- SNAPSHOT: Equities up, Treasuries up, Crude down, Dollar up
- REAR VIEW: Trump reportedly told EU leaders and Zelensky that conceding territory will be necessary for a peace deal with Ukraine/Russia; Bessent says will meet again with Chinese officials in the next two/three months; Interview list for new Fed chair totals eleven, but Trump later said its down to three or four; China announces two stimulative targeted loan subsidy programmes; Russia to spread out oil cuts to compensate OPEC+ through to 2025; Bessent says there is a very good chance of a 50bps rate cut at Fed September meeting; EIA crude stocks show a surprise build; Fed’s Goolsbee says tariffs are a stagflationary shock.
- COMING UP: Data: Australian Jobs Report (Jul), UK GDP (Jun/Q2), EZ Flash GDP (Q2) and Employment (Q2), US PPI (Jul), Jobless Claims. Events: Norges Bank Policy Announcement. Speakers: Norges Bank Bache; Fed’s Barkin. Supply: US. Earnings: Applied Materials, JD.Com, RWE, Antofagasta.
Stocks were higher on Wednesday, but small caps continued to surge while the Nasdaq closed marginally higher. The outperformance in the Russell was led by more dovish rate cut bets, which were bolstered by Treasury Secretary Bessent advocating for a 50bps move in September. Moneymarkets now fully price in a 25bp rate cut in September. Meanwhile, the Treasury Secretary also announced that there are 11 candidates for Fed Chair, all of whom have now been named, but some suggest that they are interviewing a wide range of candidates is a tactic to put pressure on the Fed. Note, a lot of the candidates who have been interviewed are calling for lower rates and/or are critical of the Fed. T-notes rallied throughout the session but pared ahead of settlement, almost completely paring the post-CPI downside in the long-end. In FX, the Dollar was weighed by lower yields while G10 FX performed well, particularly GBP and NZD. Crude prices settled red but well off the earlier lows. Weakness was seen in the wake of the inventory data, but pared into settlement with eyes on the Trump/Putin meeting. The White House has been tempering expectations ahead of the meeting, but Trump suggested there will be a second, more important meeting if the first goes well. Gold prices benefited from the weaker dollar and lower yields on prospects of a more dovish Fed.
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