Global Market Quick Take: Asia – July 2, 2024

In the news:

• Tesla deliveries set to fall for second straight quarter (Reuters)
• Chewy shares fall nearly 7% as the boost from Roaring Kitty’s new stake diminishes (CNBC)
• Salesforce shareholders reject compensation plan for CEO Marc Benioff (CNBC)
• Trump Media joins Russell Indexes after annual refresh (Reuters)

Macro: 

• US ISM manufacturing PMI for June saw the headline post a surprise decline to 48.5 from 48.7, beneath the 49.1 forecast. The subcomponents of the report saw prices paid ease to 52.1 from 57.0, taking it to the lowest level in 2024 so far, while employment fell into contractionary territory at 49.3 from 51.1. New Orders rose to 49.3 from 45.4, indicating a further slowdown, albeit at a slower rate than in May. We discussed the broadening of weakness in the US economy in yesterday’s Saxo Market Call podcast, and the US JOLTS jobs openings will be key to watch today.
• Germany’s headline inflation came in lower than expected in June, although core is not reported in the preliminary numbers. Headline inflation was at 2.5% YoY from 2.8% in May, driven by lower fuel costs. Today’s focus turns to Euro-area inflation for June.
• Former president Trump was given relief from the Supreme Court after its ruling that the President should be give broad immunity. That will likely lead to the prosecution from January 6 being less likely and give the President and his staff more time to focus on the election.

Macro events: RBA Minutes (June), Australian & Canadian Manufacturing PMI Final (June), EZ Flash CPI (June), Unemployment Rate (May), US JOLTS Job Openings (May). Speakers: Fed's Powell, ECB's Lagarde

Earnings: N/A

Equities:  U.S. stocks closed higher as the second half of the year began. The S&P 500 increased by 0.3%, the Dow Jones rose by 0.1%, and the Nasdaq climbed 0.8%, driven by strong performances from tech giants such as Apple (+2.9%), Amazon (+2%), and Microsoft (+2.2%). Nvidia saw a rebound with a 0.6% increase, while other chip makers like AMD (-2.8%) and Arm (-2.9%) experienced declines. Tesla notably surged by 5.9%, and Meta recorded slight gains despite facing regulatory concerns in the EU over its ad-free services model on Instagram and Facebook. CAC 40 climbed 1.1% to close at 7,561 on Monday, after initially surging up to 2.8%. Investors are processing the election results, recognizing that political instability is likely to persist.

Fixed income: U.S. 10-year bond yield hit a 4-week high of 4.48% due to fiscal risk concerns and Fed policy outlook. Anticipation of a Trump presidency and expansionary fiscal policies increased inflation worries. ISM data showed a significant manufacturing contraction and slowing prices. About 65% of the market expects a Fed rate cut in September, with over 60% predicting two or more cuts this year. The yield on the German 10-year Bund increased to 2.57% at the start of July, its highest in over two weeks. Political uncertainty in France contributed to volatility in the European bond market, while investors analyzed recent domestic price data for insights into the ECB’s policy outlook. UK's 10-year Gilt yield climbed to 4.24%, reaching a three-week high ahead of the upcoming parliamentary elections.

Commodities: Oil prices rose due to summer demand expectations and concerns over Middle East conflicts. Brent prices climbed 6% in June, bolstered by OPEC+ extending output cuts until 2025. Additionally, Hurricane Beryl's approach to the Caribbean's Windward Islands could affect oil and gas production and consumption in the Americas. US natural gas futures dropped roughly 5% to a six-week low of $2.47/MMBtu on Monday, driven by higher production, reduced demand forecasts, and an excess of gas in storage. Silver surges more than 1% from its daily low of $28.95 and gold gained 0.22% to above $2,330.

FX: There was a sense of relief in the European markets following the first round of French elections, which signaled that Marine Le Pen may not get an absolute majority. The euro rose while the safe-haven currency Swiss franc underperformed. US bond yields rose late in the overnight session with markets considering the possibility of another Trump presidency after last week’s debate and Supreme Court ruling limiting the chance of Trump facing a trial before the November election. The US Dollar rose as a result, while the Japanese yen slipped to record lows once again. The New Zealand dollar and the Australian dollar also slipped, and the latter will be eyeing the minutes from the Reserve Bank of Australia’s June policy meeting where the door for a rate hike was kept open. To read more about our FX view, go to the Weekly FX Chartbook published yesterday. 

For all macro, earnings, and dividend events check Saxo’s calendar.

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