Stocks rise and Treasuries flatten after mixed PMI data

to continue current policy stance The US, UK, and Eurozone all released PMI data today, with the US coming in higher than expected. However, the Eurozone and UK data was weak, and the BoJ is reportedly considering increasing its inflation outlook for 2023. Lastly, China's Politburo has pledged to


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


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In a day of choppy trading, stocks ended up firmer than they started on Monday. Treasuries fell and oil prices rose. Gold was lower but the dollar was higher. On Monday, the US and Eurozone PMI figures were mixed and accompanied by dire commentary about persistent inflation. The US data was more mixed and saw some weakness. China's Politburo released a similar statement pledging greater support, but without any specifics. This helped China ADRs to outperform. Treasury curves flattened out after the data, mainly due to a large block sale of 2yrs ahead of the auction. This was better than the average but not as good as before. The crude prices rose on the back of the China stimulus expectations following the Politburo's statement, while the Dollar was boosted by the weaker Euro after weak PMI data.



The US S&P Global Manufacturing PMI exceeded expectations, increasing to 49 from 46.3, and also exceeding the upper end of analyst predictions which ranged between 45.3,47.5, However, the Services PMI fell short of expectations, dropping to 52.4, from 54.5, and below expectations of 54.1. Despite this, it still remains in expansionary territory. The data for services was at the lower end of expectations, between 52 and 55.9. The composite index fell but remained expansionary, with a reading of 52, down from 53.2. The report also stated that the rate of overall output growth was consistent with a GDP growing at an annualized quarter rate of 1.5% to start Q3, down from 2% in Q2 (note: Q2 GDP is due Thursday). The report's commentary was bleak. The report stated that business optimism had dropped to its lowest level this year. The report also stated that the growth was driven entirely by the service industry, especially rising spending from international clients. This is helping to offset a stagnant manufacturing sector and an increasingly subdued US demand. In the comments on inflation, the stickiness of the price pressures was seen as a major issue. "As survey index of sales prices has been a reliable indicator of consumer price increases, anticipating a easing of 3% in June. It sends a warning that further drops in inflation rates below 3% could prove to be elusive in near-term. It noted that firms increased their workforce at the beginning of Q3, however, the rate of employment creation was marginal and the lowest since January. New orders were slightly more encouraging. They remained in expansionary territory but at a slower pace. It noted that a sustained increase in new exports for services supported the recovery as domestic demand lost momentum due to rising interest rates.

Fixed Income


Treasuries have flattened out ahead of the supply and following PMI data, and there has been a huge block trade of 2yrs ahead of the auction.

At settlement: 2s +4.3bps, 3s+3.6bps, 5s+3.0bps, 7s+2.2bps, 10s+1.6bps, 20s+1.0bps, 30s+1.1bps.


5yr BEI -4.6bps, 10yr BEI -3.3bps, 30yr BEI -2bps,


Treasuries began the session with a steady climb in response to disappointing EZ PMI data as well as the UK. In addition, the Chinese government's statement at the Politburo Meeting highlighted its challenges with the insufficient domestic market and stated that it would be actively expanding the domestic market. This was essentially a promise of more support without any specifics. T-Notes reached a high of 112-17+ before the US equity opening and the S&P GlobalPMI data. The data were mixed. Manufacturing beat expectations (but remained in contractionary territory), while services missed and saw the composite drop. Commentaries on inflation were also quite alarming, pointing out the persistent sticky inflation and the worry that further drops in inflation rates below 3% in the short-term may be elusive. Treasuries were then sold into the 2-year auction. This was aided in part by future sales. The front-end selling was led a large block sale of c. 43k at the 2yr 101-213 a few hours prior to the 2yr.


Overall, this was a stronger auction than the previous one but still not as good as it had been. We did have a 0.3bp tail (prev. The stop-through was 0.8bps, and the average stop-through was 0.1bp. However, B/C of 2.78x (prev. The 2.86x was slightly above the average of six auctions, but it wasn't as strong as the last month's sale. Direct demand was higher than average, with a jump from 18.2% to 20,8%. The indirect demand was also higher than average, but not quite as high as last month's auction.



SR3U3 -2.0bps at 94.580, Z3 -2.5bps at 94.620, M4 -3.5bps at 95.230, U4 -5.0bps at 95.615, Z4 -6.0bps at 95.950, H5 -6.0bps at 96.200, M5 -6.0bps at 96.350, U5 -6.0bps at 96.445, U6 -3.0bps at 96.650, U7 -1.0bps at 96.665 Z7 -1.0bps at 96.635.

US sold USD 70bln in 3-month bills, at 5.270%; covered 2.82x. US sold USD 62bln in 6-month bills, at 5.270% and covered 2.89x.

NY Fed RRP Op demand remains unchanged at USD 1.77tln across 100 counterparties

Volumes fall from USD 1.46bln to USD 1.4bln, SOFR drops to 5.05% (from 5.06%) as of 21st July.

EFFR was flat at 5.08% on July 21st. Volumes fell to USD 110bln, from USD 111bln.



WTI and Brent futures hit 3-month highs as China hopes for stimulus boosted crude prices.

In this regard, the Chinese Politburo will be looking for any hints about further stimulus measures to stimulate the second largest economy in the world and the

Initial Statement

The government has vowed that it will optimise and adjust its property policies. It also said the economy is facing new challenges and difficulties mainly because of insufficient domestic consumption, but they would actively expand domestic consumer demand. WTI and Brent reached highs of USD 79.28/bbl & USD 82.90/bbl respectively during the US session as participants awaited the week's major risk events, which include central bank meetings (FOMC ECB BoJ), data and earnings. According to Ria, Russia has reportedly been looking into limiting the number gasoline exporters. Deputy PM Novak also supported proposals for a limit on oil products exporters. On Friday, he reminded that Russia has not ruled out the introduction of oil export product quotas. He also noted that some refineries in Russia had postponed their maintenance until a later time.



: SPX +0.40% at 4,554, NDX +0.14% at 15,448, DJIA +0.52% at 35,411, RUT +0.28% at 1,965.


Energy +1.66%; Real Estate +0.99%; Financials +1.01%; Consumer Discretionary (+0.52%); Communication Services +0.46%. Materials +0.31%. Consumer Staples+0.38%. Technology +0.26%. Industrials +0.24%. Health -0.23%. Utilities --0.28%.


: DAX 40 +0.08% at 16,191, FTSE 100 +0.19% at 7,679, CAC 40 -0.07% at 7,427, Euro Stoxx 50 -0.20% at 4,383, IBEX 35 -0.29% at 9,544, FTSE MIB +0.18% at 28,908, SMI -0.27% at 11,177.



Apple (AAPL),

Bloomberg reports that suppliers will ship 85mln iPhones by 2023. This would be the same as 2022. It is also reportedly considering raising prices for the pro models.

Tesla (TSLA),

UBS downgraded the stock, noting that the recent increase in demand is fully accounted for by the recent price reductions. According to Reuters, Tesla executives will meet the Indian Commerce Minister in this month to discuss plans to build a factory that would produce a new USD 24, 000 car.


A court rejected a settlement which would have allowed the company to sell more stock. The court ruled that the deal was unfair for preferred shareholders and blocked any future legal claims.

Domino's Pizza (DPZ)

Revenue and US SSS fell short of expectations, but profit and international SSS exceeded expectations.

American Express (AXP).

Piper Sandler's stock was downgraded amid concerns about the company's ability to meet its revenue and profitability targets.

Kodiak Sciences (KOD)

The company has decided to stop developing its experimental drug for treating a certain type of eye disorder. It took this decision after failing to achieve its main goal in late-stage tests of the antibody-based drug.

Chevron (CVX)

Eimear Bonner, a long-time veteran of the company, was announced as the new CFO for next year.

Shopify (SHOP).

MoffettNathanson upgraded Shopify; stated that the enterprise business was approaching a turning point. Some desks attributed the rise in China Stocks to the US Politburo signaling property easing, and its focus on investor concerns. China's top leadership on Monday showed more support for housing, but they did not announce a massive stimulus package to help a slowing economy.

Verizon (VZ),

Bloomberg reports that the company plans to increase wireless internet usage by USD 10/month.


The Dollar

The dollar was stronger on Monday, mainly due to the EUR and GBP's weakness (more below), and a rise in US Treasury yields. The Greenback reached a high of 102.42, despite a quiet trading session, with a few nuggets. This was ahead of this week's major risk events, which include the FOMC, ECB and BoJ. On Monday, however, the US PMI composite dropped to 52.0 from the previous value of 53.2. Manufacturing rose to 49.0 from 53.2 (prev. The release was accompanied by cautious commentary. It noted that business optimism for the coming year had fallen to its lowest level this year. Also, the sticky nature of price pressures is a concern, sending a warning signal that further drops in inflation rates below 3% could prove difficult in the short term. This report will not have a major impact on the Fed's decision-making process for Wednesday, as there are no other data points of tier one scheduled. The Fed is expected to hike rates by 25bps and the focus will be on Fed Chair Powell’s comments for future decisions. These will be made meeting-by-meeting, and based on data.


The Buck was the G10's underperformer.


After the disappointing Eurozone PMI and UK PMI in the European morning, where misses across the board were observed. EUR/USD has hit a low at 1.1061 compared to a high of 1.1146 and is currently around the trough as participants wait for the ECB's announcement on Thursday. A 25bps guarantee would be a good outcome. Cable fell to a low of 1,2799 but only briefly dropped below 1.2800.


The NZD continued to outperform. However, this was due more to its Antipodean counterpart than NZ-specifics. AUD/NZD retreated dramatically when the Aussie suffered a decline in two of the three PMIs. Apart from that, the Antipodes had a light news flow as traders waited for risk events to occur later in the week. The AUD/USD pair traded in very narrow ranges (0.6716-56) whereas NZD/USD had a high of 0.6215 and a low at 0.6157. The Australian CPI will be released on Wednesday, followed by the PPI on Friday.


The dollar saw marginal gains against the Loonie and the crude complex firmed up after the tailwinds of China's stimulus. Note that a BoC Survey from June 8th-19th found most Canadians believe the BoC will hold rates at 5.0% through 2023, and then start to reduce rates.


Mixed. JPY gained some stability and strength amid the latest BoJ reports that the Bank may upgrade its inflation projections for the current fiscal to around 2.5%. However, it fell off the best levels when US Treasury yields recovered. This Treasury yields fightback weighed heavily on the Swissy, with USD/CHF reaching a high of 0.8690. The Yen Watchers are waiting for the BoJ's rate decision this Friday, which will also be accompanied by the latest Outlook Report that contains the median forecasts of the Board members for Core CPI and Real GDP. Reports in the press have indicated that there are expectations the BoJ will raise its inflation forecast beyond the 2% target at the next meeting. If confirmed, this could pave the path for policy normalisation.


MXN, BRL and ZAR were the top three currencies compared to the dollar. The Mexican Peso had slightly higher inflation rates in the first half, while the Rand initially benefited from Gold. However, the yellow metal was unable to sustain its gains. The Yuan gained initial traction through tech support, as well as Chinese President Xi's statement that the government will strive to reach the annual development targets and China’s FX regulator releasing draft measures to facilitate cross-border trade. The Yuan also gained some strength from the Politburo's reports. The TRY was unchanged, but the CLP, HUF, and ILS all fell, with the Israeli Shekel being weighed down by reports that Israel's judicial compromise talks had collapsed, in addition to the Parliament ratifying a contested law restricting some supreme courts powers.