A daily market update from FS Insight — what you need to know ahead of opening bell

“Religiosity turns out to be the best indicator of civic involvement: it’s more accurate than education, age, income, gender or race.” — Lord Rabbi Jonathan Sacks

Overnight

Powell says risks have come closer to balance BBG

Scientists wary of bird flu pandemic ‘unfolding in slow motion’ RT

Biden’s LNG export ban is blocked WSJ

Skydance Media’s deal to buy Shari Redstone’s family company is back on WSJ

Ambulance wait times balloon as New York City’s gridlock worsens Crain’s

Hedge fund giants Citadel and Millennium post strong first-half gains FT

Investors give lifeline to Texas bank confronting real-estate risks WSJ

BlackRock navigates climate proposals with new voting policy FT

China ETF assets register ‘explosive’ growth FT

Global investment banks cut jobs in China retreat FT

The underground network sneaking Nvidia chips into China WSJ

Venture capital is increasingly becoming a haves and have-nots industry WSJ

Tech industry wants to lock up nuclear power for AI WSJ

Private-equity fundraising slogs through first half as assets remain frozen WSJ

Private equity’s movie studio cuts back on back of changed reality Semafor

Shortly after Hungary assumes E.U. Council presidency, Putin-friendly PM Viktor Orbán arrives in Kyiv on a surprise visit Semafor

Sudden return of the Trump trade sends Treasurys reeling WSJ

People dislike activist short selling BBG

HSBC curbs hiring, reins in banker travel in cost-cutting push BBG

Revolut chair welcomes London listing overhaul as fintech reports record profits FT

CFA Level II pass rate spikes to 59%, the highest since 1998 BBG

City of London delays decision on new tallest building FT

Beijing and Moscow go from ‘No Limits’ friendship to frenemies in Russia’s backyard WSJ

How a London fund with a thorny history in Russia won global influence FT

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

In the first 2 trading days of July, the S&P 500 is up ~1%. Yesterday’s rally was aided by dovish comments by Fed Chair Powell at Sintra (see below) and was a reminder that our sense is that consensus leans hawkish, as does, likely, the FOMC (mirroring consensus). Thus, incrementally dovish developments are positive for equities.

Despite a shortened trading week (markets close early Wed, and are closed Thursday), this is a heavy data week. There is still important data both Wed and Friday:
– 7/3 Wed 8:30 AM ET: May Trade Balance    -73.6be
– 7/3 Wed 9:45 AM ET: Jun F S&P Global Services PMI    53.0e
– 7/3 Wed 10:00 AM ET: Jun ISM Services PMI    52.4e
– 7/3 Wed 10:00 AM ET: May F Durable Goods Orders
– 7/3 Wed 2:00 PM ET: Jun FOMC Meeting Minutes
– 7/4 Thu July 4^th Holiday
– 7/5 Fri 8:30 AM ET: Jun Non-farm Payrolls    +191ke

Bottom line: July is off to a strong start, but Friday is key, with its June jobs report. If it is as weak as Goldman expects (50k below consensus), this should lead to a rally in Treasuries, boosting an already seasonally strong July for stocks.

Click HERE for more.

TECHNICAL

As discussed in yesterday’s note “It’s thought that the combination of FOMC Chair Powell’s comments on Tuesday, along with Christine Lagarde, could reflect more of a dovish tone that allows yields and the U.S. Dollar to begin to work lower.”

Equities are now entering a very bullish part of the summer ahead of the July 4^th holiday, where SPX normally shows strong gains in the first part of the month. 

As the chart shows for the NYSE Fang+ index (NYFANG- Bloomberg) Technology has managed to successfully power higher, back to new highs, despite some minor lagging lately in the price of NVDA. While the NYFANG index has pushed back to new all-time highs this week, we’ve begun to see some mean reversion, with TSLA 6.60%  carrying the charge, while NVDA 4.19%  has been lower by over 2% in the last week.

We feel this is a healthy rotation, and still see the NYFANG index push higher over the next 1-2 weeks, ahead of a possible late-July stall-out.

Click HERE for more.

CRYPTO

In our latest video, we discuss the SEC lawsuit against ConsenSys, our revised ETH ETF timeline, some encouraging flows data, as well as certain sentiment and flows data that we would like to see improve.

Click HERE for more.

First News

Ghosts to the Human Eye Invisible. Hurricane Beryl, the earliest storm ever known to have strengthened into a top-level Category 5 storm – sustained winds of 160+ mph! – is an omen of a bad hurricane season. The previous record, set in 2005, heralded the second most intense hurricane season on record. Now, Scientific American argues that, with the warm waters of the Atlantic driven by climate change and El Niño pushing more energy into cyclones, Beryl is the albatross that portends more storms. The ecosystem of tropical storms worldwide seems to be changing: The World Meteorological Organization (WMO) declared that Cyclone Freddy – a literal storm cloud that hung over southeast Africa for weeks in 2023, killing hundreds – was the longest-lasting tropical cyclone ever recorded. The WMO said it was “possible, and indeed likely, that greater extremes will occur in the future.”

As extreme-weather events happen outside of expected windows (formulated on the basis of reasonably recent statistics) scientists are scrambling to zoom out statistically on the time window being examined, so as to include more data and unearth more patterns. Enter thefield of paleotempestology (PT) – which is not, as it would seem, the academic discipline concerned with the stormy lives of dinosaurs and the people who love them, but rather – the science of trawling through geological and geospatial information to determine the history of storms in a region. PT really kicked into gear following 1992’s Hurricane Andrew, which devastated southern Florida and led reinsurers to invest money into – that’s right – prehistoric hurricane research. 

To predict how hurricanes might act in the future, we had only been able to look at ~170 years’ worth of instrumental data, and the prospect of learning more about thousands of years of weather by radiocarbon-dating waves of sand in lakes near the coastline has been seen as attractive both from a pure-science and applied-statistics point of view. Scientists have been able to extend the record to the last millennium using two independent estimates: 1. a reconstruction from sedimentary paleohurricane records, and 2. a statistical model of hurricane activity using sea-surface temperatures (SSTs).

A study published by Nature in January of this year found that “statistically significant agreement between the two estimates and the late-20^th-century hurricane frequency is within the range seen over the past millennium. Numerical simulations using a hurricane-permitting climate model suggest that hurricane activity was likely driven by endogenous climate variability and linked to anomalous SSTs of warm Atlantic and cold Pacific”.

^{ResearchGate*}

Translating plodding scientific prose into a commonly comprehensible idea, the conclusion seems to be that it’s natural for storms to occur from time to time, driven by abnormal sea-surface temperatures. Projected trends in hurricane frequency can be based on the chart above, which examines hurricane frequency on the basis of sediment cores from the Gulf Coast (the chart above), which show an intense period of hurricane activity for centuries that ended abruptly 600 to 800 years ago. Specifically, in Florida’s Shotgun Pond, over the past 2000 years, there was higher activity than the historical period in 650-1000, 1100-1300, 1350-1450, and 1750-1850 AD, with lower activity than today in 450-650, 1000-1100, 1300-1350, and 1500-1750 AD. Hurricane Michael, in 2018, left a deposit.

All of this is to say that those who engage in paleomercantology (if that’s what we would call the study of prehistoric markets) and willing to zoom out sufficiently to include a sufficiently encompassing corpus of data on the markets of, say, the Sumerians, Akkadians, Assyrians, Egyptians, Greeks, Phoenicians, Romans, Byzantines, Venetians, Genoese et al, would then be able to “sift it repeatedly for patterns, exploiting the power of computers to hunt for ghosts that to the human eye would be invisible… [seeking] signals that make no intuitive sense [but] do indeed work” in the manner of the late great Jim Simons’ Renaissance Technologies (More Money Than God, pp 301-2).

Semafor, ResearchGate, Wikipedia, Bloomberg

^{* Age models and storm records from Shotgun Pond (a–c). Age model outputs from Bacon⁴³ are shown for Shotgun Pond (a). The adjusted depth is the depth after sand bed removal. Darker gray shades indicate a higher density of age-depth profiles. The 95% confidence interval is indicted by the black dotted lines bracketing the age-depth shaded curves, the weighted mean age-depth profile is indicated by a solid red line, calibrated radiocarbon age probabilities are shown in blue, and ages derived from ²¹⁰Pb and ¹³⁷Cs are shown in green. Sand content is displayed as the percent of > 63 µm mass relative to the dry bulk mass (b), and sand beds removed prior to developing the age models (“events”) are indicated with an asterisk. The 168- and 161-year historic periods are outlined in black dashed rectangles for Shotgun Pond (b). Thickness of sand beds in cm identified as “events” are displayed as vertical black bars for Shotgun Pond (c). The number of events in 168- and 161-year moving windows are displayed in orange for Shotgun Pond (c). The horizontal orange dashed lines (c) indicate historical event frequencies, which is the historic baseline level relative to which “active” and “quiescent” intervals are discussed in the text.}

Russia, China: We’ll Take Global Warming If It Benefits Us. A Chinese radio station based in Tianjin has begun broadcasting Arctic sea ice conditions along Russia’s coast for ships navigating the Northeast Passage. This move aligns with China’s efforts to use northern shipping routes as alternatives to the Suez Canal.

Arctic routes are gaining popularity as global warming reduces ice coverage, allowing for extended ice-free periods during each navigation season. These paths connect the Pacific and Atlantic Oceans, offering a shorter route between major economies.

For Russia, this presents an opportunity to increase oil and gas exports to China amid Western sanctions. China views Arctic shipping lanes as a way to diversify its shipping options beyond the Strait of Malacca.

The Tianjin Coastal Station now provides sea-ice analyses, forecasts, and weather information for key straits along the Russian coast, including the Bering, Dmitry Laptev, Velikitsky, and Kara Straits. Daily broadcasts are scheduled from July 1 to October 31 at 2 p.m. and 10 p.m. Beijing time.

The Northeast Passage, also known as the Northern Sea Route (NSR), offers a significantly shorter distance between Europe and East Asia compared to the Suez Canal route. The NSR spans approximately 13,000 km from Murmansk to the Bering Strait, while the Suez Canal route is about 21,000 km.

China currently imports some liquefied natural gas (LNG) from Russia via Arctic routes, primarily through the Yamal project, operated by Novatek, in which Chinese state-owned companies have stakes. Russia’s Gazprom delivered its first LNG cargo to China via the NSR in September 2023.

India, a major buyer of Russian oil, has also expressed interest in Arctic shipping cooperation with Russia. GCaptain