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.” — Rabbi Lord 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
Overnight |
S&P Futures -2
point(s) (-0.0%
) overnight range: -9 to +4 point(s) |
APAC |
Nikkei +1.26%
Topix +0.54% China SHCOMP -0.49% Hang Seng +1.18% Korea +0.47% Singapore +1.41% Australia +0.28% India +0.67% Taiwan +1.28% |
Europe |
Stoxx 50 +1.40%
Stoxx 600 +0.87% FTSE 100 +0.57% DAX +0.99% CAC 40 +1.58% Italy +1.38% IBEX +1.22% |
FX |
Dollar Index (DXY) -0.09%
to 105.63 EUR/USD +0.13% to 1.0759 GBP/USD +0.14% to 1.2703 USD/JPY -0.30% to 161.92 USD/CNY -0.03% to 7.2733 USD/CNH +0.01% to 7.3063 USD/CHF +0.08% to 0.9032 USD/CAD +0.05% to 1.3672 AUD/USD +0.08% to 0.6672 |
UST Term Structure |
2Y-3
M Spread widened 0.3bps to -62.6bps
10Y-2 Y Spread narrowed -1.9bps to -33.3bps 30Y-10 Y Spread narrowed -1.5bps to 15.7bps |
Yesterday's Recap |
SPX +0.62%
SPX Eq Wt +0.45% NASDAQ 100 +1.01% NASDAQ Comp +0.84% Russell Midcap +0.34% R2k +0.19% R1k Value +0.36% R1k Growth +0.79% R2k Value +0.40% R2k Growth -0.02% FANG+ +1.71% Semis +1.00% Software +0.49% Biotech -1.81% Regional Banks +1.19% SPX GICS1 Sorted: Healthcare -0.40% Energy -0.20% Materials +0.16% REITs +0.40% Utes +0.44% Tech +0.54% Indu +0.55% SPX +0.62% Cons Staples +0.62% Comm Srvcs +0.84% Fin +1.10% Cons Disc +1.81% |
USD HY OaS |
All Sectors +1.9bps
to 360bps All Sectors ex-Energy +1.9bps 333bps Cons Disc +1.9bps 291bps Indu +0.7bps 247bps Tech +2.6bps 432bps Comm Srvcs +6.0bps 676bps Materials +3.0bps 308bps Energy +2.3bps 269bps Fin Snr +1.8bps 324bps Fin Sub -0.5bps 226bps Cons Staples +0.2bps 295bps Healthcare +1.4bps 381bps Utes +2.0bps 220bps * |
Date | Time | Description | Estimate | Last |
---|---|---|---|---|
7/3 | 8:30 AM | May Trade Balance | -76.5 | -74.558 |
7/3 | 9:45 AM | Jun F S&P Srvcs PMI | 55.1 | 55.1 |
7/3 | 10:00 AM | Jun ISM Srvcs PMI | 52.6 | 53.8 |
7/3 | 10:00 AM | May F Durable Gds Orders | 0.1 | 0.1 |
7/3 | 2:00 PM | Jun 12 FOMC Minutes | n/a | 1 |
7/3 | 2:00 PM | Jun 12 FOMC Minutes | n/a | 1 |
7/5 | 8:30 AM | Jun AHE m/m | 0.3 | 0.4 |
7/5 | 8:30 AM | Jun Unemployment Rate | 4 | 4 |
7/5 | 8:30 AM | Jun Non-farm Payrolls | 190 | 272 |
7/8 | 11:00 AM | Jun NYFed 1yr Inf Exp | n/a | 3.17 |
7/9 | 6:00 AM | Jun Small Biz Optimisum | n/a | 90.5 |
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 4th 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 4th 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 21.09% carrying the charge, while NVDA 0.44% 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 those time windows, so as to include more data and unearth more patterns. Enter the field 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 is attractive both from a pure-science and applied-statistics point of view. Scientists have been able to extend the record back by two millennia 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-20th-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”.
Translating plodding scientific prose into a commonly comprehensible idea, the conclusion seems to be that it’s natural for unnaturally strong 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, which show a centuries-old intense period of hurricane activity 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 CE, with lower activity than today in 450-650, 1000-1100, 1300-1350, and 1500-1750 CE. Hurricane Michael also left a deposit in 2018.
All of this is to say that those who engage in paleomercantology (if that’s what we are calling the study of prehistoric markets) and are willing to zoom out enough to include a sufficiently encompassing corpus of data on the markets of, say, the Sumerians, Akkadians, Assyrians, and Egyptians (in addition to those of the 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