Morning Brew July 4 2022
Senior Relationship Manager
Summary: 4th of July, expect thin volumes in nervous markets
Friday was a decent start into the third quarter for Equities overall, US Indexes gained app 1% in fairly slow trading. Outlier was the chip sector that came under severe pressure on a warning by Micron Technology that demand was slowing. This dragged the sector down by app 4%.
The USD Index hit a high of 105.63 on Friday and receded to 105..02 now on 10 year yields in the US falling to 2.90. German Yields also fell with the Bund future gaining. EURCHF remains near parity and EURUSD at 1.0436, GBPUSD traded below 1.20 on Friday but gained to 1.2100.
Commodity weekly: Copper and cotton crushed on galloping recession fears
Gold and Silver came under severe pressure, Gold seems to have found a bottom at 1780 again, Silver seems to have room to the downside until 18.40 technically.
Bitcoin remains below the 20k and ETH at 1050.
The main question at the moment seems to be if a recession or hints thereof causes central banks to shift their rate expectations or if the current hawkish expectations remain anchored. Hi Inflation in the EU calls for a hike by the ECB on the 21st, currently futures price in a 10 bps hike. For the FOMC on the 27th, a 75% probability for a 75bps hike is traded.
German Trade data came worse than expected this morning with the Trade balance at -1 bio vs a surplus of 2.7 bio expected.
At 8:30 we are expecting the Swiss CPI and at 9:00 that of Turkey, EU Sentix Index at 11.
Remember that the US is closed for the 4th of July.
Tomorrow international PMI will be closely watched, Wednesday EU Retail Sales and US PMI and Friday the US Nonfarm Payroll will be the key event.
Expect thin liquidity and somewhat nervous trading today as may market participants are off.