Cyclicals lag in risk-off trade in wake of soft data – Newsquawk US Market Wrap

  • SNAPSHOT: Equities down, Treasuries down, Crude down, Dollar up.
  • REAR VIEW: Soft US ISM & JOLTS data; Bostic would have “grudgingly” voted for a fee hike in July; RBA retains fee unchanged; EZ & UK Manufacturing continues to crumble although the PMIs differ considerably on inflation implications; PFE income miss & lower steering; Strong CAT earnings; Mexico shut its largest oil-export terminal on Sunday.
  • COMING UPData: US ADP National Employment Events: BoJ Minutes Supply: Germany & US Quarterly Refunding Announcement Earnings: Hugo Boss, Telecom Italia, BAE Systems, Smurfit Kappa, Taylor Wimpey, Simon Property Group, Occidental Petroleum, Exelon, CVS Health, Qualcomm, MetLife.
  • WEEKLY US EARNINGS ESTIMATES: [WED] CVS, QCOM, PYPL; [THURS] CI, COP, AMZN, AMGN, GILD, ABNB, SYK, AAPL, BKNG. To obtain the report, please click here.

More Newsquawk in 2 steps:


Stocks noticed marginal draw back on Tuesday albeit the cyclical-targeted Russell2k underperformed on weak US financial data with the US ISM Manufacturing PMI lacking expectations whereas JOLTS additionally got here in beneath expectations. The Dow managed to put up marginal good points, nevertheless, and outperformed due to a really sturdy report from Caterpillar (CAT). It was a risk-off day all through the session with in a single day urge for food weighed on by downbeat China Caixin PMI whereas the Final July European PMI data highlighted recessionary woes in the commentary, however the headline figures have been in line and unrevised. UST yields rallied forward of quarterly refunding on Wednesday with the 10yr reclaiming 4% and the 30yr hitting the best degree of 2023 to this point which supported the Dollar and weighed on the Yen however the Aussie underperformed after the RBA left charges unchanged vs some expectations for a 25bp fee hike. Crude costs bought off on threat urge for food however pared from lows on provide woes out of Mexico and a bullish Bloomberg OPEC survey.


FEDBostic (2024 voter) hit the wires on Tuesday, and famous he would have “grudgingly” voted for a fee hike in July, and if the financial system evolves as he expects, could be snug advocating for no fee hike in September. Bostic added they’re in a section the place there’s some threat of over-tightening. The Atlanta Fed President added if progress on inflation unexpectedly stalls, he could be snug considering a fee hike. On unemployment, he expects it to rise as inflation falls, however maybe solely to higher threes or 4% and he shall be resolute to not change coverage path till he’s positive they are going to get inflation to 2%. Bostic concluded the Fed needs to be cautious, affected person and resolute and there’s nonetheless appreciable momentum in the financial system, noting data is in line with an ‘orderly slowdown’. Goolsbee (voter) spoke once more and largely reiterated what he stated on Monday, though he did notice the JOLTS data seems in line with a powerful labour market transferring to a extra balanced section.

ISM MANUFACTURING: The Manufacturing survey for July missed expectations at 46.4 (exp. 46.8) however rose from the prior 48.1. New Orders helped with the rise, rising from 47.3 from 45.6, albeit nonetheless remaining in contractionary territory. Prices Paid rose in July, albeit nonetheless sub-50, printing 42.6, up from the prior 41.8 however brief of the anticipated 42.8, displaying costs are slowing however not as a lot as June. Employment noticed a steep fall to 44.4 from 48.1, deeper than the anticipated decline to 48 – displaying indicators of a loosening labour market in the manufacturing sector forward of Friday’s NFP report. The Services ISM PMI is due on Thursday for a view of the providers sector, which has been holding up higher than manufacturing. This data is at odds with some of the sturdy US releases we’ve got seen lately, serving to these assist the soft touchdown argument, though the broad contraction in manufacturing is price monitoring given the 9 consecutive months of contractions.

JOLTS: Job openings have been modestly down in June, falling to 9.582mln from the revised 9.616mln and beneath the anticipated 9.610mln, whereas the quits fee printed 2.4% (prev. 2.6%). The headline fell to their lowest degree since April 2021, however there’s nonetheless a big hole between the lengthy-time period common degree, or one in line with slack in the labour market. In addition, whereas the quits fee fell, the measure is sort of unstable, and Oxford Economics notes it stays at a degree that signifies continued stress on wages as many staff depart jobs in search of different (increased paying) alternatives. Overall, Oxford Economics provides, “though we expect last week’s rate increase to be the last, risks are tilted towards additional tightening if the Fed determines the data warrant it.” As such, the consultancy provides, June’s JOLTS report sits squarely in the center – continued, clear progress, however at doubtlessly too sluggish a tempo for the Fed’s liking. Looking forward, OxEco anticipate related outcomes from July’s employment report, with job good points solely slowing marginally.



Treasuries bear-steepened into Wednesday’s refunding announcement, with soft ISM and JOLTS failing to cease the rot. At settlement, 2s +3.8bps at 4.912%, 3s +6.3bps at 4.579%, 5s +6.5bps at 4.244%, 7s +7.8bps at 4.156%, 10s +9.0bps at 4.047%, 20s +9.4bps at 4.311%, 30s +8.8bps at 4.104%

INFLATION BREAKEVENS: 5yr BEI -3.2bps at 2.385%, 10yr BEI -0.8bps at 2.362%, 30yr BEI +1.0bps at 2.299%

THE DAY: T-Notes traded in skinny ranges in the course of the APAC Tuesday session, discovering assist at 111-10+ with contracts struggling for path. RBA left charges unchanged in opposition to some expectations of a 25bps fee hike, which gave a marginal steepening bias to the curve. There was a slew of PMI data throughout Asia, which was combined, though China’s Caixin mfg. ultimate studying for July was revised into contractionary territory.

T-Noted edged to highs of 111-16 in the London morning earlier than higher promoting kicked in, in lack of an apparent catalyst. The Eurozone noticed its unemployment fee dip to a report low, whereas the EU mfg. ultimate studying for July remained unchanged in contractionary territory; none of the data garnered a lot speedy response in govvies.

Contracts dipped into the money bond open, with the stomach and lengthy finish weakest on the curve with desks pointing to quarterly refunding after the chunky upward revisions to quarterly financing estimates on Monday night. T-Notes noticed a kneejerk spike on the miss in July ISM mfg. and the bigger fall than anticipated in JOLTS June job openings, however that was not sufficient, and new lows have been being made earlier than lengthy. T-Notes troughed for the session at 110-26+, though the lengthy-finish traded notably weaker into the NY afternoon, with the money 30yr yield hitting its highest ranges of the yr above 4.10%.


  • SR3U3 +0.0bps at 94.590, Z3 -0.5bps at 94.620, H4 -1.0bps at 94.830, M4 -2.0bps at 95.140, U4 -3.5bps at 95.500, Z4 -5.0bps at 95.820, H5 -6.0bps at 96.070, M5 -6.5bps at 96.235, U5 -7.5bps at 96.325, U6 -9.0bps at 96.490, U7 -9.0bps at 96.470.
  • SOFR rises again to five.31% as of July thirty first from 5.30%, volumes rise to USD 1.551tln from 1.419tln.
  • EFFR flat at 5.33% as of July thirty first, volumes fall to USD 103bln (prev. 106bln).
  • US bought USD 50bln of 42-day CMBs at 5.280%, coated 3.24x.
  • US left 4-, 8-, and 17-week invoice public sale sizes unchanged at USD 70bln, 60bln, and 46bln, respectively; 4- and eight-week to be bought on August third and 17-week payments on August 2nd; all to choose August eighth.

LATER THIS WEEK (US objects bolded):

  • WED: ADP Employment (Jul), Quarterly Refunding, BCB Announcement.
  • THU: Services and Composite Final PMI (Jul), Durable Goods R (Jun), ISM Services PMI (Jul), Productivity (Q2), Jobless Claims, Fed’s Barkin (nv), BoE Announcement and MPR, CNB Announcement, Chinese Caixin Final PMI (Jul), Swiss CPI (Jul), EZ/UK Services and Composite Final PMI (Jul).
  • FRI: Jobs Report (Jul), RBA SoMP, EZ Retail Sales (Jun), Canadian Jobs Report (Jul).



The crude complicated was decrease early on following development issues earlier than moved off lows as threat sentiment improved considerably whereas it was additionally reported that Mexico shut its largest oil-export terminal on Sunday. In the US afternoon, WTI and Brent pared off lows of USD 80.59/bbl and USD 84.21/bbl, respectively, which coincided with reviews from Bloomberg that Mexico’s largest oil export terminal was shut on Sunday on account of a leak, however it’s anticipated to renew service later this week. Meanwhile, the Bloomberg OPEC Survey acknowledged crude output plunged by essentially the most in three years in July, falling 900k BPD to common of 27.79mln BPD. In addition, Marathon Petroleum (MPC) assumes the Galveston Bay refinery (593k BPD) reformer to be down all through Q3 ’23 and expects crude throughput volumes of roughly 2.7mln BPD, or 94%, in Q3. Looking forward, US NFP is on Friday, and a raft of earnings are additionally due with highlights from Apple (AAPL) and Amazon (AMZN), forward of non-public stock data after-hours. Current expectations (bbl): Crude -1.4mln, Distillate +0.1mln, Gasoline -1.3mln.

Overnight, a shock contraction in the Chinese Caixin Manufacturing PMI saved costs on the again foot, while the general recessionary commentary from the European PMIs solely saved costs subdued in the morning. The complicated, nevertheless, trimmed earlier losses as individuals await the OPEC+ JMMC on Friday, whereby individuals count on the present pact (which doesn’t embody the voluntary cuts) to be rolled over, while eyes stay on whether or not Saudi will decide to roll over its 1mln BPD voluntary cuts or unwind offline manufacturing by 250-500k BPD.

MEXICO: Mexico’s largest oil-export terminal, FPSO Yúum Ok’ak’ Náab, was shut on Sunday on account of a leak in one of its hose trains, based on Bloomberg sources. The FPSO and Salina Cruz are anticipated to renew service later this week, when Pemex could have an opportunity to clear a backlog of seven ships ready to load 8mln bbls of oil for purchasers in the US, South Korea, China and India. Note, Pemex shut its Salina Cruz terminal in July after hoses loading a ship have been blown off by sturdy winds.

BP: In earnings, the oil big beat on income however missed on revenue and famous it expects oil costs in Q3 to be supported by seasonal demand and the OPEC+ manufacturing restrictions. Moreover, BP expects business refining margins to stay above historic common ranges and expects the danger of an earlier-than-regular seasonal fill of European fuel storage in Q3 to proceed to weigh on European fuel and Asian LNG costs absent disruptions to provide. In the US, Henry Hub fuel costs are anticipated to seek out assist from coal-to-fuel switching in the facility sector.


CLOSES: SPX -0.27% at 4,576, NDX -0.25% at 15,718, DJIA +0.20% at 35,630, RUT -0.45% at 1,994.

SECTORS: Utilities -1.26%, Consumer Discretionary -1.15%, Consumer Staples -0.51%, Health -0.51%, Energy -0.48%, Materials -0.44%, Communication Services -0.29%, Real Estate -0.12%, Financials -0.03%, Technology +0.09%, Industrials +0.32%.

EUROPEAN CLOSES: DAX -1.26% at 16,240, FTSE 100 -0.43% at 7,666, CAC 40 -1.22% at 7,406, Euro Stoxx 50 -1.40% at 4,407, IBEX 35 -1.44% at 9,503, FTSE MIB -0.97% at 29,356.

STOCK SPECIFICSPfizer (PFE) missed on income and lower/narrowed FY steering citing decrease Y/Y revenues in FY23 on account of declines for COVID-19 merchandise. Caterpillar (CAT) beat on EPS and income, with quarterly machine retail gross sales topping in all geographical areas with APAC surprisingly rising. Expects increased H2 gross sales and revenues Y/Y. Merck & Co (MRK) posted a shallower loss per share than anticipated and beat on income and key drug gross sales; FY steering was sturdy. Uber Technologies (UBER) gross bookings beat and posted a shock revenue per share but it surely missed on income. The subsequent quarter gross bookings outlook topped the anticipated with journeys seen rising no less than 20% Y/Y. CFO Chai is to step down from January fifth, 2024. Arista Networks (ANET) surpassed expectations on the highest and backside line with the Q3 income information impressing. Exec stated it was aiming for no less than double digits development subsequent yr. ZoomInfo (ZI) fell brief on income with income information mild for each the following quarter and FY. Note, EPS beat and co. authorised a brand new USD 500mln buyback programme. Woodward (WWD) smashed expectations on each EPS and income and FY23 steering topped consensus. Exec stated Aerospace and Industrial companies have been enhancing, and output is rising. Global Payments (GPN) topped Wall St. expectations on EPS and income; it additionally lifted its 2023 outlook. Melco Resorts & Entertainment Ltd (MLCO) earnings beat and in addition noticed tailwinds from Macau Casino income for July hovering Y/Y. Norwegian Cruise Line (NCLH) is tumbling regardless of a reasonably respectable report, highlighted by EPS and income beating. As such, the new RCL report final Thursday could possibly be weighing on the title in addition to Q3 steering barely mild. JetBlue (JBLU lower FY outlook and warned of potential loss in the present quarter as travellers look to go abroad and its partnership with American Airlines (AAL) ends. Note, EPS barely beat with income in line. Marriott International (MAR) beat on EPS and income and stated Greater China rebounded rapidly as soon as journey restrictions have been lifted in January with Q2 RevPar surpassing pre-pandemic ranges; it additionally raised FY23 adj. EPS and income outlook. Zebra Technologies (ZBRA) income fell brief as did subsequent quarter outlook. Eaton (ETN) beat on the highest and backside line; raised Q3 EPS view. Apollo is main a chapter mortgage deal for trucking agency Yellow (YELL), based on Bloomberg.


The DXY continued its bid to start out August with DXY reclaiming 102.00 to discover a excessive of 102.43 as UST yields surged with the 10yr rising again above 4% and the 30yr yield seeing its highest degree in 2023. The strikes got here regardless of net-soft US financial data with US ISM manufacturing PMI lacking on the headline, with each costs and employment easing whereas the most recent JOLTs data got here in beneath expectations and the give up fee fell. Meanwhile, Fed’s Goolsbee spoke once more, largely reiterating what was stated on Monday however noting the JOLTS data seems in line with a powerful labour market transferring to a extra balanced section. In a analysis notice Monday, Barclays famous that disinflation in the US has pushed the Buck to a downward spiral since final yr, and on the similar time, USD speculative futures positioning could be very low, can be displaying indicators of bottoming. Barclays notice that “while we are no dollar bulls”, an acceleration of US development can set off “pockets of tactical dollar strength”, including a key threat is that if China stimulus comes in extra aggressive than anticipated.

The Euro was weaker because the greenback superior with EUR/USD solely briefly rising again above 1.10. In the EU, the EZ unemployment fee ticked decrease to six.4% regardless of expectations for an unchanged print of 6.5%. In Germany particularly, the unemployment change fell by 4k, higher than the anticipated 20k, taking the unemployment fee to five.6% from 5.7%. Meanwhile, the Final Manufacturing PMI data was in line and unchanged in the eurozone at 42.7. For the complete Newsquawk EU data wrap, please click here.

The Yen weak spot continued put up-BoJ final week with the surge in UST yields weighing, in addition to different conventional havens, CHF and XAU. USD/JPY peaked above 143.50 earlier than paring marginally heading into APAC trade. Gold costs fell beneath USD 1,950/oz whereas USD/CHF rose above 0.8750 and EUR/CHF rose above 0.9600.

AUD underperformed after its rally on Monday following the RBA fee resolution which opted to go away charges unchanged vs combined expectations for both a 25bp hike or standing pat. The RBA did notice some additional tightening could also be applicable whereas reiterating the board stays resolute in its dedication to return inflation to focus on. Alongside the unchanged fee resolution, the weak China Caixin PMI solely added to Aussie woes, as did a downbeat threat atmosphere. AUD/USD hit a low of 0.6603 discovering assist on the spherical degree, which it hovered round heading into the APAC session.

Other cyclical currencies additionally fell sufferer to the USD energy however NZD was one other underperformer because it tracked the Aussie decrease however AUD/NZD fell sub 1.08 on the Aussie stress. CAD was weighed on by the decrease oil costs and threat off tone in addition to the gaining Dollar. GBP noticed related worth motion with Cable sub 1.28 once more whereas EUR/GBP briefly rose above 0.8606 however failed to carry onto the psychological degree with eyes on the BoE fee resolution due Thursday.

The Yuan was weaker on each offshore and onshore currencies after the Final July Caixin Manufacturing PMI fell into contractionary territory and missed analyst expectations at 49.2 from the prior 50.5 (exp. 50.3). The Caixin survey now joins the NBS PMI survey in contractionary territory, albeit that noticed a marginal beat on Monday, whereas providers missed. There was as soon as once more extra assist jawboning from officers, the place the PBoC is to assist a wholesome and secure growth of the actual property market and is to forestall and fend off monetary dangers in key areas.

EMFX was typically weaker after the China data, whereas the aforementioned risk-off tone and energy in the greenback solely added to the EM woes with ZAR lagging on the draw back as gold costs tumbled. BRL noticed notable weak spot, regardless of respectable industrial output data. Note, with the BCB due on Wednesday night, Credit Agricole notes with USD/BRL hovering close to the 2022 lows since final April, “we believe the BRL is once again primed for a sharp reversal”. Noting the plain culprits could possibly be the BCB’s pivot in the direction of easing and the looming 2024 funds proposal. MXN, COP and CLP all noticed weak spot too.


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