Daily Market Outlook, June 4, 2024

Munnelly’s Macro Minute…

“When Bad News Means Bad News…”

Asian stock markets experienced a downturn following the release of a weaker-than-expected US ISM manufacturing survey on Monday, reversing the prior market dynamic where the market perceived bad news as good news for market sentiment as it prompted the markets to believe that the Fed would step in with rate cuts, recently we are witnessing a reversal of this response. This survey's results have cast a shadow over the market's risk appetite, fueling worries about the US economy's deceleration. Moreover, there's an anticipation that the Federal Reserve might maintain elevated interest rates to effectively combat inflation. While equity markets are uncertain about the news, the bond market shows a clear decrease in yields. The likelihood of a September rate cut has increased from 50:50 to 60:40, according to the CME Group's FedWatch Tool.

Investors are setting their sights on the upcoming ECB monetary policy announcement and the US employment data, expected on Thursday and Friday, respectively. The British Retail Consortium disclosed its informal retail sales data for May overnight, indicating a recovery after April's sales were dampened by inclement weather. The figures showed a modest 0.4% increase year-over-year, a rebound from April's 4.4% decline, yet still falling short of projections. This aligns with the recent CBI distributive trades survey, which also noted improved sales in May. No additional UK economic data is slated for release today.

In the Eurozone, the absence of significant data releases today means there's little chance of altering expectations for an ECB rate reduction this Thursday. However, today's German unemployment report is likely to garner interest. The consensus is that jobless claims for May increased by 7,000, with the unemployment rate predicted to hold steady at 5.9% for the fifth consecutive month, following a rise throughout 2022 and 2023. Given that wage growth indicators are still relatively high historically, there may be a cautious approach to further ECB rate reductions later this year.

Sateside, the spotlight will be on this afternoon's factory orders and the JOLTS report. Factory orders are projected to have seen a 0.6% uptick in April, largely inferred from durable goods data. The JOLTS report is anticipated to provide insights into whether there's a cooling off in labor demand.

Overnight Newswire Updates of Note

BRC & Barclays Say Wet Weather Keeps Cloud Over UK Spending In May
Sunak And Starmer Set To Clash In First UK Election Leaders’ Debate
BoJ’s Ueda: Will Adjust Degree Of Support If Inflation Moves As Expected
Japan's Govt To Warn Of Weak Yen Pain In Policy Roadmap, Draft Shows
Australian Consumer Confidence, Inflation Expectations Nudge Higher
JPMorgan Sees Ample Demand For Growth In Treasury Bill Supply
Oil Pushes Lower As OPEC+ Plan Spurs Concerns About Ample Supply
E*Trade Considers Kicking Meme-Stock Leader Keith Gill Off Platform
Maersk Lifts Guidance Again On Surging Freight Rates
Netanyahu Signals Openness To Cease-Fire But Wants Option To Resume

(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: 1.0805-10 (975M), 1.0850-60 (755M), 1.0870-80 (1BLN)
1.0890-00 (1.64BLN), 1.0915-25 (581M)
USD/CHF: 0.9090-00 (1.15BLN)
EUR/CHF: 0.9650 (401M), 0.9800 (400M), 0.9925 (532M)
EUR/SEK: 11.6800 (425M). EUR/GBP: 0.8500 (793M)
GBP/USD: 1.2680 (322M), 1.2690-05 (560M)
AUD/USD: 0.6545-50 (951M), 0.6650 (302M), 0.6670-75 (560M)
0.6690 (279M)
USD/JPY: 155.00 (523M), 155.50 (220M), 155.75 (251M)
156.40-50 (635M), 157.00 (372M)
USD/ZAR: 18.1600 (335M), 18.1900 (308M), 18.6850 (234M)

CFTC Data As Of 31/05/24

Japanese yen net short position is -156,039 contracts
Euro net long position is 57,572 contracts
Swiss franc posts net short position of 44,366 contracts
British pound net long position is 25,402 contracts
Bitcoin net short position is -756 contracts
Equity fund managers raise S&P 500 CME net long position by 31.431 contracts to 978,007
Equity fund speculators increase S&P 500 CME net short position by 12,145 contracts to 330,057
Gold NC Net Positions increased to $236.6K from previous $229.8K