Morning Brew July 11 2024

Good morning,

As nothing rocked the boat yesterday, risk sentient did very well, the three big US Indexes added around 1%, the Nikkei crossed 42000 for the first time ever, the GER40 rose to 18450. Volumes were relatively low at 10 billion shares against an 11.5 billion average and the VIX is low at 12.8.

Ten year yields are trading around 4.30 and the USD Index fell below the 105 again to trade at 104.95. EURUSD is 1.08354, GBPUSD 1.2854 and USDJPY 161.70. Gold and Silver are 2381 and 31.05 while Bitcoin and Ethereum are at 57800 and 3090.

We are heading into a very busy day in terms of data, news and earnings. At 8 the German Inflation (+2.5%) and the UK GDP (+1.2%) will be released, at 14:30 the US Consumer Price Index expected at 3.1% and 3.4% core, Initial Jobless Claims are seen at 238k. Pepsi and Delta Airlines will report before the bell kicking off the earnings season.

Comment on the CPI: If the actual CPI  print comes in line with these expectations, then the market could increase the bets for a September rate cut to be fully priced in from 78% now. This could lead to a rally in bonds and equities, while the US dollar could face downside pressures. If the core CPI print is however above 0.3% MoM, that could see some USD buying and equity and bond selling as markets pushback on rate cut expectations again. To know more, listen to our Monday Macro podcast.

After Jerome Powells testimony the last two days it is very clear that the Fed has not made up it`s mind but is data dependent, the CPI is one of the key inputs.

In terms of news, more and more prominent democrats are urging Joe Biden from remaining in the race. George Clooney openly asked Biden to make room for a nimbler candidate, Nancy Pelosi and Chuck Schumer are said to be opposed to Biden in the race. NATO seems to be getting ready for a second Trump term, the alliance decided to take over the coordination of Ukrainian aid from the US. Any decision may have an impact on markets depending on who is selected and what the perceived chances against Donald Trump are.

Sino-US trade friction remains in focus as the US are looking go raise tariffs on aluminum that is imported to the US vial Mexico to prevent circumvention of direct taxes.

Redmond wrote a piece on Fed Policy: the Fed's Structural Dovish Orientation: Why Trump May Not Need to Rock the Boat

Trade carefully today!

Thursday

- Data DE HICP UK  GDP, US CPI & Initial Jobless Claims, Cook & Bostic speak
- Earnings: DNB  Delta Airlines, Pepsi Cola
Friday
- Data Sweden & France CPI US PPI & University of Michigan Sentiment

- Earnings:  Bank of New York Mellon, Citigroup, Wells Fargo, JP Morgan Chace

Expiries (in UTC)

Physically Settled Futures

FPN4 will expire 11-Jul-2024 at 15:00

CN4 will expire 15-Jul-2024 at 09:00

HEN4 will expire 15-Jul-2024 at 17:00