Newsquawk

Europe Market Open: DXY continues to slip with fixed bid while the overall tone edges higher

13 Jul 2023, 06:25 by Newsquawk Desk

APAC stocks traded higher as the region reacted to the softer-than-expected US inflation data while weaker-than-expected Chinese trade data failed to dampen the spirit.
European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.1% after the cash market closed up by 1.7% yesterday.
DXY sits at its lowest level in over a year, EUR/USD and Cable maintain 1.11 and 1.30 status respectively, antipodeans lead.
Fixed income markets remain supported post-CPI, Crude futures continued to edge higher owing to the upbeat risk tone.
Looking ahead, highlights include UK GDP, EZ Industrial Production, US IJC, ECB Minutes, IEA OMR, Supply from Italy & US, Earnings from PepsiCo.

US stocks gained while the dollar and yields were pressured after softer-than-expected US inflation spurred risk appetite and money markets unwound Fed rate hike pricing beyond July.
SPX +0.74% at 4,472, NDX +1.24% at 15,307, DJIA +0.25% at 34,347, RUT +1.05% at 1,933.
Click here for a detailed summary.

NOTABLE HEADLINES

Fed's Beige Book for June stated that overall activity increased slightly since late May with expectations for slow growth ahead and many reported labour availability has improved with wage inflation normalising, while price expectations are flat to lower in the months ahead.
US Senate Committee unanimously approved Biden nominee Jefferson as Fed Vice Chair and also approved Cook to the Fed board which moves to the full Senate for a final vote.
US Senator Warren said Fed Chair Powell should halt the rate hikes, while she added that the banking industry is still overly concentrated and anything that causes the demise of small banks is a bad idea, according to Bloomberg.
US NEC Director Brainard said the labour market is in much better balance than just six months ago and June CPI was encouraging. Brainard also stated that recent non-housing core services inflation is close to pre-COVID levels and that new evidence today suggests the US is on the path to moderate inflation.

APAC stocks traded higher as the region reacted to the softer-than-expected US inflation data which underpinned the global risk appetite, while weaker-than-expected Chinese trade data failed to dampen the spirit.
ASX 200 was firmer with all sectors lifted by the constructive mood and as yields continued to decline.
Nikkei 225 reclaimed the 32,000 level at the open after the US CPI data provided a rising tide for stocks.
Hang Seng and Shanghai Comp were positive with outperformance in the Hong Kong benchmark due to tech strength after Chinese Premier Li met with several HK-listed tech giants, endorsed the platform economy and pledged more support for the sector, while gains in the mainland were somewhat capped alongside the latest Chinese trade data which missed forecasts.
US equity futures notched mild gains overnight in an extension of the post-CPI momentum.
European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.1% after the cash market closed up by 1.7% yesterday.

DXY languished at its lowest level in more than a year after the softer-than-expected US inflation data saw money markets price this month’s expected Fed rate hike to be the last in the current cycle.
EUR/USD held on to its spoils after the US CPI data propelled the single currency to the 1.1100 handle.
GBP/USD benefitted from the weaker buck and gradually breached through resistance at 1.3000.
USD/JPY sat near the prior day’s lows beneath the 139.00 level after a narrowing of yield differentials.
Antipodeans were firmer owing to their high-beta statuses and recent commodity gains.
PBoC set USD/CNY mid-point at 7.1527 vs exp. 7.1623 (prev. 7.1765)

10yr UST futures remained afloat after the post-CPI bull-steepening and solid 10yr auction.
Bund futures held on to their recent gains and found a platform at the 132.00 level.
10yr JGB futures took inspiration from peers but with upside capped by mixed 20yr auction results.

Crude futures continued to edge higher owing to the upbeat risk tone and dollar weakness.
Spot Gold marginally extended on its advances as the greenback remained languished at 1-year lows.
Copper futures plateaued overnight and held on to post-CPI gains amid the heightened risk appetite.

Bitcoin traded rangebound as participants shunned crypto in favour of traditional risk assets.

NOTABLE ASIA-PAC HEADLINES

China's Customs said the nation's exports showed strong resilience in H1 but also noted that sluggish global economic growth, slowing global trade and investment, geopolitical risks and weakening external demand continue to impact China's trade. Furthermore, it stated that China's trade growth faces relatively big pressure but China is confident it can consolidate its market share in global trade this year, while a Customs official noted feelings of pressure and optimism for China trade in H2, according to Reuters.
US Secretary of State Blinken will meet with China's top diplomat Wang Yi at the ASEAN meetings.
Chinese hackers reportedly breached the email of US Commerce Secretary Raimondo and State Department officials, according to WSJ.
Bank of Korea kept its base rate unchanged at 3.50%, as expected, with the rate decision made unanimously and 6 members wanted to keep the door open for one more rate hike. BoK said domestic economic growth is expected to recover gradually, while GDP growth and consumer price inflation this year are expected to be consistent with forecasts. Furthermore, BoK Governor Rhee said several board members expressed concern about the rise in household debt, while he added that inflation will rebound to around 3% by year-end and fall again to the 2% level next year.

DATA RECAP

Chinese Trade Balance (USD)(Jun) 70.62B vs. Exp. 74.8B (Prev. 65.81B)
Chinese Exports YY (USD)(Jun) -12.4% vs. Exp. -9.5% (Prev. -7.5%)
Chinese Imports YY (USD)(Jun) -6.8% vs. Exp. -4.0% (Prev. -4.5%)
Chinese Trade Balance (CNY)(Jun) 491.3B (Prev. 452.3B)
Chinese Exports YY (CNY)(Jun) -8.3% (Prev. -0.8%)
Chinese Imports YY (CNY)(Jun) -2.6% (Prev. 2.3%)

US President Biden said Ukraine will not be in NATO for a while, while he also said that the US is considering sending long-range missiles to Ukraine, according to FT.
Russian Foreign Minister said the NATO summit in Vilnius showed that the alliance has finally returned to Cold War schemes and Russia will carefully analyse NATO summit results taking into account challenges and threats to Russian security and interests. Furthermore, they will continue to strengthen military and defence, while Russia will respond to threats in a timely and appropriate manner using all means and methods at its disposal, according to TASS.
North Korea said it test-launched a Hwasong-18 ICBM on Wednesday and leader Kim guided the missile test, while Kim said they will continue military offensive measures until the US abandons its hostile policy against Pyongyang.
UN Security Council is to meet publicly on Thursday regarding North Korea's missile launch, according to Reuters.
US defence official Ratner spoke with China’s Ambassador to US Xie Feng on Wednesday and underscored the commitment to maintaining open lines of military-to-military communication.

UK PM Sunak is set to be presented a plan on Thursday to give a million public sector workers a pay rise of around 6%, according to The Telegraph

Data Recap