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Markets today: Gas to Europe unlikely this week

Oil is the most notable driver, with Brent +$4.50 and WTI Crude +$4.60 on reports that Saudi Arabia will no longer pump oil


Today’s Podcast

Preview Michele

  • US stocks fall despite GS earnings beat, led by Apple
  • Oil up nearly $5 after reports Saudi Arabia won’t pump oil after Biden visit
  • USD weakens across the board despite weakness in US equities and rising US bond yields
  • RBA Today’s Michelle Bullock: “How are households positioned for interest rate hikes?
  • Netflix reports after Tuesday’s NYSE close

Michelle, my beautiful, Are the words that go very well together – The Beatles

US stocks are down the best part of 1% after gains of +/- 1% in Europe, despite comfortable beats on revenue and earnings from Goldman Sachs (Bank of America less). Apples plans to slow hiring plans ahead of an “imminent economic downturn” are partly to blame, with its stock down more than 2%. This before Netflix’ s income after Tuesday’s NYSE close. IBM just released and comfortably beat its revenue estimate for the second quarter. Elsewhere, the USD is weaker across the board for no obvious ‘new news’ reason, except perhaps Oil is up +/-5% after President Biden’s visit to Saudi Arabia in hopes to persuade the kingdom to pump more oil. deaf ears. AUD/USD is off its overnight highs but clings to the 0.68 handle it reclaimed yesterday in our time zone. Benchmark bond yields are higher, in the US by 4 to 6 basis points.

Economic news has been limited since local markets halted yesterday and where the key release during our time zone was of course New Zealand’s Q2 CPI, posting a headline up 7.3% vs. 6.9% vs. 7.1% expected and the RBNZ’s preferred “sector factor model”. estimate up to 4.8% compared to an upward revision of 4.6% (from 4.2%) in the first quarter. The main data overnight were the US NAHB survey (home builders) which, at 55 to 67 (65 expected), is the weakest since 2015 if we exclude the temporary crisis weaker at the start of the pandemic. That’s ahead of US housing starts tonight (see Coming Up below).

Across all markets, Oil is the most notable driver, with Brent +$4.50 and WTI Crude +$4.60 according to reports Saudi Arabia will not pump more oil than otherwise following the visit of US President Biden. Oil is up far more than gas prices in the European market, where the benchmark TTF Netherlands is up less than 1% ahead of the scheduled end of NordStream 1 pipeline maintenance on Thursday (but which could possibly be delayed by a few days given the delay in transporting the now legendary gas turbine from Canada to Germany).

It is worth noting here the story that Gazprom declared force majeure on at least three of its European gas buyers, including Germany. This may be “in the past” in that it relates to a period from about June 14 until when NordStream 1 was shut down for annual two-week maintenance on July 11, when we know that throughputs have dropped by about 60%. Cold solace though, and where we continue to find no valid reason why Russian President Putin will not be seen as weaponizing EU gas supplies, the only real question is whether it is as soon as this this month or not until later in the year.

Last covid-related news from china remains discouraging , with new cases in Shanghai topping 500 on Sunday (519) after Saturday’s 580 and mass testing occurring in nine districts as the financial hub seeks to stamp out infections. Meanwhile, the Macau gambling enclave has extended its lockdown. There is some positive (ex-covid) news though, with reports late yesterday that authorities were set to sanction the growing consumer boycott of mortgage payments on unfinished homes and urge (force?) banks to increase lending to developers so they can complete unfinished housing projects. What this means for China’s mounting debt problems in the future, which is already manifesting itself in runs on smaller banks, is another obvious fact.

Central bank discourse has been (thankfully) thin on the ground so far this week, with one exception being outbound Bank of England MPC member (and hawk) Michael Saunders , which he says is not unlikely to rise to 2% or more (currently 1.25% after 5 hikes). He reminds us that his preference has been to tighten relatively quickly and bring inflation expectations under control by “leaning” into risks, and also that the UK has capacity issues due to weak growth in the hand. and demographic challenges (i.e. low growth potential). The call for 2% or more is not big news, however, as money markets are already forecasting a little over 100 basis points in the Bank Rate hike in upcoming meetings (August and September).

Meanwhile in the Background to the leadership of the British Conservative Party, as expected, Tom Tugendhat was eliminated. That leaves Sunak (115 votes), Mordaunt (82), Truss (71) and Badenoch (58). Another will drop out on Tuesday, then another Wednesday, leaving the final two, who will face off over the course of August, before some 200,000 Conservative Party members decide who will be leader and prime minister on or before September 5.

To finish Indeed the DXY USD index is down 0.6% and the broader Bloomberg BBDXY index is down -0.4% (the former largely thanks to the 0.6% rise in EUR/USD). GBP leads the G10 chart for no apparent reason, while NOK and CAD outpaced AUD gains (+0.3) and NZD is weaker (-0.2%) and where the rise in oil prices would seem to explain their outperformance.


  • Recently appointed RBA Deputy Governor Michelle Bullock is due to deliver an AEDT noon speech titled “How are households positioned for interest rate hikes?” An opportunity for sure to analyze the RBA’s thinking on how much it thinks the cash flow channel will limit how fast and how high the cash rate will be. Minutes of the RBA’s July meeting are also due out, where it agreed to raise the cash rate from 0.50% to 1.35%.
  • Overseas, the most recent UK labor market data will affect the Bank of England’s rate decision next month, with as much focus on average earnings figures (excluding bonuses seen of 4.3% vs. 4.2% for the three months to May) than on the employment numbers (where the 3-month change through June was little changed from May’s 177k to 170k and the monthly change (June) +70k.
  • The Eurozone has a final CPI for June (core seen unrevised at 3.7%, headline at 8.6%, while in the US housing begins in Junes and building permits for the month of June, where there was a slight correction (+2%) after the 14.4% drop in housing starts in May.
  • US earnings season kicks off with strong interest after tonight’s close Netflix Q2 Report, after shocking the market with the announcement of a net loss of 200,000 subscribers in the first quarter and expectations of a further loss of 2 million in the second quarter. Netflix’s stock is down almost 70% since the start of the year.

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