Is Prudence the Play? | Morning Express 08/1/2022

Posted: Aug. 1, 2022, 9:13 a.m.

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- Chinese Manufacturing for July whiffs due to lockdowns. State read released Saturday contracts at 49.0 versus 50.4 expected and Caixin read last night was 50.4 versus 51.5 but avoids contraction. There are two sides to the coin. Headline data is a negative. However, July is backward-looking and weak due to lockdowns. The Chinese economy has been trending weaker since mid-2021 and outside of lockdowns has shown demand resurgence. At the same time, weakness in the data could encourage looser/stimulative policy, which will be seen as supportive to risk assets.

- U.S. equity index futures slipped from Friday’s loft close, but indices across Europe are up nearly 0.5%.

- Eurozone Manufacturing contracted in July, but not as bad as expected at 49.8 versus 49.6.

- U.S. ISM Manufacturing for July is due at 9:00 am CT, after final July SPGI Manufacturing PMI at 8:45 am CT.

- Earnings continue with Activision Blizzard and Devon Energy after the bell. Tomorrow picks up with SPGI, Caterpillar, Marriot, and more before the open and AMD, PayPal, Starbucks, Pioneer Natural Resources, Marathon Petroleum, Uber, and more after the close.

- Current odds for the Fed’s September meeting are a 50-basis point hike with a 68.5% probability. There is also a 69.8% probability the Fed hikes another 100-basis points through yearend.

- Keep an eye out for Fed speak, St. Louis Fed President Bullard is on the schedule for tomorrow.

- Speaker of the House Pelosi is expected to visit Taiwan tomorrow. The anticipation is heating up the geopolitical landscape and U.S.-China relations are to be watched closely.

 

E-mini S&P (September) / NQ (September)

S&P, yesterday’s close: Settled at 4133.50, up 60.00 on Friday and 168.50 on the week

NQ, yesterday’s close: Settled at 12,971.50, up 234.00 on Friday and 548.00 on the week

Fundamentals: 

- From Tuesday’s settlement through Friday, the S&P gained 5.4% and NQ 7.1%. It would be reasonable to expect the market to digest this run for a day or two.

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NQ (September)

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Crude Oil (September)

Yesterday’s close: Settled at 98.62, up 2.20 on Friday and up 3.92 on the week

Fundamentals: 

- In Friday’s Midday Market Minute, Bill Baruch spoke of a near-term capitulation Friday morning where everyone who wanted to buy had bought.

- Libya bringing production back to 1.2 mbpd quick ahead of this week’s OPEC+ meeting likely opened door for profit taking at elevated levels.

- Weaker than expected Chinese Manufacturing PMI, highlighted above, weighing on the energy complex.

- Soft tape continued with selling kicking in early in European session after reports Russia increased daily Oil and Gas condensate output in July by 2% MoM. However, loadings in western ports are expected to decline by 5% in August from July.

- Slam in early U.S. hours came on data showing Saudi Arabia’s Crude exports surged to 7.5 mbpd in July versus 6.6 mbpd in June, according to a Bloomberg report.

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Gold (December) / Silver (September)

Gold, yesterday’s close: Settled at 1781.8, up 12.6 on Friday and 36.5 on the week

Silver, yesterday’s close: Settled at 20.197, up 0.329 on Friday and 1.58 on the week

Fundamentals: 

- Although the U.S. Dollar Index is lower, the USDCNH is sharply higher (+0.55%), and as we always say the USDCNH has a large impact on the metals. (USD / Chinese Yuan)

- From a risk-management standpoint, ahead of a big week of data, smart to lock in this rebound in some manner. Cannot ignore rare major four-star resistance in Silver, highlighted below.

- U.S. ISM Manufacturing for July is due at 9:00 am CT, after final July SPGI Manufacturing PMI at 8:45 am CT.

- Geopolitical tensions arising from Speaker of the House Pelosi visiting Taiwan could be a positive.

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Silver (September)

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