Daily Market Outlook, July 18, 2024

Munnelly’s Macro Minute…

“Nasdaq Sell Off Gains Momentum On Trump Trade Concerns”

On Thursday, Asian stocks experienced a decline, driven by a widespread sell-off in the technology sector amid concerns over potential tightening of US restrictions on chip sales to China. The region saw significant losses in Japanese and South Korean stocks, with the Topix index dropping by as much as 1.5%. Tokyo Electron was particularly hard hit for the second consecutive day, experiencing an approximately 11% decline, while Taiwan Semiconductor Manufacturing also dropped by as much as 4.3%. Meanwhile, the performance of Hong Kong and mainland Chinese stocks was mixed, as US futures showed a slight increase.

The recent sell-off in the tech sector gained momentum this week following reports that the United States was considering stricter restrictions on chip exports to China. This, combined with comments on Taiwan by Donald Trump, has raised geopolitical concerns and set a negative tone for the European market hours.

The technology index for pan-European STOXX 600 is once again in focus after experiencing its largest one-day percentage drop since December 2022 on Wednesday, largely due to ASML dragging it lower. Investors in the chip industry have been cautious due to Washington's protective stance towards the U.S. semiconductor manufacturing industry, which is seen as strategically important for competing against China.

According to Bloomberg news, the U.S. has informed allies that it is contemplating the use of severe trade restrictions if companies continue to provide China with access to advanced semiconductor technology. Additionally, comments from Republican presidential candidate Trump regarding Taiwan have led to a significant decline in chip stocks, resulting in a market value loss of over $500 billion.Chip stocks have been a driving force behind this year's global share rally, propelling the Nasdaq and S&P 500 to record highs. Some analysts believe that the recent market movements are a result of investors adjusting their positions.

All eyes will be on TSMC, which is set to report earnings later on Thursday. The company's shares have dropped by more than 6% over the past two days. Meanwhile, the European Central Bank policy meeting will take center stage later in the day, with expectations for the central bank to maintain interest rates. Traders will closely watch for any comments from officials that may provide insight into future rate cuts.These comments are likely to influence the euro, which reached a four-month high on Wednesday as traders fully priced in a 25 basis-point rate cut by the Federal Reserve in September, following remarks from officials. The yen experienced volatility after reaching its highest level in six weeks on Thursday, with traders still cautious due to suspected interventions.

Overnight Newswire Updates of Note

Starmer Seeks To Start Rebuilding Relations With Europe
Rachel Reeves To Outline Rules Preventing Another Liz Truss-Style Budget
Nancy Pelosi Warns Biden Of 2024 Presidential Race Peril
US Democratic Sen. Schumer Told Biden To End His Re-Election Bid
Japan's Exports Grew For Seventh Straight Month In June
Australia Unemployment Edges Up; Amid Population And Participation Growth
Japan Arranging To Shoulder $3.3 Billion In G7 Loans For Ukraine
Oil Prices Rise On Bigger-Than-Expected Drop In US Crude Stocks
Gold Price Stays Supported At $2,450 Amid Risk Aversion, Fed Easing Bets
Warner Bros Discovery Plan Split Digital Streaming And Studio Businesses Legacy TV
Hong Kong’s Ether ETFs Face US Competition, Investors May Flock To City

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0880 (1.4BLN), 1.0895-1.0905 (3.1BLN) , 1.0915-25 (2.4BLN)
1.0930-40 (1BLN), 1.0950 (1BLN)
EUR/CHF: 0.9640 (250M), 0.9700 (655M), 0.9750 (1.1BLN)
GBP/USD: 1.2925 (575M), 1.2975-80 (1.5BLN), 1.3000 (503M)
EUR/GBP: 0.8375 (936M), 0.8400 (509M), 0.8425 (354M)
AUD/USD: 0.6720-25 (447M), 0.6735 (428M), 0.6800-05 (1.3BLN)
AUD/NZD: 1.1000 (654M), 1.1050 (224M), 1.1075 (190M), 1.1100 (280M)
NZD/USD: 0.6040 (500M)
USD/CAD: 1.3550 (1.1BLN), 1.3690-1.3700 (474M), 1.3730 (513M), 1.3750 (300M)
USD/JPY: 155.50-60 (527M), 156.00 (325M), 156.70-80 (600M)
156.95-157.00 (1.9BLN), 157.10 (400M), 158.00 (3.7BLN)
EUR/JPY: 171.50 (850M).

CFTC Data As Of 9/7/24

Japanese yen net short position is -182,033 contracts
Euro net long position is 3,623 contracts
British pound net long position is 84,690 contracts
Swiss franc posts net short position of -46,088 contracts
Bitcoin net short position is -118 contracts
Equity fund speculators increase S&P 500 CME net short position by 47,949 contracts to 341,624
Equity fund managers raise S&P 500 CME net long position by 24,304 contracts to 977,432