Global Markets
US Yield Curve & Fed Rate
Monitor
Crypto Market Tracker
Key Macro & Technicals
Market Commentary
·
FX markets still
trading in a range last 1M with USD Index -0.3%. Big trend still dollar
weakness and stable $/CHF ironically the biggest movers during this period with
-1.8% move among the major currencies. Deeper dive, shows $/CHF following
through on the down-move since 2019 and next target would be ATL 0.7579 in
08/11. FX crosses also risk-on with EUR/JPY and AUD/JPY both rallying 3.5% and
3.8% respectively.
·
On 10/07, Well
Fargo strategists cited that the US economy appear to be losing steam with real
GDP contracting 0.5% in the 1Q25, a dip partly reflecting a surge in imports sparked
by businesses racing to lock in order before Trump’s elevated tariffs. All else
being equal, imports in national income and product accounts can mechnically
reduce GDP. They also added that their projection for real GDP expansion of
1.8% in the 2Q25 “may overstate the strength of the economy at present”.
·
On 29/06, China
manufacturing PMI fell abruptly to 49.7 as local manufacturers grappled with
sluggish overseas demand amid relatively high US trade tariffs. Washington and
Beijing were also seen agreeing to uphold the May deal, as well as establish a
framework for a trade deal in Jun 2025.
·
On 20/06, the USD
slipped to multi-year lows against EUR and CHF alongside Asia FX as concerns
about Fed independence undermined faith in the soundness of USA’s monetary
policy. InTouch Capital Markets Kieren said “market will likely bristle at any
early move to name Powell’s sucessor, particualrly if it appears
politically-motivated”. The ending of “US exceptionalism” has been a major
theme in the USD decline in recent months as investors question it dominant
reserve currency status and main safe haven among currencies
·
On 20/06, Chinese
Premier Li Keqiang said “China will take forceful steps to boost consumption”
at the latest AIIB annual meeting. Beijing has through late-2024 rolled out a
slew of measures aimed at boosting laggard consumer spending, most notably
subsidies on eletronics and household goods. Whilst the swathe of recent
econommic readings show some pressure from the US tarriffs, they also
highlighted the resilience of the Chinese economy
·
On 30/06, Canada
announced it would rescind its Digital Services Tax (DST) clearing the way for
the resumption of trade and security negotiations with the US, with both sides
aiming to strike a deal by 21/07. The decisions comes just days after Trump
abruptly called off trade talks on 28/06, denouncing the attack as a “blatant
attack”.
·
Most of the
action lie in MSCI World +3.7% and US equities as S&P 500, DJI, NASDAQ have
gained 4.7%, 5.2% and 6.1% respectively. Updated the FIbo projections and xxx
and 6500 levels now look within range for both MSCI World and S&P 500.
Another major mover has been the Nikkei 225 which has rallied +6% lately, which
has broken out a bullish triangle formation. CSI 300 bullish falling wedge
formation breakout also following as it been clinging to key 4000 level last
few months. Indian and Russian equities also experience positive momentum with
SENSEX, Nifty 50 and Russian Index jumping 3.1 – 3.5% range. Sector-wise most
of the gains have been around financials, technology and communication sectors
based on XLC, XLF, XLK with the only outlier being energy with XLE -3.8% no
doubt to to collapsing oil prices. Unsurprisingly, OVX has shot up 17.6% whilst
all other volatility indices like VIX, SKEW, VVIX have faded 20%.
·
Was reviewing
prior S&P 500 Fibo price targets which stood at 6120 – 6370 and 6940 in
09/24 as well as 6166 and 6465 in 11/24. Updating the Fibo clusters revael that
we are nearing the revised targets 6330 and 6487 levels. After that is 7160
which feels too aggressive from last low 3500 in 08/20 for this trading cycle.
·
On 26/06, market
chatter is that big investors are safeguarding against thinly-traded markets
given complacent market mood which might spark a repeat of Aug 2024 rout. They
see stocks, bonds and currencies vulnerable against the backdrop of fragile
Israel-Iran ceasefire, seesawing oil prices and trade-war uncertainty. HSBC
Asset Managment CIO Xavier said “our positioning is that over the next 3M
market will not get the positive confirmations they are pricing-in”.
·
On 30/06, GS
noted that US pension funds sold $28B in equities for their Jun rebalancing
following the S&P 500 hitting a new ATH. This selling amount ranks in the
89th percentile among all buy-and-sell estimates in absolute dollar
value last 3Y. Looking at longer timeframes, it also sits at 90th
percentile of similar transactions dating back 01/20.
·
On 09/07, most
Fed members eye rate cuts for 2H25 with divisions emerging on the exact path.
Some members feel a cut in Jul 2025 would make sense whilst others like Fed
Powell continue to back the wait-and-see approach citing uncertainty around
policy impacts from Washington on the economy and inflation. For 2026, the
voting Fed memebrs projected rates to fall to 3.6% in 2026, up from prior
forecast of 3.4% in 03/25. For 2027, the committee revised its policy rate
outlook higher, seeing rates falling to 3.4%, up from 3.1% previously. Macro
wise, inflation in both US and China are non-issues, US inflation continues to
fall despite Liberation Day and Chinese inflation remains in the negative
territory. This clearly strengthens the case for further Fed rate cut and PBOC
fiscal and monetary stimulus.
·
On 25/06, Trump
touted he might expediate his accouncement of the Fed Jerome Powell’s successor
according to a WSJ report. He has toeyd with the idea of selecting and
announcing the replacement by Sep/ Oct 2025 and considering former Fed governor
Kevin Warsha nd National Economic Council Director Kevin Hassett. Other
contenders include Treasury Secretary Scott Bessent, former World Bank
President David Malpass and Fed governor Christopher Waller. Fed Powell has
largely disregarded calls to cut rates immediately and has signalled he will
serve the remainder of his term which end May 2026.
·
On 29/06, Trump
has said he wants to to cut the Fed rate to 1% from 4.25 – 4.5% right now.
Investors are also keeping an eye on his massive tax cut and spending bill now
facing the Senate, which could add $3.3T to the national debt over a decade
according to the Congressional Budget Office estimates. This estimate hit to
the $36.2T federal debt is about $800B more than the version passed last month
in the House of Representatives. Democrats are hoping the latest revised figure
could stroke enough anxiety among fiscally-minded conversatives to persuade
them to buck the Republican party which controls both chambers of Congress.
·
“Republicans are
doing something the Senate has never, never done before, deploying fake maths
and accounting gimmicks to hide the true cost of the bill. They are about to
pass the sigle most expensive bill in US history to give tax breaks to
billionaires whilst taking away Medicaid, SNAP benefits and good paying jobs
for millions of people”, Democractic Senate Minority Leader Chuck Schumer said
as the debate opened on 29/06. Senate Republicans who reject the CBO’s
estimates on the legislation costs are set on using an alternative calculation
method that doest not factor in costs from extending the 2017 tax cuts. Using
this methodm the budget bill appears to cost substantially less and seems to
save $500B accroding to Bipartisan Policy Center and therefore a “magic trick”.
If the Senate passes the bill, it will then return to the House of
Representatives for the final passage before Trump can sign it into law.
·
On 25/06, UBS
said the tech rally has more legs as AI adoption spread across industries
likely crossing the 10% threshold, a milestone that took e-commerce +20 years
to achieve. Examples include Microsoft using AI for 30% of its coding worka and
PayPal handling 80% of customer support through AI tools. UBS expects global
capital spending to rise 33% in 2026 to $480B after surging 60% this year.
NVIDIA has surged to ATH $154.31 on 25/06 after an exceptionally bullish note
from Loop Capital triggered investor enthuisiam.
·
Fixed markets
been slow as well with 10Y UST bearish rising wedge breakout in 06/25 still in
play, targeting 3.88% levels is doable consdering we are entering 2H25 so Fed
has to make good on their forecasted cuts to avoid losing credibility. LQD,
HYG, EMB moved up slightly circa 0.3 – 0.9% so seems credit markets in a
holding pattern for now.
·
US REIT are stuck
too with IYR only -0.5% last 1M except for VNO has dropped 4.4% lately. S-REIT
and M-REIT however more buoyant with MAPL +3.6% and IGRE +13.2% which is pretty
significant. On deeper dive, IGRE is on a bull run hitting ATH and technicals
indicates there might be more to this recent upmove
·
On 25/06, DLR which
is a $59B market-cap REIT announced it will raising EUR 850M at 3.875% through
its subsidiary Digital Dutch Finco BV. The indenture govering the notes include
covenants restricting the company’s ability to incur additional indebtness and
requires maintainence of a pool of unencumbrered assets. The notes are
redeemable in whole or in part at the issuer’s option at 100% and make-whole
premium except within 90 days of maturity.
·
Broad commodities
still in doldrums with S&P GSCI -3% and Baltic Dry Index -15.5%. However,
there is some action in XPD/$ +18.3% and XPT/$ + 14% with oil and corn futures
dropping 6.2% and 7.3% respectively. Deeper dive into XPT/$ reveals it has
entered a big bull market lately jumping form $970 in 03/25 to $1402 today
which is a +40% price increase and a new ATH $1422 too. Corn futures at $400
now targeting low $360 on 08/24 and after that $301 on 04/20. The grain has
been on a massive downtrend last 3Y. BTC/$ made a new high at $119.5k with
SOL/$ and XRP/$ up 11.6% and 29.3% whilst
memecoins SHIB/$ and DOGE/$ also up 10.2% and 12.8% last 1M. On 09/07, US
copper imports also been hit by 50% tariffs to boost domestic production which
has disadvantaged big exporters Chile, Canada and Peru.
·
On 30/06, BTC/$
has hit $108k with the biggest driver was the progress of a stablecoin
regulation bills through Congress, highlighteing Trump’s commitment to doling
out more crypto-friendly regulations. Further signs of government adoption
continued with Freddie Mac and Fannie Mae signalling they would consider using
crypto as collateral in home loans. In addition to institutional adoption, risk
appetite was boosted over the past week by Israel and Iran ceasefire which
appears to be holding. According to Macquarie, Trump also seemed to dissuade
“regime change” in Iran, thus disminishing the prospect that Iran will devolve
into social instability or chaos. Also, the combination of Iran’s proportional
response and prospect that she will not disrupt the flow of oil has led of
large declines in the price of Brent crude.
·
As the 09/07
deadline for US-EU tariff deal approaches, with scant progress so far towards
mutually-agreed baseline levies, concern is growing over how long will market
stay numb to trade risks. Oil has swung $63 – 81/bbl in Jun making it once of
the most volatile months for crude in 15 years
·
On 25/06, oil
rises as draw in US crude stocks signal firm demand with de-escalation of
conflict between Iran and Israel refocusing market back to fundamentals. Oil
crude oil inventories fell for a 5th straight week whilst gasoline
stocks upexpectedly fell 2.1M barrels compared with forecase for a 318k barrel
build. On Saturday, Rosneft Igor Sechin said OPEC+ could bring forward it
output hike by around a year from initial plan. Meanwhile, Trump has hailed a
swift end to war between Iran and Israel and said Washington would likely seek
a commitment from Tehran to end its nuclear ambitions at the next talks.
Key QnA
·
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