Daily Market Outlook, July 19, 2024

Munnelly’s Macro Minute…

“Trump Accepts Nomination, Biden Reflecting On His Run”

Asian stocks and currencies dropped due to economic and geopolitical concerns, despite market optimism about interest rate cuts, a global tech outage adds to the turmoil. The MSCI Asia Pacific Index fell over 1%, its biggest weekly decline in three months. Chinese stocks in Hong Kong led the region's losses, as investors were not convinced by the Third Plenum's efforts to show the economy's potential for renewed growth. US futures rose after the S&P 500 fell for the second consecutive session on Thursday.

The past week has been turbulent for investors, with a sell-off in the tech sector due to escalating trade tensions between the US and China, uncertainty surrounding the US presidential election, and a disappointing outcome from China's third plenum. As the global economic situation becomes increasingly uncertain, interest rate expectations have taken a backseat for the time being. The recent attempted assassination of Republican presidential candidate Donald Trump may have been a sign of more market turmoil to come, as reflected in the spike in Wall Street's fear gauge, the VIX index. On Friday, Asian shares struggled, and the sell-off in technology stocks affected other sectors, with Europe also expected to open lower.

Even positive earnings and forecasts from Taiwan's TSMC were unable to alleviate investors' concerns about a potential US crackdown on Chinese chips, leading to further declines in the world's largest contract chipmaker's shares on Friday. In addition, comments from Trump suggesting that Taiwan should pay for its defense contributed to TSMC's worst weekly decline since late May, with over $61 billion wiped off its peak market value.

The cautious market sentiment on Friday provided some support for the dollar as a safe haven, distancing it from a four-month low caused by expectations of an imminent Federal Reserve easing cycle. In recent days, Fed policymakers have indicated the possibility of a rate cut in September, while the European Central Bank has left the door open for a similar move. On the other hand, the Bank of England has not yet found conditions favorable for a rate cut, and traders have reduced the likelihood of a cut in August.

Overnight Newswire Updates of Note

UK Consumers Stay Cautious As New Government Takes Office
New Law Aimed To Prevent Repeat Of Truss Mini-Budget
France’s National Assembly Elects Macron’s Choice As Its Head
Trump Accepts GOP Nomination, Bullet Wound To His Ear And Electoral Wind At His Back
Top Democrats Prepare For Campaign Without Biden
Once Defiant, Biden Is Now 'Soul Searching' About Dropping Out Of Race
Fed's Daly: 'Not There Yet' On Price Stability
US Fed Governor Bowman Comments In Prepared Speech On Bank Reform
Chinese Leaders Sticks To Painful Reform Playbook To Target Risks And Growth
China Wraps Third Plenum With Calls For Stronger Social Control And Economic Growth
Japan's Inflation Rate Rose For Second Consecutive Month In June
Japan Government Cuts GDP Growth Outlook To 0.9% From 1.3% In FY 2024
Kim Jong Un Meets Russian Vice Defense Chief In Pyongyang To Boost Military Ties
Drone Explodes In Central Tel Aviv, Killing Man And Wounding Several Others

(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: 1.0900-05 (1.2BLN), 1.0915-20 (586M), 1.0935-40 (471M)
1.0950 (1.2BLN)
USD/CHF: 0.8800 (1.1BLN), 0.8900 (280M), 0.8950 (662M), 0.9075 (750M)
GBP/USD: 1.2850 (645M), 1.2970-75 (564M), 1.3025 (200M)
EUR/NOK: 11.68 (525M), 11.70 (443M)
EUR/GBP: 0.8400 (176M), 0.8440 (200M)
AUD/USD: 0.6720-25 (731M), 0.6765 (1.4BLN)
NZD/USD: 0.6050 (527M)
USD/CAD: 1.3675 (402M), 1.3695-1.3705 (614M), 1.3725 (347M)
USD/JPY: 157.00 (620M), 158.00 (789M). EUR/JPY: 172.00 (205M)

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