Daily Market Outlook, June 25, 2024

Munnelly’s Macro Minute…

“Nvidia Three Day 13% Decline Dampens Risk Appetite”

Asian stocks, including Japan's stock market, saw gains on Tuesday despite a mixed day on Wall Street. There are rumors that the tech sector's rise might be ending. US equity contracts increased slightly during Asian trade on Monday, following gains in non-tech US sectors. Nvidia has experienced a three-day loss of around $430 billion. Investors in Asia are shifting focus from the technology sector to other areas of the market, with a growing number in Japan buying value stocks like financials. This shift is due to the belief that the country's central bank will tighten its policies.

European stocks may face a setback on Tuesday after starting the week with gains. Tech stocks, particularly Nvidia, are expected to take a hit following a sell-off in the high-flying chip sector on Wall Street. On Monday, the S&P 500 lost 0.3% while the Nasdaq dropped more than 1%, and the SOX semiconductor index slid more than 3%. However, value stocks, as seen in the 0.7% rise in the Dow, have benefited from the tech sector's loss.

Geopolitical developments in France's snap elections this weekend could quickly shift sentiment. The far right's efforts to reassure the markets about fiscal restraint have been effective so far. European investors will also monitor the European Commission's interactions with Apple and China. China is urging the EU to cancel proposed tariffs on Chinese electric vehicle imports before July 4, and negotiations are ongoing in Brussels. Apple must modify its App Store operations to avoid significant fines for antitrust violations.

Stateside consumer confidence data is due with markets eyeing further potential weakness in consumer confidence which has started to soften in recent reports. Fed Governors Michelle Bowman and Lisa Cooks are scheduled to speak at separate events. Governor Bowman will be speaking at the Policy Exchange event in London, while Governor Cooks will be speaking at the Economic Club of New York.

Overnight Newswire Updates of Note

Fed's Daly Warns Of Labor Market Risks, Nearing Inflection Point
Bank Of Canada Looks For Further Wage-Growth Slowdown, Macklem Says
Australia’s Households Remain Pessimistic On RBA Rate-Rise Fears
Empty Wellington Shops Send Grim Economic Message To RBNZ Hawks
Forget 160, Traders See Yen Slumping As Far As 170 This Time
Nvidia Shares Fall 6.7% To Close With Biggest Drop In 2 Months
Apple Spurned Idea Of iPhone AI Partnership With Meta Months Ago
Pfizer Is Testing New Non-Glp-1 Mechanism For Weight-Loss Drug
Boeing Talks To Buy Back Spirit AeroSystems Have Last-Minute Twist
Paramount+ To Increase Prices For Its Streaming Plans
US Warned Hezbollah It Can't Hold Israel Back If Escalation Continues

(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: 1.0700 (1.7BLN), 1.0730-40 (795M), 1.0750 (334M)
USD/CHF: 0.8875 (277M). EUR/CHF: 0.9700 (710M)
AUD/USD: 0.6610 (246M), 0.6625-30 (281M), 0.6670-80 (935M)
USD/CAD: 1.3640 (220M), 1.3655 (310M)
USD/JPY: 158.55 (330M), 159.00 (360M), 160.00 (1.7BLN)
The French election risk is still present in the euro FX options market, as implied volatility measures the risk for FX options based on actual volatility. Any difference between implied and actual volatility can be traded. Changes in implied volatility can indicate upcoming FX risks. One-month expiry euro volatility saw a significant increase after the French election announcement, and one-week expiry options included the first round vote from Monday June 24. The gains in one-week implied volatility highlight the related actual volatility risk, but the current lack of actual volatility is dampening broader implied volatility.

CFTC Data As Of 21/06/24

Bitcoin net short position is -723 contracts
Swiss Franc posts net short position of -37,390 contracts
British Pound net long position is 47,621 contracts
Euro net long position is 7,951 contracts
Japanese Yen net short position is -147,753 contracts
Equity fund speculators increase S&P 500 CME net short position by 112 contracts to 353,049
Equity fund managers cut S&P 500 CME net long position by 7,915 contracts to 960,056