closely monitor liquidity in longer tenor Indian debt that is part of its emerging market bond index, after moves by authorities to remove eligibility from future issuances of the bonds. A lack of secondary market quotes or complaints from clients would prompt the Wall Street bank to reassess whether the notes should continue to be included in the index, according to a person familiar the institution’s thinking, who asked not to be named because they weren’t authorized to speak publicly on the matter.

CORPORATE (BBG): Intel’s Sales Slump Threatens Biggest Share Drop in 24 Years 

Intel Corp. is headed toward its biggest share decline in 24 years after giving a grim growth forecast and laying out plans to slash 15,000 jobs, signaling that the chipmaker is ill-equipped to compete in the artificial intelligence era. Sales for the current quarter will be $12.5 billion to $13.5 billion, the company said Thursday. Analysts had projected $14.38 billion on average, according to data compiled by Bloomberg. Intel will have a loss of 3 cents a share, excluding certain items, versus expectations for a profit of 30 cents. 

CORPORATE (WSJ): Apple’s iPhone Sales Slip, but Investors Still Expect AI Rally

The iPhone maker is preparing to release “Apple Intelligence” in the fall, which investors hope will lead users to upgrade their phones.

CORPORATE (WSJ): Amazon Shares Slide as Spending Surges and Revenue Outlook Disappoints

The company projected weaker-than-expected revenue growth and said it would continue to ratchet up spending to meet anticipated demand for artificial-intelligence services.

DATA

SWITZERLAND DATA (MNI): Detailed Data Suggests Lower Services Price Pressure

• SWISS JUL CPI -0.2% M/M, +1.3% Y/Y

Swiss July Headline CPI came in in line with both expectations and June's print at 1.3% Y/Y. Looking at the data in more detail, it appears that there was a relatively broad-based decrease in pressures in the services categories (overall services 2.2% Y/Y vs 2.4% prior) - pp contributions to headline decreased in all of healthcare, transport, communication, and recreation, and only increased in the hospitality category. While the decreases in contributions were helped by volatile package holidays (6.0%Y/Y to 4.2%Y/Y), they support the view that inflationary pressures decreased slightly this month compared to last month.

FRANCE DATA (MNI): Industrial Production Rebounds Less Than Expected in June

• FRANCE JUN INDUSTRIAL PRODUCTION +0.8% M/M, -1.6% Y/Y
• FRANCE JUN MANUFACTURING OUTPUT +0.8% M/M, -2% Y/Y

France Industrial Production disappointed on both a yearly and monthly basis again in June at -1.6% Y/Y (vs -1.1% consensus, -3.1% prior) and 0.8% M/M (vs 1.0% consensus, -2.2% prior revised from -2.1%). The softer than expected reading was largely due to manufacturing production (which accounts for over 80% of industrial production) rebounding less than expected and only rising 0.8% M/M (after falling -2.7% last month). 'Extractive industries, energy and water' production printed a smaller gain of 0.7% M/M (vs 0.8% M/M prior) - its fourth consecutive gain albeit softest.

ITALY JUN INDUSTRIAL PRODUCTION +0.5% M/M ; -2.6% WDA Y/Y (MNI)

FOREX: EUR Recovers Off Lows, While Trend in USD/JPY Remains Lower

• Despite softer stocks, lower US yields and a general risk-off theme, currency markets are more sanguine early Friday, treading water ahead of the key US jobs release later today. The single currency is among the strongest performers in G10, recovering off lows posted yesterday at 1.0778 to keep EUR/USD above the 1.08 handle ahead of the NY crossover.
• JPY benefits from the cautious backdrop, however USD/JPY is yet to print a new pullback low - still intact from yesterday at 148.51. Clearance here puts the pair to fresh multi-month lows. 
• Elsewhere, equities markets are backtracking, with the e-mini S&P and broader US equity futures space pointing to a deeply negative open on Wal Street later today. Intel's after-market earnings on Thursday were the core trigger, with a very disappointing set of results driving their share price lower by over 20% ahead of the opening bell. As a result, global chipmakers and tech names are heavy, prompting notable underperformance in the NASDAQ future and Dutch stock indices - home to semiconductor name ASML.  
• Currency markets are on watch for today's NFP print (currently expected at +175k, with a whisper number of +170k), with renewed concerns on the pace of the deterioration in the US labour market. The unemployment rate is of interest, and any further tick higher in the rate this month will put the rate at a new post-pandemic high. 

BONDS: Off Best Levels, EGBs Widen Further vs. Bunds as Equities Struggle

Bonds are firmer on the day but off highs.

• Bulls failed to push German 10-Year yields meaningfully below 2.20%. The failure to take out that level triggered a bit of a retracement.
• An extension of yesterday’s risk-off trade was initially seen, with tech stocks under pressure in Asia following earnings reports from Intel and Amazon.
• Catch up to Thursday’s weakness in U.S. & European equities, as well as assessment of U.S. data, also factored in there.
• German yields are ~2bp lower, seeing a parallel shift across the curve.
• EGB spreads to Bunds are wider given the broader risk-off trade,
• BTP/Bunds moved above 145bp for the first time since early July, before fading.
• OAT/Bunds back above 75bp.
• Gilt yields are 1-5bp lower, bull steepening.
• Futures volumes are elevated across core contracts.
• The U.S. NFP report dominates today’s calendar.
• Payrolls are expected to moderate further in July. Hurricane effects add a further layer of complexity.
• BoE chief economist Pill will speak again today. He was a hawkish dissenter, voting against yesterday’s rate cut, before stressing that the BoE has not committed to further easing.

EQUITIES: E-Mini S&P Sharply Reverses This Week's Prior Gains

A bear threat in Eurostoxx 50 futures remains present and the contract traded lower Thursday. Price has recently breached 4846.00, the Apr 19 low. The clear break of this level paves the way for an extension towards 4711.10 next, a Fibonacci projection. Note that price has also pierced the 200-dma, reinforcing a bearish theme. Initial firm resistance to watch is 4951.89, the 50-day EMA. S&P E-Minis traded lower between Jul 16 - 25, resulting in a break of the 20- and 50-day EMAs. The breach does highlight a short-term bearish threat - a corrective cycle. Yesterday’s move lower and today’ extension reinforces the short-term bearish theme and this has opened 5370.62, a Fibonacci retracement. Resistance to watch is 5600.75, the Aug 1 high. Clearance of this level would highlight a bullish break and signal the end of the correction.     

• Japan's NIKKEI closed lower by 2216.63 pts or -5.81% at 35909.7 and the TOPIX ended 166.09 pts lower or -6.14% at 2537.6.
• Elsewhere, in China the SHANGHAI closed lower by 27.05 pts or -0.92% at 2905.337 and the HANG SENG ended 359.45 pts lower or -2.08% at 16945.51.
• Across Europe, Germany's DAX trades lower by 185.8 pts or -1.03% at 17897.43, FTSE 100 lower by 22.76 pts or -0.27% at 8259.56, CAC 40 down 31.6 pts or -0.43% at 7338.85 and Euro Stoxx 50 down 52.67 pts or -1.11% at 4713.05.
• Dow Jones mini down 236 pts or -0.58% at 40278, S&P 500 mini down 53.25 pts or -0.97% at 5426.25, NASDAQ mini down 309 pts or -1.62% at 18710.75.

Time: 09:50 BST

COMMODITIES: Gold Narrows Gap to Bull Trigger at $2483.7

A bear threat in WTI futures remains present and Wednesday’s strong bounce is considered corrective - for now. The recent breach of both the 20- and 50-day EMAs, reinforces a bear theme. A continuation lower would open $72.23, the Jun 4 low and the next key support. For bulls, a reversal higher would instead refocus attention on the key resistance points at $83.58, the Jul 5 high, and $84.36, the Apr 12 high. Gold has traded higher this week. The recent move down appears to have been a correction. The yellow metal did manage to pierce support at the 50-day EMA - at $2370.3. A clear break of this average would signal scope for a deeper retracement towards $2277.4, the May 3 low and a key support. For bulls, this week’s gains are constructive. Sights are on $2483.7, the Jul 17 high, and a bull trigger. Clearance of this hurdle resumes the uptrend.

• WTI Crude up $0.5 or +0.66% at $76.81
• Natural Gas up $0.02 or +0.76% at $1.983
• Gold spot up $16.14 or +0.66% at $2462.59
• Copper up $2.55 or +0.62% at $410.9
• Silver up $0.37 or +1.28% at $28.891
• Platinum up $10.22 or +1.06% at $974.02

Time: 09:50 BST

Date	GMT/Local	Impact	Country	Event
02/08/2024	1115/1215		GB	BOE's Pill at National MPC Agency Briefing
02/08/2024	1230/0830	***	US	Employment Report
02/08/2024	1400/1000	**	US	Factory New Orders
02/08/2024	1430/1030		CA	BOC market participants survey
02/08/2024	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly