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The May Trade Balance Report showed a narrowing in the trade deficit to $69.0 billion (consensus -$69.0 billion) from an upwardly revised $74.4 billion (from -$74.6 billion) in April. The deficit moved in a positive direction, but not because of any overwhelming strength in exports. On the contrary, exports were $2.1 billion less than April exports. The swing factor was that imports were $7.5 billion less than April imports.
The key takeaway from the report is that the decline in exports and imports is emblematic of a softening in global demand that one would expect to see in an environment where many of the world’s leading central banks are raising rates.
Initial jobless claims for the week ending July 1 increased by 12,000 to 248,000 (consensus 245,000).
Continuing jobless claims for the week ending June 24 decreased by 13,000 to 1.720 million.The key takeaway from the report is much the same: initial jobless claims — a leading indicator — continue to run well below recession-like levels.
Yields Soar
2-yr: +12 bps to 5.06%
3-yr: +14 bps to 4.76%
5-yr: +14 bps to 4.40%
10-yr: +9 bps to 4.04%
30-yr: +5 bps to 3.99%Equity indices in the Asia-Pacific region ended the week on a mostly lower note.
—Equity Markets—
Japan’s Nikkei: -1.2% (-2.4% for the week)
Hong Kong’s Hang Seng: -0.9% (-2.9% for the week)
China’s Shanghai Composite: -0.3% (-0.2% for the week)
India’s Sensex: -0.8% (+0.9% for the week)
South Korea’s Kospi: -1.2% (-1.5% for the week)
Australia’s ASX All Ordinaries: -1.6% (-2.1% for the week)Hong Kong-listed banks remained under pressure while sovereign debt also retreated overnight after yesterday’s slide in U.S. Treasuries, with Australia’s 10-yr yield rising to a level not seen since early 2014 (4.305%) while New Zealand’s 10-yr yield hit a level not seen since 2011 (4.930%).
Japan’s Prime Minister Kishida may reportedly reshuffle his cabinet in September.
Japan’s May Average Cash Earnings 2.5% yr/yr (expected 0.7%; last 0.8%),
May overall wage income 2.5% yr/yr (expected 0.7%; last 0.8%),
May Overtime Pay 0.4% yr/yr (expected -2.8%; last -0.7%).
May Household Spending -1.1% m/m (expected 0.5%; last -1.3%); -4.0% yr/yr (expected -2.4%; last -4.4%).
May Leading Index 1.4% m/m (last 0.0%) and Coincident Indicator -0.4% m/m (last 0.1%)Samsung reported a 96% drop in profit due to continued pressure on prices of memory chips.
South Korea’s May Current Account surplus $1.93 bln (expected deficit of $650 mln; last deficit of $790 mln)
Major European indices trade on a mostly higher note while Spain’s IBEX (-0.5%) lags amid weakness in select industrial and energy names.
—Equity Markets—
STOXX Europe 600: +0.2% (-3.0% week-to-date)
Germany’s DAX: +0.5% (-3.1% week-to-date)
U.K.’s FTSE 100: -0.3% (-3.6% week-to-date)
France’s CAC 40: +0.6% (-3.7% week-to-date)
Italy’s FTSE MIB: +0.6% (-1.9% week-to-date)
Spain’s IBEX 35: -0.5% (-3.7% week-to-date)The EU is reportedly looking to withdraw from the international Energy Charter Treaty.
European Central Bank policymaker de Guindos repeated that the governing council is not yet done with rate hikes while President Lagarde said that there is more work to do in order to lower inflation.
Germany’s May Industrial Production -0.2% m/m (expected 0.0%; last 0.3%); 0.8% yr/yr (last 1.8%)
France’s May trade deficit EUR8.4 bln (expected deficit of EUR9.0 bln; last deficit of EUR10.6 bln) and May Current Account deficit EUR700 mln (expected surplus of EUR600 mln; last deficit of EUR1.70 bln)
Italy’s May Retail Sales 0.7% m/m (expected 0.1%; last 0.2%); 3.0% yr/yr (expected 4.2%; last 3.2%)
Swiss June Unemployment Rate 2.0%, as expected (last 2.0%)U.K.’s June Halifax House Price Index -0.1% m/m (expected 0.1%; last -0.2%); -2.6% yr/yr (expected -2.3%; last -1.1%). Q1 Labor Productivity -1.4% qtr/qtr, as expected (last 0.4%)
Levi Strauss (LEVI 13.10, -1.13, -7.9%): beats by $0.01, reports revs in-line; guides FY23 EPS and revs below consensus
Exxon Mobil (XOM 102.60, -0.32, -0.3%): downgraded to Peer Perform from Outperform at Wolfe Research
JPMorgan Chase (JPM 144.40, +1.19, +0.8%): downgraded to Peer Perform from Outperform at Wolfe Research
KLA Corporation (KLAC 453.55, -7.99, -1.7%): downgraded to Sector Weight from Overweight at KeyBanc Capital Markets
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