A Buildup To Friday's CPI | Morning Express 06/08/22
Posted: June 8, 2022, 8:37 a.m.
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4158.75, up 38.25
NQ, yesterday’s close: Settled at 12,711.50, up 106.50
Fundamentals: A precipitous drop in Treasuries, rise in yields, paused yesterday, allowing U.S. equity benchmarks to regain their footing. Make sure to check out yesterday’s Morning Express writeup, ‘If Treasuries Taketh, Can They Giveth?’, where we discuss four major tailwinds to the recent move in yields and how a reprieve would support risk-assets. The U.S. Treasury will auction $33 billion of 10-year Notes at noon CT. It is imperative for traders and investors to keep a pulse on the yield’s gyrations at the psychological 3.0% mark and the response to the auction.
Crude Oil has traded above the $120 mark for much of the session, stoking inflation fears and underpinning today’s rebound in yields. The EIA will release weekly inventory data at 9:30 am CT. There are reports that Russia and Iran are working diplomatically on a Nuclear Deal. China’s reopening has certainly supported Oil prices. Tonight, we look to May Trade Balance data from China. This comes after state representatives released a statement discussing economic downward pressures and the plans “to further boost opening up”.
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The economic calendar begins to pick up a bit today, as we move into a busier back-half of the week. Preliminary Eurozone GDP for Q1 improved to 5.4%, from 5.1%. This comes ahead of tomorrow’s ECB policy meeting, where the bank is expected to signal a rate lift-off next month to battle record high inflation. In fact, markets are beginning to price in 75-basis points worth of hikes through September, by the ECB.
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NQ (June)
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Crude Oil (July)
Yesterday’s close: Settled at 119.41, up 0.91
Fundamentals: Crude Oil tapped a new swing high overnight, reaching 121.37 and taking out that from Monday at 120.99. Comments from the UAE Energy Minister and OPEC+ Secretary General on the lack of spare capacity, and especially so as demand in China rebounds out of lockdowns, have reignited a very constructive bull leg. This is the exact narrative we have been talking about since mid-2021 and we believe the fact such high-profile representatives are now admitting it is extremely bullish for the intermediate-term view. Stoking the bullish view are also reports from Reuters that European insurers are banned from insuring seaborne cargoes of Russian Oil.
Weekly EIA inventories are due at 9:30 am CT. The private API survey was released last night and said +1 mb Crude, +1.821 mb Gasoline, and +3.386 mb Distillates. However, inventories at the Cushing hub slipped by 1.839 mb. This was overall a bearish read, but the draw at Cushing exudes the tightness within the physical market. Expectations for today’s official report are -1.917 mb Crude, +1.075 mb Gasoline, and +1.06 mb Distillates.
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Gold (August) / Silver (July)
Gold, yesterday’s close: Settled at 1852.1, up 8.4
Silver, yesterday’s close: Settled at 22.178, up 0.086
Fundamentals: Gold and Silver are again mixed but feeling some pressure from the most recent swing high as the Treasury complex slips back. As we noted above, strength in Crude Oil is stoking yields higher. Similar to that of stocks, currencies, and Treasuries, we are likely to see metals hold a consolidation patter ahead of tomorrow’s ECB policy decision and Friday’s CPI data. As a reminder, keep a close eye on the USDCNH which continues to see a bid at the 6.50 mark, underpinning the U.S. Dollar, and thus a headwind to metals.
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