CURRENCY MARKET WRAP 

As of Mon Jul 15th, Singapore Time zone UTC+8

Dollar Index +0.05%, 96.82
USDJPY, -0.83%, $107.83
EURUSD, -0.06%, $1.1271
GBPUSD, -0.07%, $1.2572    
USDCAD, +0.03%, $1.3034
AUDUSD, +0.11%, $0.7017
NZDUSD, +0.29%, $0.6694

Friday’s advance was supported by continued hope for a rate cut taking place as soon as July 31. Powell’s dovish two-day testimony on monetary policy was followed by an overt call for a lower fed funds rate range. Chicago Fed President, Charles Evans, said on Friday that “a couple rate cuts” are needed in order to boost inflation. Interestingly, this comes just two months after the FOMC voter said that the fed funds rate could remain at its current level until late 2020. The dovish remarks led to another increase in expectations for a 50-basis point rate cut. At the end of the week, the fed funds futures market saw a 21.4% implied likelihood of a 50-basis point rate cut on July 31, up from 5.4% one week ago.

Treasuries started the day in the red, but a daylong rebound lifted all tenors into the green by the close. The 10-yr yield dipped one basis point to 2.11%. The U.S. Dollar Index returned into the neighbourhood of its 200-day moving average (96.77), sliding 0.25% to 96.81.

STOCK MARKET WRAP 

S&P500, +0.46%, 3,013.77
Nasdaq, +0.59%, 7,943.24
Nikkei Futures, +0.47%, 21,600.0

The major averages ended the week at fresh record highs after a steady daylong push that was paced by the Dow Jones Industrial Average (+0.9%) while the Nasdaq (+0.6%) and S&P 500 (+0.46%) recorded slimmer gains.

Eight out of eleven sectors recorded gains on Friday, with cyclical groups faring better than the countercyclical side. Industrials (+1.8%) and consumer discretionary (+1.1%) spent the day atop the leaderboard to end the week with respective gains of 1.2% and 2.1%. Industrials rallied alongside heavyweight Boeing (BA 365.33, +6.33, +1.8%) while transport stocks outperformed. The Dow Jones Transportation Average jumped 2.4% with trucking names leading the push. JB Hunt (JBHT 92.94, +5.18, +5.9%) and Ryder (R 57.53, +3.14, +5.8%) spiked near 6.0% apiece, even though peer, U.S. Xpress (USX 4.32, -0.53, -10.9%), warned that industry conditions have worsened.

On the downside, the health care sector (-1.2%) spent the day behind the remaining groups. Drugmakers were pressured after Illumina (ILMN 305.05, -58.61, -16.1%) issued weaker than expected guidance for Q2 and lowered its outlook for the fiscal year. Another sector component, Johnson & Johnson (JNJ 134.30, -5.81, -4.2%), slid to a five week low after Bloomberg reported that the company could face a criminal probe into undisclosed health risks associated with JNJ’s baby powder.

CURRENCY MARKET WRAP 

As of Fri Jul 12th, Singapore Time zone UTC+8

Dollar Index +0.05%, 97.11
USDJPY, +0.24%, $108.60
EURUSD, -0.07%, $1.1250
GBPUSD, +0.12%, $1.2521
USDCAD, -0.03%, $1.3069
AUDUSD, +0.19%, $0.6972
NZDUSD, +0.25%, $0.6661

Fed Chair Powell wrapped up his semiannual testimony on Capitol Hill on Thursday, which didn’t differ too much from yesterday’s session. Powell’s dovish tone assured the market’s thinking that the Fed will cut the fed funds rate by at least 25 basis points at the July 30-31 FOMC meeting.

Higher-than-expected consumer inflation data, however, did temper some expectations for a 50-basis points rate cut. The core reading in the Consumer Price Index for June rose 0.3% (consensus 0.2%), raising the yr/yr rate to 2.1% versus 2.0% in May. According to the fed funds futures market, the implied likelihood for a 50-basis points cut declined to 20.4% from 26.6% yesterday. 

Separately, the White House abandoned its proposal to eliminate rebates from government drug plans, which benefited shares of health insurers and companies with exposure to pharmacy benefit management.

The 2-yr yield increased three basis points to 1.85%, and the 10-yr yield increased six basis points to 2.12%. The U.S. Dollar Index was relatively unchanged, +0.05% at 97.11. WTI crude declined 0.4% to $60.26/bbl.

STOCK MARKET WRAP 

S&P500, +0.23%, 2,999.91
Nasdaq, -0.08%, 7,896.78
Nikkei Futures, +0.73%, 21,658.0

S&P 500 (+0.23%) and Dow Jones Industrial Average (+0.9%) closed at record highs on Thursday amid lingering rate-cut optimism. The Dow also hit the 27,000 level for the first time, but the Nasdaq Composite (-0.08%) and Russell 2000 (-0.5%) were unable to keep pace.

Thursday’s leaders included most of the S&P 500 cyclical sectors. The industrials (+0.7%), financials (+0.6%), and materials (+0.4%) sectors finished atop the standings. The real estate sector (-1.2%) was the day’s outright laggard amid higher U.S. Treasury yields.

In earnings news,Fastenal (FAST 30.36, -0.89, -2.9%)disappointed investors by missing profit estimates. Delta Air Lines (DAL 60.16, +0.69, +1.2%), on the other hand, reported better-than-expected results and raised its full-year guidance.

CURRENCY MARKET WRAP 

As of Thu Jul 11th, Singapore Time zone UTC+8

Dollar Index -0.44%, 97.06
USDJPY, -0.48%, $108.33
EURUSD, +0.45%, $1.1258
GBPUSD, +0.31%, $1.2506
USDCAD, -0.40%, $1.3074
AUDUSD, +0.44%, $0.6959
NZDUSD, +0.59%, $0.6644

Fed Chair Powell took to Capitol Hill for his semiannual testimony on monetary policy, but the market didn’t have to wait for it to begin to hurriedly leap to record highs. The market received Powell’s prepared remarks before his testimony, and the market interpreted the written statement as a strong case for at least a 25-basis points rate cut given the uncertainty in the economic outlook. There was already a 100% implied likelihood for a 25-basis points cut in the fed funds rate prior to today, according to the fed funds futures market. The probability for a 50-basis points cut, however, did increase to 26.6% from 3.3% yesterday. Contributing to the rebalancing was Powell saying that the stronger-than-expected June employment report did not alter the Fed’s mindset, contrary to the market’s thinking last Friday. 

The Fed also released the minutes from the June FOMC meeting, although market reaction was muted as Powell’s comments provided a more updated view on monetary policy. Powell will head back to Congress today to conclude his testimony.

Shorter-dated U.S. Treasuries increased noticeably on growing expectations for a sharp rate cut, driving the 2-yr yield down eight basis points to 1.82%. The 10-yr yield increased one basis point to 2.06%. The U.S. Dollar Index declined 0.44% to 97.06.

STOCK MARKET WRAP 

S&P500, +0.45%, 2,993.07
Nasdaq, +0.98%, 7,903.40
Nikkei Futures, +0.06%, 21,522.5

The S&P 500 gained 0.45% on Wednesday, briefly surpassing 3000 for the first time after Fed Chair Powell fueled the market’s expectations for a rate cut at the July 30-31 FOMC meeting. The Dow Jones Industrial Average (+0.3%) and the Nasdaq Composite (+0.8%) also set new intraday highs with the Nasdaq finishing at a record close. The Russell 2000 increased 0.2%.

The dovish tone helped eight of the 11 S&P 500 sectors finish higher. The S&P 500 energy sector (+1.4%) led the advance, buoyed by higher oil prices ($60.48/bbl, +$2.69, +4.7%) amid bullish inventory data and supply disruption in the Gulf of Mexico. The financials (-0.5%), industrials (-0.3%), and materials (-0.2%) sectors were the only sectors that finished lower.

Separately, American Airlines (AAL 32.94, +0.58, +1.8%)was a notable gainer on Wednesday after it raised its Q2 guidance for unit revenue and pre-tax margin. Deere (DE 160.81, -2.54)fell 1.6% after UBS downgraded the stock to Neutral from Buy, although it did raise its price target to $167.

CURRENCY MARKET WRAP 

As of Wed Jul 10th, Singapore Time zone UTC+8

Dollar Index +0.12%, 97.50
USDJPY, +0.15%, $108.89
EURUSD, -0.08%, $1.1206
GBPUSD, -0.40%, $1.2462
USDCAD, +0.23%, $1.3125
AUDUSD, -0.61%, $0.6930
NZDUSD, -0.29%, $0.6603

In trade, USTR Lighthizer and Treasury Secretary Mnuchin spoke to China’s Vice Premier Liu He on Tuesday, according to CNBC. Market reaction was muted, as it was expected that there would be a phone call this week to continue trade talks.

The main highlight for markets this week will be Fed Chair Powell’s testimony before the House Financial Services Committee on monetary policy and the state of the US economy later today. With markets cutting their odds for the Fed cut during the next meeting after the latest NFP report, the content of the speech has the potential to meaningfully impact market expectations.

U.S. Treasuries finished slightly lower in another tight-ranged session. The 2-yr yield increased one basis point to 1.90%, and the 10-yr yield increased two basis points to 2.05%. The U.S. Dollar Index advanced 0.12% to 97.50. WTI crude increased 0.7% to $57.79/bbl.

STOCK MARKET WRAP 

S&P500, +0.12%, 2,979.63
Nasdaq, +0.53%, 7,826.86
Nikkei Futures, -0.17%, 21,493.0

S&P 500 increased 0.12% on Tuesday, as shares of large-cap technology stocks helped the stock market overcome a slow start. Overall, there appeared to be a wait-and-see mindset for potential market-moving catalysts this week, including Fed Chair Powell’s semiannual monetary policy testimony on Capitol Hill later today.

Solid gains in the FAANG stocks – Facebook (FB 199.21, +3.45, +1.8%), Apple (AAPL 201.24, +1.22, +0.6%), Amazon (AMZN 1988.30, +35.98, +1.8%), Netflix (NFLX 379.93, +3.77, +1.0%),and Alphabet (GOOG 1124.83, +8.48, +0.8%)– contributed to the positive disposition. The S&P 500 real estate sector (+0.5%) was Tuesday’s best-performing sector.

On the downside, the materials (-1.0%), consumer staples (-0.6%), and industrials (-0.2%) sectors were the lone sectors that finished lower. PepsiCo’s (PEP 131.74, -0.82, -0.6%)better-than-expected earnings results were unable to stir further buying interest in the stock or the consumer staples sector.

In other corporate news, Acacia Communications (ACIA 64.91, +16.85, +35.1%) agreed to be acquired by Cisco (CSCO 56.34, +0.15, +0.3%)for $2.6 billion, or $70 per share, in cash. The deal represented a 46% premium to ACIA’s closing price on Monday.

CURRENCY MARKET WRAP 

As of Tue Jul 9th, Singapore Time zone UTC+8

Dollar Index +0.14%, 97.37
USDJPY, +0.23%, $108.72
EURUSD, -0.10%, $1.1215
GBPUSD, -0.07%, $1.2515
USDCAD, +0.20%, $1.3103
AUDUSD, -0.12%, $0.6973
NZDUSD, -0.07%, $0.6626

There were no notable data prints out if the U.S. and G7 on Monday, the major currencnies remained relatively unchanged.

Turkish Lira dropped on Monday as investors ditched Turkish assets after the country’s central bank governor was ousted by President Recep Tayyip Erdogan. A presidential decree released Saturday said Turkish central bank Governor Murat Cetinkaya was removed from his post and replaced with his deputy, Murat Uysal. The decree did not specify why Cetinkaya was fired, but speculation of his removal had been rising given his reluctance to cut interest rates at Erdogan’s behest. Cetinkaya’s dismissal comes at a time when Turkey’s economy is in disarray and Erdogan struggles to maintain political power.

U.S. Treasuries finished little changed in a quiet session. The 2-yr yield increased one basis point to 1.89%, and the 10-yr yield declined one basis point to 2.03%. The U.S. Dollar Index increased 0.14% to 97.37. WTI crude increased 0.2% to $57.40/bbl.

STOCK MARKET WRAP 

S&P500, -0.48%, 2,975.95
Nasdaq, -0.71%, 7,785.79
Nikkei Futures, -0.23%, 21,700.0

S&P 500 lost 0.48% on Monday, pressured by analyst downgrades and waning hopes for a 50-basis points rate cut at the end of the month. With the major indices near record highs, investors adopted a cautious mindset in front of speeches from several Fed officials this week.

Contributing to the risk-off mood was a slew of downgrades, which featured Apple (AAPL 200.02, -4.21, -2.1%)being downgraded to Sell from Neutral at Rosenblatt. Morgan Stanley, meanwhile, downgraded global equities to Underweight from Equal-Weight, citing a poor outlook for equities over the next three months. Weakness in Apple contributed to the underperformance in the S&P 500 information technology sector (-0.7%). Losses from the materials (-1.1%), communication services (-0.9%), health care (-0.8%), industrials (-0.7%), and financials (-0.6%) sectors also hindered the broader market.

In other corporate news, shares of Boeing (BA 351.12, -4.74, -1.3%) underperformed the broader market amid news that a Saudi airline opted out of $5.9 billion 737 Max order in favour of Airbus.

CURRENCY MARKET WRAP 

As of Mon Jul 8th, Singapore Time zone UTC+8

Dollar Index +0.54%, 97.29
USDJPY, +0.61%, $108.47
EURUSD, -0.52%, $1.1226
GBPUSD, -0.43%, $1.2525
USDCAD, +0.19%, $1.3077
AUDUSD, -0.61%, $0.6979
NZDUSD, -0.88%, $0.6629

U.S. job growth rebounded strongly in June, with government payrolls surging, but persistent moderate wage gains and mounting evidence the economy was losing momentum could still encourage the Fed to cut interest rates this month.Nonfarm payrolls increased by 224,000 jobs last month as government employment rose by the most in 10 months, and construction and manufacturing hiring regained speed. The economy created only 72,000 jobs in May. Economists polled by Reuters had forecast payrolls rising 160,000 in June. Average hourly earnings rose 0.2% in June after gaining 0.3% in May. That kept the annual increase in wages at 3.1% in June for a second straight month.

The solid report served as another reminder that the U.S. economy continues holding up well against a backdrop of slowing activity elsewhere. Friday’s news weighed on Treasuries, sending the 10-yr yield higher by ten basis points to 2.05%, while the implied likelihood of a 50-basis point rate cut fell to just 4.9% from 29.2% on Wednesday. The fed funds futures market remains certain that a 25-basis point cut will take place on July 31.

In corporate news, Deutsche Bank will cut approximately 18,000 jobs over the course of the next three years as part of a major reorganization, BBC reported Sunday. Deutsche Bank will exit its Equities Sales & Trading business, while retaining a focused equity capital markets operation. In addition, the bank plans to resize its Fixed Income operations in particular its Rates business and will accelerate the wind-down of its existing non-strategic portfolio. In aggregate, Deutsche Bank will reduce risk-weighted assets currently allocated to these businesses by approximately 40%.

In Geopolitical news, Iran said on Sunday it will shortly boost its uranium enrichment above a cap set by a landmark 2015 nuclear deal, prompting a warning ‘to be careful’ from Trump, who has pressured Tehran to renegotiate the pact. In a sign of heightening tensions, France, Germany and Britain – all parties to the deal – expressed concerns over the step taken by Tehran, its latest effort to force the West to lift sanctions ravaging its limping economy. In a live news conference, senior Iranian officials threatened further violations, saying Tehran would keep reducing its commitments every 60 days unless European parties to the agreement protected it from sanctions imposed by Trump.

STOCK MARKET WRAP 

S&P500, -0.18%, 2,990.41
Nasdaq, -0.21%, 7,841.30
Nikkei Futures, +0.14%, 21,700.0

Equities stumbled out of the gate after a much stronger than expected headline reading of the June Employment Situation report dampened hopes for aggressive action from the FOMC.

Seven out of eleven sectors ended the day in negative territory. Countercyclical real estate (-0.6%) and health care (-0.7%) settled at the bottom of the leaderboard with health care pressured by biotech names after President Trump said that his administration is preparing a “favored-nations clause” that would reduce prices that Medicare pays for drugs. The iShares Nasdaq Biotechnology ETF (IBB 109.22, -1.71, -1.5%) narrowed this week’s gain to just 0.2%.

The top-weighted technology sector (-0.2%) settled in line with the broader market as relative strength in largest sector components outweighed continued weakness among chipmakers. The PHLX Semiconductor Index lost 0.6% with 24 of its 30 components ending in the red. AMD (AMD 31.50, +0.31, +1.0%)was among the outperformers amid speculation that the company’s newest video cards that will become available on Sunday will challenge corresponding offerings from NVIDIA (NVDA 160.23, -2.52, -1.6%)when it comes to price and performance.

CURRENCY MARKET WRAP 

As of Fri Jul 5th, Singapore Time zone UTC+8

Dollar Index -0.05%, 96.72
USDJPY, +0.01%, $107.82
EURUSD, -0.01%, $1.1286
GBPUSD, +0.00%, $1.2582
USDCAD, -0.06%, $1.3047
AUDUSD, -0.06%, $0.7024
NZDUSD, -0.25%, $0.6691

U.S. markets were closed for Independence Day.

Australian retail sales disappointed yet again in May (0.1% Actual vs 0.2% Consensus) and job vacancies fell from record highs, adding to signs of an underpowered economy and bolstering views the country’s central bank may have to cut rates for a third time this year. Financial markets are pricing in a near 90% chance of a third cut to 0.75 per cent before the end of the year.

In trade news, British Royal Marines seized a giant Iranian oil tanker in Gibraltar on Thursday for trying to take oil to Syria in violation of EU sanctions, a dramatic step that drew Tehran’s fury and could escalate its confrontation with the West. The 300,000-tonne tanker is registered as being managed by Singapore-based IShips Management Pte Ltd. Iran has said it wants to keep the nuclear deal alive but must receive promised economic benefits. This week it announced it had accumulated more low-enriched uranium than the deal allows and from July 7 will refine uranium to a greater purity than permitted.

STOCK MARKET WRAP 

S&P500, +0.00%, -Closed-
Nasdaq, +0.00%, -Closed-
Nikkei Futures, +0.34%, 21,663.0

U.S. markets were closed for Independence Day.

CURRENCY MARKET WRAP 

As of Thu Jul 4th, Singapore Time zone UTC+8

Dollar Index +0.04%, 96.77
USDJPY, -0.05%, $107.78
EURUSD, -0.03%, $1.1287
GBPUSD, -0.11%, $1.2582
USDCAD, -0.29%, $1.3058
AUDUSD, +0.51%, $0.7031
NZDUSD, +0.44%, $0.6708

U.S. ISM Non-Manufacturing Index dropped to 55.1% in June (consensus 56.1%) from 56.9% in May. The dividing line between expansion and contraction is 50.0%. Factory orders declined 0.7% in May (consensus -0.4%) after declining a downwardly revised 1.2% (from -0.8%) in April. This is the third decline in factory orders over the past four months. Initial claims for the week ending June 29 decreased by 8,000 to 221,000 (consensus 220,000). Continuing claims for the week ending June 22 also decreased by 8,000 to 1.686 million. Initial claims continue to run at relatively low levels, which suggests employers remain reluctant to reduce the size of their workforce. U.S. ADP Employment for June came in at 102K (consensus 140K), rebounding from previous 41K. The ADP figures comes out ahead of the U.S. Labor Department’s more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment.

The 2-yr yield increased by 0.1 basis points and the 10-yr yield declined 2.3 basis points to 1.764% and 1.953%, respectively. The U.S. Dollar Index was unchanged at 96.19.

STOCK MARKET WRAP 

S&P500, +0.77%, 2,995.82
Nasdaq, +0.74%, 7,857.69
Nikkei Futures, -0.10%, 21,698.0

All eleven sectors ended Wednesday in the green, but like yesterday, the advance was paced by countercyclical groups. Real estate (+1.5%), consumer staples (+1.4%), and utilities (+0.8%) jumped out to an early lead, maintaining their position until the close.

Chipmakers underperformed once again. The PHLX Semiconductor Index lost 0.4%, trimming this week’s gain to 0.8%. Broadcom (AVGO 284.89, -10.44, -3.5%) was the weakest performer, falling 3.5% after Bloomberg reported that the company is in advanced talks to acquire Symantec (SYMC 25.10, +3.00, +13.6%). The broader technology sector (+0.7%) settled just behind the broader market.

In other M&A news, Sprint (S 6.98, +0.10, +1.5%) rallied amid reports that the company’s merger with T-Mobile (TMUS 75.82, +0.34, +0.5%) is likely to be approved by the Department of Justice. Shares of Tesla (TSLA 234.90, +10.35, +4.6%) settled higher after the company reported a larger than expected number of total deliveries in Q2.