Stocks snap weekly gains streak amid net negative global PMIs

earnings European PMIs were poor, US PMIs were mixed, Yellen said more banks will seek to merge this year, and Daly said two more rate hikes this year is a reasonable projection.


: Equities down, Treasuries up, Crude down, Dollar up.


Daly says two rate hikes in this year are a reasonable estimate. Stellar KMX results; 3M reaches USD 10,3bln settlement for PFA drinking-water claims; Barclays cuts NKE PT before earnings.

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Newsquawk in two easy steps


The session was turbulent with a risk-off early on sparked by weak global PMIs. However, the US PMIs had a mixed message, with a positive reading in the services PMI, and mixed comments about inflation. Although cost inflation is rising for firms, the selling price for inflation of goods and services has hit a low for 32 months. The stocks hit a low around the cash opening before paring back a bit. This coincided with Treasuries moving from highs, with participants' focus shifting to supply next weekend. Crude prices also rose from the lows while the dollar moved from highs for DXY to lose its hold on 103. Bostic reiterated that he does not want to see any more hikes in this year. Daly, on the other hand, said two hikes are a reasonable expectation. USD/JPY has hit a new YTD high, testing 144 on the upside. If the trend continues, the pair could reach BoJ intervention levels. AUD underperformed due to lower base metals prices and a disappointing PMI overnight. Banks are a hot topic with KRE -1.4% Friday, despite Yellen's repeated comments that she expects to see more mergers of banks and warns of a hit in profits for banks during Q2 earnings.



The US Flash Manufacturing PMI fell to 46.3 in June, down from 48.4 and below the anticipated 48.5. The Composite fell to 53.0 from 48.4 (prev.). The Composite fell to 53.0 (prev. 54.9, although above the consensus estimate of 54.0. The report states that US companies reported a continued expansion of their business activity by the end of the second quarter, although the growth rate slowed down to a low of three months. The report notes that manufacturers reported a new contraction in production, while service providers experienced a slower but still significant increase in output. The growth of jobs slowed to its lowest level since January. While higher wages increased firms' costs for goods and service, the selling price inflation rate hit a low of 32 months. Williamson, the Chief Economist, added that US business activity remained strong in June. The GDP is expected to grow around 2% during Q2. This growth is mainly driven by the services sector. Manufacturing, however, faces a decline due to a drop in new orders. Service sector optimism remains high despite previous rate increases. Despite this, there are still concerns about its resilience, future rate increases, and tightening of the labor market. The selling price inflation rate of goods and services has reached its lowest level since late 2020. This suggests that the Fed is making progress against inflation.

Daly (non voter)

She said that she believes two rate hikes in 2019 is a reasonable estimate, but we don't know for certain. This means that her projections are in line with the median Fed dot graph in 2023. Daly agreed with Powell that it was prudent to reduce the pace of tightening policy as the end date approaches. Daly supported the decision made in June to keep rates unchanged and monitor the data. Like Powell, she noted that the risks of over-tightening and under-tightening were about equal (Fed chair Powell said there are signs that supply and demand are improving in the labour markets, but labour demand is still significantly higher than supply). Daly said that the credit tightening is in line with what was expected before the March banking crisis, but she is still on the lookout for any extra tightening. This is yet another reason to slow down the rate hike pace. Daly stated that the inflation expectations and frequency of price changes have both been on a downward trend. She wants to work carefully and resolutely to restore price stability. She said that her banking contacts were 'thoughtful about loan books' and careful with balance sheets, while contacts in the community are concerned about housing prices having hit bottom and rents reaccelerating.

Bostic (non voter, dovish

reiterated he does not see any more rate hikes this year but the Fed has some space before the mandated goals start to conflict, and suggests that PCE may meet the target at the end of 2024 or maybe 2025, noting it is going to take a while to get to the 2% inflation goal. Bostic expects financial-standards to tighten through the summer, and notes that will lead to a slower economy. He is not seeing elements of risk appearing in the Economy, and that the Fed is trying to return the economy to a supply/demand balance.

Fixed Income


Treasuries surged initially on the backs of weak global PMI before reversing course in the wake of mixed US PMI numbers ahead of next week's supply and as the risk level improved somewhat.

At settlement: 2s +5.0bps @ 4.750%; 3s +5.7bps @ 4.328%; 5s +5.3bps @ 3.991%; 7s+5.5bps@ 3.874%; 10s+6.0bps@ 3.739%. 20s+5.4bps@ 4.015%. 30s+5.3bps@ 3.820%.


5yr BEI at 2.197%; 10yr BEI at 2.238%; 30yr BEI at 2.243%.


Treasuries rose from 112-22 in the morning European session to north of 113 after the poor EU PMI data that raised recessionary fears. T-Notes rose as US players arrived, peaking around the US Cash Equity Open at 113-15 before the US PMI data. Treasuries muddled through the US data, which caused a two-way price movement. A miss on manufacturing and a downgrade to composite saw a short spike in T notes, but the services numbers coming in slightly above expectations allowed the move to reverse back to pre-announcement. The report's commentary stated that "Prices pressures increased in June after a decline in momentum in May." Cost inflation has increased at a rapid pace across all goods and services. "The service sector was responsible for the resurgence of cost inflationary forces, as wage costs increased." The selling price inflation of goods and services, however, has hit a low for 32 months despite higher cost inflation. Market contacts reported that there were large liquidations on the Dec'23 SOFR up side, and that dovish positions had been unwinding. This likely contributed to the movement lower. The Treasury's supply next week is also likely to support the move from highs. meanwhile, risk sentiment improved from its worst levels, reducing haven demand, and energy prices rose off their lows.



SR3M3 +0.3bps at 94.713, U3 +0.0bps at 94.650, Z3 +7.0bps at 95.090, H4 +8.0bps at 95.495, M4 +7.0bps at 95.895, U4 +7.0bps at 96.220, Z4 +5.5bps at 96.430, H5 +5.0bps at 96.560, M5 +4.0bps at 96.635, M6 +4.0bps at 96.785.

US EFFR remained unchanged at 5.07% for the 22nd of June, while volumes increased to USD 132bln.

Demand for NY Fed RRP Ops at USD 1.969tln, (prev. Demand for NY Fed RRP op at USD 1.969tln (prev. 103).



Crude oil ended the week and day in the red due to the risk-averse mood that was sparked by a string of poor global PMI data

WTI and Brent both rolled down to their session lows, USD 67.35/bbl & 72.11/bbl respectively. The risk tone was sour, highlighted by the stock market's decline and the Dollar's rise. Risk sentiment improved a bit after Europe had left the market for the day, and the complex was also able to come off its worst levels. However, it remained in the red until settlement. During APAC, prices were also subdued due to the negative risk tone and Mainland Chinese markets being away for a holiday. As mentioned earlier, oil news was scarce, but the White House is hoping that India will purchase Russian oil according to the cap price. Baker Hughes also failed to elicit any reaction from the market, while oil rigs dropped 6 to 546 and nat. gas fell unch. The total fell 5 points to 682. Next week traders will be watching the US PCE, EZ Flash CPI and BoJ SOO.



: SPX -0.77% 4,348, NDX -1.00% at 14,891, DJIA -0.65% at 33,727, RUT -1.44% at 1,821.


Utilities (-1.51%), Consumer Discretionary (-1.1%), Technology (1.1%), Real Estate (-1.09%), Energy (0.79%), Materials (0.78%), Industrials (7.5%), Consumer Staples (5.59%), Financials (4.42%), Health (3.32%), Communication Services (0.25%).


: Euro Stoxx 50 -0.76% at 4,271, FTSE 100 -0.54% at 7,461, DAX 40 -0.99% at 15,829, CAC 40 -0.55% at 7,163, FTSE MIB -0.73% at 27,209, IBEX 35 -1.06% at 9,265, SMI +0.40% at 11,228.



3M (MMM)

The PFA has confirmed that it will pay USD 10,3bln in settlement over a period of 13 years. It expects to report this amount before tax for Q2. Analysts believe the settlement is not as bad as they feared.

Carmax (KMX)

Beat on EPS and Revenue; noted that deliberate actions are driving improvements in the business despite the challenging macro-environment.

Starbucks (SBUX),

Union workers in more than 150 stores, or 3.5k employees, will go on strike because they claim that Pride decorations are not allowed in the stores.

Virgin Galactic (SPCE).

The company has raised US $300mln through a common stock offering, and plans to raise an additional USD $400mln. It intends to use these funds to expand and develop its spacecraft fleet.

Ford (F)

According to WSJ, the US government is preparing a new round layoffs of salaried employees.

Under Armour (UAA),

Wells Fargo downgraded UAA; stated that UAA was overexposed to North America and had excess inventory. A CEO has been at the helm of UAA for only six months.

Abcam (ABCM).

It is important to consider all strategic options, including the possibility of a sale. FDA refused to grant accelerated approval.

Intercept Therapeutics (ICPT)

Drug to treat a form of fatty liver. Separately ICPT announced restructuring and a reduction in workforce of approximately 33%. FY23 adj. Operating expense outlook and expects to achieve profitability by 2024.

Goldman Sachs (GS)

CNBC reports that is likely to take a significant write-down on its acquisition of Greensky in 2021 after trying to sell the business.

Nikola (NKLA).

A fire broke out behind Phoenix's HQ and affected several battery-electric trucks. The company suspects foul play.

Apple (AAPL),

Apple Insider reports that Apple is considering switching to a cheaper manufacturing process for its upcoming iPhone 15 Pro chips. This could result in a reduction of efficiency, but an overall improvement of performance. AAPL is likely to plan on introducing the A17 Bionic in the iPhone 15 line, which could be produced using


3nm manufacturing. According to WSJ, US Treasury Secretary Yellen stated that more banks (XLF and KRE) are likely to merge in the coming year due to higher interest rates. Recent banking turmoil is also making it harder for them to hold onto their depositors. She noted that paying higher interest rates on deposits could be affecting banks' profits, as it will show up in their Q2 earnings. Washington State plans to require

Tesla's (TSLA)

Charging plugs at federally and state-funded sites. Germany plans to buy 60 Chinook helicopters

Boeing (BA)

Reuters cites a source in the German parliament as saying that up to EUR 8bn could be spent on infrastructure work, including repairs, in Germany. Barclays reduced their PT in September

Nike (NKE),

Prior to earnings next week, the price will drop to USD 127/shr. Barclays warns Nike's FY24 guidance could be at risk


Recession risk is higher whether Central Banks tighten or ease.


The dollar was destined to continue its retracement of end-May highs, despite further gains vs. the Yen or Yuan due to policy differentials between the Fed-BoJ/PBoC. However, it gained momentum at the end of the last week and peaked on Friday as global growth worries increased on the backs of mostly lower than consensus preliminary PMIs. The threat of stagflation and recession had already been weighing on sentiment after a series of rate increases, some of which were larger than expected. This prompted renewed demand to the Greenback, both as a reserve currency and a safe-haven. The flash US PMIs were mixed in comparison to forecasts, which kept the Buck supported and DXY high between 103.170-101.900 within the w-t - d parameters. The Fed's rhetoric was not new, as Chair Powell or other officials said nothing particularly surprising. They all reiterated that inflation is still too high. The latest dot plot configuration, which shows two more 25-bp rate hikes this year, is also about right. July's FOMC meeting will be live. The (hard) data shows that housing starts in May were very strong, and the NAHB Index is a good indicator for this month. However, weekly jobless claims have risen to 260k, for the third time. This will be reflected in the NFP report for June.


The Aussie and Kiwi currencies were both hit by widespread aversion. They are high betas, and they have a lot of activity. However, the Aussie was also affected because it is closely tied to the Yuan, and the RBA minutes from June revealed that the decision on whether to raise 25 bp, or not, was a close one. Aud/Usd fell more than 200 pips, from around 0.6882. Nzd/Usd was only able to limit its fall within a range of 0.6237-0.6118 due to the fact that Aud/Nzd crossed had fallen to 1.0875 at one point from over 1.1050.


As mentioned above, the prelim PMIs increased economic anxiety and the French prints were particularly weak as the service sector entered contractionary territory. This pushed the composite lower and pushed the manufacturing down to sub-50. The Euro had been bid on dips despite the ECB's constant mantra that core inflation was still too high. There may be more work needed after a July rate hike. Eur/Usd advanced steadily, from around 1.0900, through Fib resistance, and beyond bands of resistance.