Macro: Sandcastle economics
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Morning Brew June 5 2024
Erik Schafhauser
Senior Relationship Manager
Summary: Bank of Canada first G7 Central Bank to cut?
Good morning
Today at 15:45, Canada could be the first among the G7 to cut rates this cycle. Rate traders price in a 25 basis point cut with a probability of 80%. Inflation in Canada remains above the target at 2.7%
Besides the Canadian Rate decision, Global PMI (Purchasing Manager Index) will be released with Sweden 8:30, Italy 9:45, France 9:50, Germany 9:55 EU 10:00, UK 10:30 US 15:45. The Chinese Services PMI came strong at 54 in the night.
Yesterday, indexes traded slightly higher but remain in the range, the Dow closed up 0.36%, the S&P + 0.15%, the Nasdaq +0.17% Overall volumes were 20% below the average.
Oil and Oil stocks traded lower yesterday , tech again friendly, Nvidia rose to 1164. Hindenburg Research identified a new short-target with Axos Financial, the stocks fell 4.2%.
10 Year Yields are at 4.34 after trading at 30 basis points higher just a week ago, the USD Index is a little above yesterday's level at 104.26, EURUSD could not hold above 1.09 and fell to 1.0872 GBPUSD is at 1.2765, USDJPY 155.75. Gold and Silver sold off yesterday and are at 2320 and 29.55.
Kim took a look at the possible targets of the selloff in metals yesterday:
- Gold holding on above key support. If broken, sell-off to 2,220 in the cards
- Silver double top pattern unfolding with bearish target to 28.50, maybe even 26
- Platinum testing key support around 1,015. Bearish move can push it to 974
- Copper correction eyeing support at 446. Will it hold?
Peter and Soren discussed the implications of the ECB decision for Equities
Heading into central bank cycle, we are feeling the uncertainty among market participants:
If central banks cut rates, is that interpreted as supportive or as a sign that markets are in real trouble?
Every data point is being benchmarked against this uncertainty and makes trading tricky. Be careful, consider employing optionality and trade safely!
Wednesday
- Data: International PMI, Bank of Canada Rate decision
- Earnings: Brown-Forman, Lululemon, Dollar Tree Campbell
Thursday
- Data: DE Industrial Orders, ECB Rate decision, US Initial Jobless claims.
- Earnings: Nio, DocuSign, Samsara, Meituan
Friday
- Data: CH FX Reserves, EU GDP, US Nonfarm Payroll
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