US stocks finished lower with price action choppy on return from the holiday weekend

NS

Tuesday, Jun 20, 2023 - 09:32 PM

US stocks ended lower in a volatile session after the long weekend. Initial weakness was framed as a preliminary month- and quarter-end sale in the absence any major data releases before Friday's ISMs. However, the downside was contained as participants digested the strong Housing Starts Data and a softening of yields.

The USD was slightly stronger as US participants returned after the long weekend. DXY hit a high of 102.79 following the surge in US Housing Starts. The dollar failed to maintain its highs, however, as Treasury yields continued their decline on technicals and position.

Highlights for the coming months include the Australian Westpac Leading Index (AWI), BoJ Meeting Minutes from April, Adachi's speech at BoJ, and supply from Australia.

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Looking Ahead

Highlights include the BoJ April meeting minutes, Adachi's speech, and supply from Australia.

US TRADE

US Stocks

The session ended lower in a choppy session after the long weekend. Initial spurts were framed as pre-quarter and month-end sales in the absence any major data releases before Friday's ISMs. However, the downside was contained amid a softening of yields and participants digesting strong Housing Starts Data.

SPX

-0.47% to 4,389

NDX

-0.09% to 15,070

DJIA

34,054 -0.72%

RUT

-0.47% on 1,867

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For a summary in detail.

NOTEABLE HEADLINES

In prepared remarks for Senate confirmation hearing, Fed Vice Chair Jefferson (voter), said that he is focused on returning inflation back to 2%, and that they need to remain attentive to inflation, banking sector stress, and geopolitical uncertainties.

Jefferson added that

He said that the US banking system was sound and resilient, but that he would remain alert to threats to its stability.

According to Reuters.

Cook, the Fed Board nominee (voter), said that in her prepared remarks for the Senate Hearing that she was focused on inflation until it is completed. She also added that the US is at a crucial juncture.

Kugler, the Fed Board nominee for Senate confirmation hearings, said that in her prepared remarks she was deeply committed to establishing monetary policies to reduce inflation and to promote maximum employment.

Kugler added that high inflation is bad for workers and businesses.

It is crucial to reduce inflation to the Fed's target of 2%.

Fed's Barr said that the banking system was quite strong, but there were concerns. Observers should not generalise too much from Spring banking woes.

US Treasury increased its 4-week and eight-week bills sizes from USD 65bln to USD 60bln.

The auction for 17-week bills (June 21st), which will settle all three on June 27, was left unchanged, at USD 46bln.

DATA RECAP

US Building Permits for May 1.491M vs. 1.42M (Prev. 1.417M)

US Housing Starts in May 1.631M vs. 1.4M (Prev. 1.401M)

Fixed Income

US Treasuries

Bulls flattened out after the long weekend, and futures made a huge recovery from their lows on Monday as fears grew about month-end and quarter-end flows.

FX

USD

The DXY hit a high of 102.79 after the US Housing Starts surge. The dollar failed to maintain its highs, however, as Treasury yields continued their decline on technicals and position.

EUR

EUR/USD briefly fell below 1.900 before recovering most of the losses.

GBP

The dollar index has been trading slightly lower in line with the general weakness of cyclical currencies.

JPY

USD/JPY continues to pull back from the 142.00 handle.

NBH has cut its one-day key rate from 17% to 16% (as several analysts had predicted). NBH stated that it will continue to gradually reduce the interest rates of one-day contracts to the base rate, if risk perceptions improve.

While it was noted that a gradual and cautious approach is required.

COMMODITIES

Crude Oil

Prices were lower due to concerns about Chinese growth, while the dollar strength following the blowout Housing Starts data drove WTI below USD 70/bbl. The session ended with WTI trading at around USD 70/bbl.

Barzani, the Iraqi Kurdish Prime Minister, arrived in Turkey to meet with President Erdogan about the halted oil imports.

Reuters citing sources.

China's crude oil consumption is expected to rise 3.5% YoY by 2023, reaching 740mln tons.

According to CNPC Research.

The Indian Oil Minister has noted that petrol and diesel could be reduced next quarter, if global conditions remain stable.

GEOPOLITICAL

The EU will offer Ukraine EUR 50bln over the next four-year period and asks 27 member states to contribute EUR 66bln for priority projects.

according to Commission President von der Leyen.

The Kremlin of Russia said that it was hardly worthwhile to talk about stable ground for conducting negotiations with Ukraine, but President Putin is still open to dialogue.

The Russian Defence Minister stated that Ukraine intends to strike Crimea with HIMARS or Storm Shadows. However, the use of such weapons would involve the US and UK fully in the Russia-Ukraine war.

According to TASS.

Russia believes that the Black Sea grain agreement will end on July 18, 2018.

According to Sputnik, citing Vice Foreign Minister Vershinin.

ASIA-PAC

APAC HEADLINES TO NOTE

Chinese Premier Li stated that China is confident and capable of achieving a continuous and healthy development.

Premier Li said the same thing.

China is ready to work with Germany in order to bring Sino-German relations up to a new level.

The draft conclusions of the EU Summit call on China engage in global challenges such as climate change, biodiversity, and debt relief.

According to an EU official

Nasdaq executives will visit China in this year to resume data partnership discussions with Chinese companies about accessing economic data desperately desired by Western investors.

According to Semafor.

EU/UK

NOTEABLE HEADLINES

UK Chancellor Hunt has said that capping supermarket prices was not the best long-term solution. He will be meeting with regulators to discuss next week what should be done.

Hunt said that they also

Will have compassion for people whose mortgage rates are increasing but will not take any action that could increase inflation.

UK Chancellor Hunt announced that he would meet with the main mortgage lenders this week to discuss flexible repayment plans for families who are in arrears, as well as other measures.

BoE's Hall said that recent changes in UK government bonds yields had tested the resilience and liquidity of investment funds.

Villeroy, ECB's Villeroy, said that inflation in France and Eurozone has passed its peak.

While he added

The ECB will base its decisions on the inflation data, and most of their rate hikes are complete.

Vujcic, ECB's Vujcic, said that sometimes a soft land is not possible. They have to weigh the risks of doing too little vs. too much.

While he added, core inflation pressures still remain in the EZ.

DATA RECAP

German Producer Prices (May) -1.4 % vs. the previous year -0.7% (Prev. 0.3%)

German Producer Prices YY* May 1.0% vs. 1.7% (Prev. 4.1%)

0