‘Twas The Day Before CPI | Morning Express 06/09/22
Posted: June 9, 2022, 8:29 a.m.
There will be no Morning Express tomorrow morning.
Please remember that U.S. CPI data is due at 7:30 am CT tomorrow, Friday morning.
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4114.00, down 44.75
NQ, yesterday’s close: Settled at 12,615.75, down 95.75
Fundamentals: ‘Twas the day before CPI, when all thro’ the screen, not a market was stirring, nothing red or green. But an ECB decision still hung in the balance. Would Lagarde’s approach prove to be callous?
The ECB is arguably facing a tougher task than the Federal Reserve, attempting to rein in record inflation in the face of energy dependence, the result of many years of poor decision making. Consumer prices in the Eurozone are at the same levels, or better, than the U.S., 3.8% Core and 8.1% headline, but producer prices are the canary in the coal mine. Remember, producer prices are a leading indicator for consumer prices, and Eurozone PPI has risen for 15 straight months. The last three PPI reads have each been above 30% YoY, with April posting an eye-popping 37.2%. The area is experiencing two massive economic shocks, the war and sanctions tied to Russia, as well as China’s lockdowns. Energy dependence is at the heart, and banning Russian Oil is only stoking inflation. On Tuesday’s note, ‘If Treasuries Taketh, Can They Giveth?’, we pointed to the German 10-year yield rising to the highest level since June 2014. The 40-basis point move (almost 50% ascent) began on May 30th, the day the EU officially announced its ban on Russian Oil. The Eurozone is facing the grave reality that things must change, but first, the ECB must thread a needle, slowing demand without sending the economy into a deep recession.
Do not miss our daily Midday Market Minute, from yesterday.
The ECB policy decision was released at 6:45 am CT. The bank points to a 25-basis point rate hike in July and said its Asset Purchase Programme (APP) will end July 1st. They also cut the GDP forecast for 2022 to 2.8%. ECB President Lagarde begins her press conference at 7:30 am CT.
It is also important to note that China’s Trade Balance data overnight was strong with both Exports and Imports more than doubling expectations, increasing by 16.9% YoY versus 8.0%, and 4.1% versus 2.0%, respectively.
U.S. Initial Jobless Claims are due at 7:30 am CT. The U.S. Treasury will auction $19 billion 30-year Bonds at noon CT. Inflation data from China is released tonight at 8:30 pm CT. Do not forget, U.S. CPI is out tomorrow at 7:30 am CT.
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NQ (June)
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Crude Oil (July)
Yesterday’s close: Settled at 122.11, up 2.70
Fundamentals: Crude Oil achieved the upper-end of our target zone. We have continuously pointed to a hold above the breakout zone at 116.43-117.07 as paving a path of least resistance to 123.70. Yesterday’s high was 123.18, and it is important to not be greedy in this market environment. The key driver yesterday was less the inventory data and the continued rhetoric of the lack of spare capacity. Both the UAE Energy Minister and the OPEC Secretary General pointed to such a phenomenon. Check out yesterday’s Midday Market Minute, where we discussed spare capacity and the impact of the weekly EIA inventory report.
Overnight, China released a bullish Trade Balance update, as noted in the S&P/NQ section, both Exports and Imports more than doubling expectations, increasing by 16.9% YoY versus 8.0%, and 4.1% versus 2.0%, respectively. As for Crude Oil, Imports were +12% YoY and 2.7% MoM.
Traders want to keep an eye on China’s zero-virus policy as President Xi reiterated his stance this morning and mass-testing continues.
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Gold (August) / Silver (July)
Gold, yesterday’s close: Settled at 1856.5, up 4.4
Silver, yesterday’s close: Settled at 22.094, down 0.084
Fundamentals: Gold and Silver continue their rangebound consolidation ahead of tomorrow’s CPI data. Although rates are rising on the heels of the ECB telegraphing a 25-basis point hike in July and President Lagarde’s speech, Gold is holding ground very well. Buoying the metals complex is Euro strength coming out of the policy decision and U.S. Initial Jobless Claims coming in at the highest since March 10th. The U.S. Treasury will auction $19 billion 30-year Bonds at noon CT. Inflation data from China is released tonight at 8:30 pm CT. Do not forget, U.S. CPI is out tomorrow at 7:30 am CT, stay nimble.
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Silver (July)
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