Macro: Sandcastle economics
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Morning Brew July 12 2023
Erik Schafhauser
Senior Relationship Manager
Summary: CPI Day
Good Morning,
Big CPI today , traders seem to expect a weaker reading as yields drop int eh forefront. 10 year US yields are below the 4% at 3.964 and the 2 year are below 5% at 4.86. The USD Index falls to a two month low at 101.42.
EURUSD broke the 1.10, GBPUSD above 1.29 and USDJPY below 140. GBPJPY fell to 180.80. Gold rose to 1938 usd / Oz and Silver 23.22.
Equities gained with the Dow +0.9% , the NASDAQ +0.55% and S&P500 +0.7%. Besides the lower rates, Microsoft`s US approval for the Activision takeover boosted sentiment, and higher oil boosted the sector. Oil is up 4% the week. Overall, volumes remained a little subdued at app 10% below the average – today should be different.
Watch out for eh Nasdaq rebalancing and Peter wrote a summary of the implications.
China is likely to announce stimulus measures not far int he future.
What to expect from the CPI? The Core CPI is expected at 5% YoY and 0.3% Monthly with estimates ranging tichtly between 4.9% and 5.1% and 0.2% - 0.4%% respectively, the headline annual non seasonal number is expected at 3.1% annually with a range between 2.9% and 3.3%. JP Morgan estimates the following moves in the S&P:
- CPI above 3.7%: S&P 500 down between 2-2.5%
- CPI 3.3%-3.6%: Down between 1-1.25%
- CPI 3%-3.2%: Up between 0.5-0.75%
- CPI 2.8%-2.9%: Up between 1.5-1.75%
- CPI below 2.7%: Up between 2.5-3%
A key factor to watch is the implied fed rate in the future right now, the year end rate is being traded at 5.375% and for the next meeting, the probability of a hike by 25bps is 88%.
Wednesday July 12
US CPI, Feds Barkin & Kashkari speak
Thursday July 13th
China Trade Data, UK GDP, FR CPI, US Initial Jobless Claims and PPI
Earnings: Pepsi&Delta
Friday July 14th
Sweden CPI, EU Trade Balance, US University of Michigan, Feds Walker speaks
Earnings: JP Morgan, Citi, Statestreet.. Blackrock
Expiries
Physically Settled Futures
- NK225M3 will expire 13 Jul 2023 at 06:15 GMT
- CUSN3 will expire 14 Jul 2023 at 04:00 GMT
- LBRN3 will expire 14 Jul 2023 at 15:00 GMT
- HEN3 will expire 17 Jul 2023 at 17:00 GMT
Trade carefully
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