Daily Market Outlook, July 9, 2024

Munnelly’s Macro Minute…

“FED Chair Powell Testimony The Macro Catalyst For The Day”

Japanese stocks, particularly semiconductor-related shares, led gains in Asia following their US counterparts. The Nikkei 225 Stock Average set a new record, with a year-to-date gain of over 23%. Australian equity indices and US stock futures surged, while the S&P 500 closed 0.1% higher on Monday. Mainland China and Hong Kong saw a decline in shares as the dollar strengthened against other major currencies. Information technology shares were the largest contributors to gains in the MSCI Asia Pacific Index, with sentiment around stocks with high exposure to AI being the most elevated since 2019. In China, markets are skeptical about the central bank's fresh liquidity operations announced on Monday, and investors are also looking ahead to a major annual policy summit next week. The Bank of Japan is set to have key meetings aimed at gauging a realistic pace for a reduction of its bond purchases to be announced later this month, with increased demand at a Japanese five-year auction despite speculation about the BOJ's bond buying reduction.

Today, Washington is taking center stage, with intense post-French-election negotiations underway. Federal Reserve Chair Jay Powell will begin two days of semi-annual Congressional testimony with an appearance before the Senate on Tuesday. While inflation was a concern earlier this year, it has since cooled, and the job market is showing signs of strain from months of tight policy. Traders will be closely monitoring Powell's balancing act between addressing price pressures and avoiding unnecessary hardship for American workers. Following Powell's testimony, Thursday will bring the latest consumer price data, which may not be the preferred sequence of events for investors and Powell. There are also uncertainties surrounding the U.S. presidential election in November, with Joe Biden facing pressure to retire despite his insistence on staying in the race. Biden's odds of running have increased, while odds on Kamala Harris replacing him have fallen. Meanwhile, Donald Trump may announce his running mate on July 15 at the start of the Republican convention. In France, the political landscape is uncertain following a split vote across three parties, with the leftist New Popular Front emerging as the winner and President Emmanuel Macron's centrist Ensemble Alliance securing seats in parliament. This outcome is likely to result in a period of political paralysis and a decrease in France's influence in Europe.

Overnight Newswire Updates of Note

NATO Summit Puts Biden’s Fitness Under a Microscope - WSJ
Hamas Chief: Latest Israeli Attack On Gaza Endangers Ceasefire Talks
Fitch: US, China Challenges Persist For Global Credit Outlook
BoJ Sounds Out Market Players Before Finalising Bond-Buying Cuts
Britain’s Retailers Report Sharp Drop In Spending In Colder June
Australia Business Conditions Worsen In June, Job Outlook Dims - Yahoo
Japan’s Nikkei Hits Record High as Chip-Related Shares Track US Peers
APAC Stocks Rise Before Powell’s Testimony: Markets Wrap
S&P 500, Nasdaq Hit New Records As US Stocks Start Week With Gains
Roche Receives CE Mark For Continuous Glucose Monitoring Solution
Saudi Aramco Mandates Banks For Multi-Tranche USD Notes
Shell Redeploys Gulf Of Mexico Staff To Its Perdido, Whale Oil Platforms
Oil Prices Continue Retreat On Tuesday, Extending Losses

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0700 (2.1BLN), 1.0710-20 (1.5BLN), 1.0725 (379M), 1.0750 (1BLN)
1.0765-70 (1BLN), 1.0780 (404M), 1.0800 (2.9BLN), 1.0815-25 (813M),
GBP/USD: 1.2605 (533M), 1.2645-60 (689M), 1.2770 (404M)
AUD/USD: 0.6665 (780M), 0.6700 (438M), 0.6750-60 (1.7BLN)
NZD/USD: 0.6250 (436M)
USD/CAD: 1.3660-70 (889M), 1.3685-90 (962M), 1.3700 (262M)
USD/JPY: 160.00 (587M), 161.00 (450M)

CFTC Data As Of 5/7/24

JPY: -184,223 contracts
EUR: -9,519 contracts
GBP: 62,041 contracts
CHF: -43,443 contracts
Bitcoin: -912 contracts
Equity fund managers cut S&P 500 CME net long position by 24,005 contracts to 953,130
Equity fund speculators trim S&P 500 CME net short position by 5,025 contracts to 293,675