Strongest to weakest of major currencies

At the start of the North American session, GBP is strongest and CHF is weakest. USD is mixed ahead of key PCE fundamentals at 8:30AM ET.

Japan’s Tokyo Consumer Price Index (CPI) rose 3.2% year-on-year overnight, less than an expected 3.4% but higher than last month’s 3.1%. The unemployment rate remained stable at 2.6%, in line with the forecast and last month’s data. Preliminary industrial production fell -1.6% month-on-month, worse than the expected -0.9% decline and a sharp drop from the previous month’s 0.7% growth. USDJPY moved to a new high but retreated from the high. Watch the USDJPY overbought video HERE.

In China, the manufacturing purchasing managers’ index (PMI) was 49.0, in line with the forecast and slightly higher than last month’s 48.8, although still indicating a decline in the sector (below 50). The non-manufacturing PMI was 53.2, down from expectations of 53.7 and 54.5 last month, signaling slower expansion in the non-manufacturing sector.

Jerome Powell of the US Federal Reserve and Christine Lagarde of the European Central Bank (ECB) confirmed their focus on beating inflation and said their work is not yet done. Both also talked about how data-dependent politics was. A flash CPI in Euros was released today and the US will also see inflation data.

In the US, the core personal consumption expenditure index, the Fed’s favorite measure of inflation, is expected to rise 4.7% annually (from 4.7% last month) and 0.3% in May (from 0.4% last month) . The numbers suggest that inflation remains persistent and reinforces expectations of another interest rate hike, likely in July.

In Europe, Lagarde has already largely signaled another rate hike from the ECB in July. The upcoming release of consumer price data for the entire euro zone will give an indication of how many more rate hikes can be expected this year. The June CPI reading was 5.5%, slightly better than expected (vs. 5.4%). and down from 6.1% last month. The core came in at 5.4% versus an expected 5.5%, but up from 5.3% last month. Inflation in France, Spain and Italy hit 14-month lows, while consumer price growth in Germany accelerated this month.

It’s the end of the month and the quarter, and US stocks are pointing to a higher open today. Markets await the release of critical PCE inflation data and reward the end of a positive month and quarter and 1H. The S&P 500 is expected to post monthly gains of over 5%, its best monthly performance since January, and a quarterly gain of nearly 7%. The Nasdaq Composite performed even more impressively, with a monthly gain of around 5% and a quarterly return of over 11%. The Dow is up 3.69% this month and 2.55% this quarter.

For the first half of 2023, the Dow is up 2.94%, the S&P is up 14.51% and the Nasdaq is up 29.86%, the best 6-month gain since 2H 1999.

US yields are higher and higher for the month as traders adjust to a tighter Fed. It rose 51 bps per month over 2 years, while it rose 23.4 bps over 10 years.

Oil changes little. Oil prices are up about 1% this week, helped by huge inventory draws (up 9.6 million barrels last week), suggesting tightening supply. In addition, US GDP for the first quarter was revised upwards to an annualized rate of 2.0% from a previously reported pace of 1.3%.

However, on a quarterly basis, oil fell 7.69%, marking the first consecutive quarterly losses since 2019, and this is due to a slow recovery in the Chinese economy and a significant increase in interest rates by Western central banks.

The week ends with the release of Baker Hughes’ US oil rig count, an indicator of future supply, and Commodity Futures Trading Commission (CFTC) position data.

The market snapshot currently shows:

  • Oil is trading almost unchanged at $69.90
  • Spot gold is trading down $2.60 or -0.14% at $1904.67
  • Silver was down 0.18-0.80% at $22.37
  • Bitcoin Trades Higher at $30,929 but Below $31,268 High

Major indexes are trading slightly higher in the premarket for U.S. stocks

  • The Dow Industrial Average is trading at 104.58 after yesterday’s 269.76 gain led by financials
  • The S&P is trading up 18.8 points after yesterday’s gain of 19.60 points
  • The NASDAQ is trading up 80 points after yesterday’s largely unchanged date

In European stock markets, major indexes are trading higher and also looking to close the month with solid gains

  • Germany’s DAX rose by 1.14%. For the month, the index rose by 2.97%
  • French CAC increased by 1.08%. For the month, the index rose by 4.13%
  • Britain’s FTSE 100 rose 0.71%. For the month, the index rose by 1.06%
  • Spanish capricorn rose 1.19%. For the month, the index rose by 6.35%
  • Italy’s FTSE MIB rose 1.18% (delayed). For the month, the index rose by 8.48%

Markets in Asia Pacific were mixed today

  • Japan’s Nikkei felt -0.14%. In June, the index increased by 7.45%.
  • Australia’s S&P/ASX 200 rose 0.12%. In June, the index rose by 1.60%
  • China’s Shanghai Composite rose 0.62%. For June, the index fell by -0.78%

Yields are higher in the US bond market

  • Two-year yield 4.905% up 0.8 basis points
  • 5-year yield 4.167% up 0.5 basis points
  • The 10-year yield at 3.87% rose 1.6 basis points
  • 30-year yield 3.920% + 0.8 basis points

In the European bond market, benchmark 10-year yields are higher:

European 10-year yield benchmark

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