Americas Breakfast Briefing

US OPEN/EVENTS AHEAD

USTs have traded in a narrow range overnight. The global IT outage resulted in a brief flight-to-quality trade that quickly reversed, although that still wasn't the 10-year yield low for the session achieved during Asia-Pac trade. The 4.2196% high, meanwhile, was the best since Monday. Resistance comes in at 4.247%. 10s and 30s currently outperforming and the curve marginally flatter but within the recent range. SPX futures are marginally lower. There is nothing of note on the data calendar leaving Williams (14.40GMT) and Bostic (17GMT) as a focus given the pre-July FOMC quiet period starts Monday and the Fed seems to be coalescing towards a relatively decent probability of a September rate cut. This remains fully priced by Oct24 FFF. One earnings report that may garner attention is AMEX which will provide some idea of how consumers, especially the higher income end of the spectrum, are performing.

- Declines from 4.751 (25 Apr YTD peak) via 4.453 (1 Jul lower high) to reach 4.067 (17 Jul, 4mth low), before ranging

- Negative/deteriorating studies suggest risk towards 3.993/3.984 (8 Mar higher low/76.4% retrace of 3.747/4.751)

- Only over 4.195 (14 Jun low) then 4.274 (9 Jul high) relieves for 4.453 lower high

EUROPEAN ROUND UP

EGB debt futures spent the session in the red with Gilts leading the way lower down close on 60 ticks at worst. Bunds were around 10 ticks better off, BTPs and OATs are further 7-8 ticks and therefore marginally outperforming. UK retail sales were disappointing for June leading to a 0.1% q/q drop. Weak goods demand isn't a new story though. Meanwhile, a couple of ECBers suggested that the market in pricing for around 45bp of easing was in a decent place i.e. two more cuts this year highly probable. Deflationary German PPI, though not a typical focus for the ECB, supportive of this. German, Italian, French yield curves were marginally steeper, the UK mixed. Equity markets were lower across the board, the EStoxx50 approached, but did not test the June 14th low, before marginal retracement.

- Declined from 97.775 (29 December 2023 peak) to 96.550 (31 May, 7-1/2 month low), before recovering to post new two-month highs over 96.755 (17 June high)

- Improving studies (note the 63% bullish rating on this week's Sentiment Matrix) suggest initial scope to 96.825 (3 May lower high)

- A clearance would then allow a run up towards 96.925 (12 April high), which guards 97.015 (25 March lower high)

- Near-term pullbacks should hold well above the 96.650 (3/5 July) higher lows and only below damages recovery potential and suggests extended ranging over 96.550

MARKET HEADLINES

- UK June headline retail sales -1.2% m/m, core -1.6% m/m. Q2 -0.1% q/q

- UK retail sales/public finances highlight challenging economic conditions

- UK consumer confidence edges up 1 point to -13

- UK June budget deficit larger than OBR forecast

- ECB SPF: inflation expectations for 2024 2.4%, 2025 2%, 2026 1.9%, longer-term 2% ...

- ... core-inflation seen 2.7% this year, 2.2% in 2025, 2% 2026

- ... economic growth expected 0.7% this year, 1.3% next year

- ECB's Muller: Important not to pre-commit on September

- ECB's Villeroy: Market expectations on rates seem rather reasonable

- ECB's Simkus: Agree with market view on two more 2024 rate cuts

- ECB's Rehn: risk of faster-than-expected inflation remains

- German June PPI -1.6% y/y versus -2.2% previously

- Japan headline CPI steady at 2.8% y/y in June, core +10bp to 2.5%, core-core +10bp to 2.2% y/y-

DAY AHEAD

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