Futures Drift From Record Ahead Of Powell, Inflation And Earnings

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Futures Drift From Record Ahead Of Powell, Inflation And Earnings

After hitting an all time high of 4,365 at the close on Friday, U.S. futures drifted lower to start the week as investors awaited the start of Q2 earnings season starting this week in order to gauge whether corporate profitability can support equity valuations. Treasury yields dropped, as an upsurge in new infections caused by the Delta coronavirus variant pushed some investors into the safety of bonds and capped commodity price gains on Monday. At 715am emini S&P futures were down 7.5pts or -0.17% to 4,352 , Dow Jones futures were down 150pts or down 0.42% and Nasdaq futures were up 30 pts or +0.20%.

Markets were jittery at the start of an eventful week that will see the U.S. second-quarter earnings season kick off, the release of inflation data in several countries, and testimony by Federal Reserve Chair Jerome Powell which will be scrutinized for any talk of tapering. Here are some of the biggest U.S. movers today:

  • Didi (DIDI) shares fall 4.4% in premarket trading, following last week’s 22% slump as Chinese regulators stepped up a crackdown on tech companies. Didi also said that CAC stated that 25 apps operated by the company in China had the problem of collecting personal information in serious violation of relevant PRC laws and regulations.
  • Sgoco (SGOC) surges 54% amid retail- trader touts on Reddit and StockTwits, while Carver Bancorp (CARV) jumps 16% after its three-day 170% gain.
  • Toughbuilt Industries (TBLT) falls 21% in premarket trading after a 39% surge last week and nearing the value to be paid in an offer.
  • Virgin Galactic (SPCE) shares rise 8.1% in premarket trading after Richard Branson’s test flight to space kicked off a landmark month for the future of space tourism.

“There does seem to be a complacency that Goldilocks is not only alive and well, but that it’s getting stronger by the day,” Simon Ballard, First Abu Dhabi Bank chief economist, said on Bloomberg Television. “Unfortunately, it has to be recognized that going forward, the longer that rates remain where they are, the more that we look toward tapering, the more severe and acute could be the reaction.”

Worries over the global economic outlook were highlighted by warning from the G20 finance ministers over the weekend, who warned that recent improvements in the global economy could be derailed by fast-spreading COVID-19 variants such as Delta. A Reuters tally here of new COVID-19 infections shows them rising in 69 countries, with the daily rate at 478,000.

The variant is responsible for record rises in infections in Australia where another lockdown looks imminent. South Korea has put its capital Seoul under the toughest anti-COVID curbs so far while cases continue to rise across Asia and Europe. “There is a bit of a global coordination problem with different countries vaccinating at a different pace. The question is how well vaccinated you are and vaccinations are pretty low across much of Asia,” said Colin Asher, senior economist at Mizuho in London; however he also noted that for Western markets, with better vaccination rates, monetary policy would be the main focus.

Separately, US inflation data due Tuesday will be particularly watched after the recent bond rally which sent U.S. 10-year Treasury yields 15 basis points lower at one point. While markets have since stabilized, yields are not far off 4-1/2 month lows at 1.35%, pressured at least partly by investors’ rethinking bullish sentiment.

* * *

MSCI’s all-country equity index closed last week in the red but rose 0.2% on Monday, lifted by hefty gains across Asia where markets tracked Friday’s record close on U.S. stocks. Asia-Pacific shares outside Japan rose 0.7% while Japan’s Nikkei bounced 2.2%. Chinese blue chips rose 1.1% after China cut its RRR on Friday, telegraphing that more stimulus was on the way, set to support China’s credit impulse and pushing risk assets higher.

The Stoxx Europe 600 was 0.1% higher after turning lower earlier, with declines for banks and travel companies offsetting gains for health care and utilities. Atos slumped as much 18% to the lowest since March 2020 after the IT services firm lowered its revenue growth and operating margin targets, which Oddo says is a “significant warning.” The euro weakened and yields on core European bonds fell after European Central Bank President Christine Lagarde told investors to prepare for new guidance on monetary stimulus in 10 days. 

Here are some of the biggest European movers today:

  • AB Science shares soar as much as 29%, the most since Dec. 16, after the company was informed by the French National Agency that measures proposed to reinforce patient safety in masitinib trials are acceptable to resume enrollment in 3 ongoing studies.
  • JCDecaux jumps as much as 8.9% after JPMorgan upgraded the outdoor advertising company to overweight from neutral on the potential for a recovery in advertising.
  • Daily Mail and General Trust shares rise as much as 10% to their highest since Sept. 2000, after the Rothermere family considers taking the media company private.
  • Admiral gains as much as 6.3% to a record high after the insurer boosted its outlook. Motor claims frequency in 2021 to date has been lower than expected due to extended lockdown restrictions, the company said.
  • CD Projekt rises as much as 7.5%. Sony said on the Playstation blog that the Polish company’s flagship Cyberpunk was the “top downloads” game in June on PS4.
  • Tate & Lyle rises as much as 4.1%, the most in 11 weeks, after the ingredients maker announced steps to deconsolidate its primary products business, including plans to distribute a special dividend. The move is broadly as expected, according to Jefferies.
  • Atlantic Sapphire shares fall as much as 15% after an incident in one of its saltwater growout systems in Denmark.

Earlier in the session, Asian equities rose led by gains in China and Japan, after U.S. stocks rallied to all-time highs and the Chinese central bank said it will cut the amount of cash most lenders must hold in reserve. The MSCI Asia Pacific Index climbed more than 1% after a four-day losing streak. Information-technology and industrials were the top-performing sectors. Japan’s Topix climbed 2.1%, while China’s CSI 300 Index added 1.3%. The liquidity-sensitive ChiNext surged 3.7% to the highest since June 2015 after the People’s Bank of China on Friday said it will reduce the reserve requirement ratio by 0.5 percentage point for most banks effective July 15, unleashing about 1 trillion yuan ($154 billion) of long-term liquidity into the economy. China’s RRR cut appeared to reflect policymakers’ view that the economy was losing momentum.

“China’s shift to an easy monetary policy is a plus for equities,” said Shoji Hirakawa, the chief global strategist at Tokai Tokyo Research Institute in Tokyo. For Japan, “the decision to hold the Olympics without an audience is positive for stocks as it alleviates concern over the spread of the Delta variant.” The strong start to the week for Asia’s stock benchmark comes after it capped a second straight weekly loss on Friday, hurt by continued losses in Hong Kong-listed Chinese tech shares and concern over the spread of coronavirus variants in various countries. Taiwan Semiconductor Manufacturing and Sony Group were the biggest boosts to the MSCI Asia Pacific Index on Monday. However, stocks plunged in Vietnam, with the VN Index losing as much as 5.7%. Authorities across Vietnam’s south have issued anti-virus movement restrictions following last week’s stay-home order in the nation’s commercial hub of Ho Chi Minh City.

In FX, the U.S. dollar inched higher against a basket of currencies at 92.17.  The Bloomberg Dollar Spot Index was poised for its first advance in three sessions, and the greenback was higher against most of its Group-of-10 peers; commodity currencies led by the Norwegian krone declined while the yen, the Swiss franc along with the euro were steady against the greenback. The euro firmed to $1.188 from last week’s low at $1.1780. It did not react to comments by European Central Bank President Christine Lagarde that the bank will change its guidance on policy at its next meeting and show it is serious about reviving inflation. The pound slipped against a broadly stronger dollar and euro, with trading seen range- bound until a new catalyst emerges; leveraged funds raised their net GBP longs, while asset managers increased their net shorts to the most bearish since November. Australia’s dollar slid after a spike in new coronavirus cases in Sydney prompted leveraged funds to reload Aussie shorts. Government bonds rose.

In rates, Treasuries yields dipped trimming Friday’s seven-basis-point rise, and the curve bull-flattened with long-end yields richer by up to 2.5bp on the day as S&P 500 futures edge lower, slightly paring Friday’s rally. Treasury 10-year yields were around 1.34%, richer by ~2bp vs Friday’s close and outperforming bunds by ~1bp; long-end-led advance flattens 2s10s spread by ~1.5bp, 5s30s by ~2bp. The Treasury supply drought that began after the 7-year note auction on June 24 ends today with a doubleheader auction as 3- and 10-year note are sold Monday, followed by 30-year bond sale Tuesday for combined $120bn in two days. WI 3- year at 0.410% is higher than 3-year auction stops since March 2020 and ~8.5bp cheaper than last month’s, while WI 10-year at 1.345% is lower than previous four results and ~15bp richer than last month’s. Bunds lagged, with focus on heavy European debt sales that are expected to total EU39b. Bond traders are also awaiting for Fed Chair Powell’s semi-annual congressional testimony is ahead Wednesday and Thursday.

In commodities, prices too were subdued, with Brent crude futures slipping half a percent. Oil extended a decline after its first weekly loss in seven amid an OPEC+ dispute over a production increase. London-traded copper, nickel and aluminium also fell, though China’s Friday move to ease policy supported Shanghai metal futures.

Looking ahead, investors will be keeping a close eye on earnings season to support Wall Street’s run higher, with the S&P 500 .SPX up roughly 16% for the year so far, underpinned by the expected earnings surge.

Expectations for a 65% rise from the same 2020 quarter, according to Refinitiv. JPMorgan, Goldman Sachs, Bank of America and other big banks kick off results from Tuesday.

Looking at today’s calendar, there are no major data releases scheduled.

Market Snapshot

  • S&P 500 futures down 0.2% to 4,351.50
  • STOXX Europe 600 little changed at 457.54
  • MXAP up 1.2% to 204.34
  • MXAPJ up 0.7% to 678.85
  • Nikkei up 2.2% to 28,569.02
  • Topix up 2.1% to 1,953.33
  • Hang Seng index up 0.6% to 27,515.24
  • Shanghai Composite up 0.7% to 3,547.84
  • Sensex little changed at 52,397.28
  • Australia S&P/ASX 200 up 0.8% to 7,333.46
  • Kospi up 0.9% to 3,246.47
  • Brent futures down 0.7% to $75.05/bbl
  • Gold spot down 0.2% to $1,803.82
  • U.S. dollar index little changed at 92.19
  • German 10Y yield fell 1.8 bps to -0.311%
  • Euro little changed at $1.1871

Top Overnight News from Bloomberg

  • European Central Bank President Christine Lagarde told investors to prepare for new guidance on monetary stimulus in 10 days, and signaled that fresh measures might be brought in next year to support the euro-area economy after the current emergency bond program ends
  • European Central Bank policy maker Francois Villeroy de Galhau signaled that he’s in no rush to agree on new measures for supporting the euro-area economy to succeed the current emergency tools
  • Bond investors are abandoning thoughts of a post- pandemic paradigm shift toward faster growth, and downplaying fears of runaway inflation — at least for now
  • Prime Minister Boris Johnson will warn people to remain vigilant as he prepares to lift virtually all remaining coronavirus restrictions in England
  • China’s V-shaped economic rebound from the Covid-19 pandemic is slowing, sending a warning to the rest of world about how durable their own recoveries will prove to be
  • Japan’s machinery orders jumped in May, climbing for a third straight month and exceeding economist’s estimates by a wide margin, even after the government tightened restrictions to control the virus

Quick look at global markets courtesy of Newsquawk

Asia-Pac stocks began the week on the front foot as they followed suit to last Friday’s gains across global counterparts including the cyclical-led advances on Wall St where the major indices posted fresh record closes, with the regional bourses taking their first opportunity to react to the PBoC’s surprise RRR cut. The ASX 200 (+0.8%) traded higher with outperformance in the mining-related sectors frontrunning the advances for the index but with upside capped by losses in consumer stocks and with Australia’s most populous city of Sydney bracing for a longer and stricter lockdown after a further increase of COVID-19 infections which the New South Wales Premier suggested were going to get worse before they get better. The Nikkei 225 (+2.3%) was the biggest gainer with the index encouraged by recent outflows from the JPY and better-than-expected Machinery Orders that printed at its highest since October, while the KOSPI (+0.9%) benefitted from early trade figures including a continuation of the double-digit growth in Exports during the first 10 days of July. Hang Seng (+0.6%) and Shanghai Comp. (+0.7%) conformed to the positive mood after the recent 50bps RRR cut by the PBoC effective from July 15th which will release around CNY 1tln of long-term liquidity and with the latest Chinese financing data also adding to the encouragement, although tensions lingered in the background after the US recently blacklisted 34 companies including 14 that were related to China’s ongoing campaign of repression against Muslim minority groups, which China’s Mofcom criticized as unreasonable suppression and vowed to take necessary measures to protect China’s rights and interests. Finally, 10yr JGBs were subdued following the recent bear-steepening in USTs, with demand sapped by the outperformance in Japanese stocks and absence of BoJ purchases in the market today.

Top Asian News

  • World’s Billionaire Factory Shudders as China Cracks Down
  • Hillhouse Is Said to Be Preferred Bidder for King Koil China
  • Japan Sees Solar as Cheaper Than Nuclear Generation by 2030
  • Iron Ore Climbs as China Stimulus Outlook, Supply Flows Eyed

The European equity space kicked off the new trading week in somewhat of a mixed/directionless fashion (Euro Stoxx 50 -0.4%), with a slight downward bias materialising since the cash open. US equity futures also vary but the NQ (+0.1%) narrowly outperforms its ES (-0.2%), YM (-0.3%) and RTY (-0.5%) counterparts. Volumes in the morning are unsurprisingly anemic after the Euro 2020 final, whilst news flow is also sparse. That being said, the rest of the week is packed with risk events – the focus from a macro standpoint will primarily fall on China’s Trade and GDP, and US CPI and Retail Sales, whilst several ECB and Fed speakers also slated for the week including a double dose of Fed Chair Powell. Meanwhile, earnings season is about to kick off again this week seeing updates from Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley, and Wells Fargo, alongside chip giant TSMC. Back to Europe, sectors paint a more defensive picture as Healthcare, Utilities and Staples reside as the outperformers. Banks and Basic resources trade on the other side of the spectrum amid declines in yields and base metals respectively. Travel & Leisure meanwhile underperforms as the spread of the COVID delta variant prompts some economies to reconsider some more stringent restrictions. Furthermore, the European Commission is set to propose an overhaul of carbon/fuel tax, whilst it will provide incentives for low-emission fuels and propose levies on heavily polluting energy in airlines. In terms of individual movers, Daily Mail and General (+0.6%) almost totally retraced the 10% gains seen at the cash open despite reports suggesting that the Rothermere family is considering taking the Daily Mail private in a deal that could value the newspaper group at GBP 810mln. Admiral Group (+4.2%) are among the winners following a guidance upgrade. Tate & Lyle (+1.8%) are firmer after proposing a sale of a controlling stake in their primary products unit. On the other end, ATOS (-17%) shares slumped as it issued a profit warning after it booked negative organic growth during the second quarter.

Top European News

  • Central London Rents Jump by Record as Tenants Return to Capital
  • European Gas Drops on Carbon Loss, Looming Nord Stream 2 Launch
  • Lithuania Urges More Sanctions Against Belarus Over Migrants
  • Benfica SAD Shares Suspended From Trading in Lisbon, CMVM Says

In FX, the Dollar looks a bit more settled after its relatively abrupt and sharp decline towards the tail end of last week when FOMC minutes and US data prompted a pull back from midweek peaks, with the index holding above the 92.000 level and the Greenback firmer against most majors ahead of Fed commentary via Williams and Kashkari plus 2 slugs of US Treasury supply that may result in some concession in yields and curve re-steepening after recent pronounced bull-flattening.

  • NZD/CAD/AUD/GBP – All on the back foot vs the Buck, and the Kiwi undermined by a slowdown in NZ electronic card sales rather than mixed RNBZ vibes as NZIER’s shadow board expects the Bank to begin tightening within 12 months, but Kiwi Bank suggest that a November hike seems premature. Nzd/Usd is back below 0.7000 as a result and the Loonie has handed back modest post-Canadian jobs data gains on the back of a retreat in oil prices with Usd/Cad hovering just below 1.2500 vs sub-1.2450 at one stage. Back down under, the Aussie remains subdued beneath 0.7500 as Sydney braces for a longer and stricter lockdown due to increases in COVID-19 cases, while the New South Wales Premier warned that the situation is going to get worse before improving and the Australia-Singapore travel bubble will reportedly be delayed until the end of 2021 at the earliest, according to Australia’s Trade Minister. Elsewhere, Sterling is subdued after England’s defeat at the Euros with Cable towards the base of a 1.3910-1.3856 range and Eur/Gbp pivoting 0.8550 ahead of UK inflation and jobs data on Wednesday and Thursday respectively.
  • JPY/EUR/CHF – The Yen continues to outperform or hold up better than its G10 counterparts and significantly stronger than forecast Japanese machinery orders could well be a factor as Usd/Jpy retreats from around 110.28 towards 110.00 where circa 1.2 bn option expiry interest resides. Meanwhile, the Euro is hovering between 1.1850-1.1900 and awaiting this month’s ECB policy meeting with anticipation after President Lagarde and GC member de Guindos both signalled that there will be a change in guidance, and the Franc is tightly bound around 0.9150 following a fairly big rise in Swiss domestic bank sight deposits in the latest reporting week.

In commodities, WTI and Brent front month futures have seen losses exacerbate in recent trade despite a lack of fresh fundamental news flow to trigger the price action, although technical factors and low volumes could be attributed to some of the downside experienced across the complex. The former now resides under the USD 73.50/bbl mark (vs high 74.93/bbl) whilst the latter trades sub-USD 74.50/bbl (vs high USD 75.84/bbl). The morning has seen a joint Saudi-Omani statement which in essence signalled that the two countries will abide by OPEC decisions. However, eyes remain on the UAE as reports last week floated the idea of a unilateral increase by the kingdom, in turn sparking fears of an OPEC breakdown Furthermore, the delta variant has put a spanner in the works in terms of the pace of crude recovery as some economies reconsider some targeted measures to stem outbreaks. Elsewhere, spot gold and silver are subdued due to the Dollar but remain within tight ranges on either side of USD 1,800/oz and USD 26/oz respectively as precious metals await this week’s risk events. Precious metals meanwhile are on the backfoot with LME copper struggling to hold above USD 9,500/t in the run-up to the Chinese GDP figures – with some doubts raised regarding the nation’s rate of growth which could’ve led to the RRR cut. However, Chinese officials have suggested that the increasing monetary supply is likely to help small companies to absorb the upstream inflation in commodity prices.

US Event Calendar

  • Nothing major scheduled

Central bank calendar

  • 12pm: Fed’s Kashkari Speaks at Townhall

DB’s Jim Reid concludes the overnight wrap

So an Englishman yesterday achieved what many thought was impossible, beating his rivals, and triumphing after many stumbles over the years. Yes Richard Branson successfully tested his Virgin Galactic space tourism venture. I’m not sure whether space is on our amber covid travel list and whether you have to quarantine when you get back but an impressive feat nevertheless. Unlike in other penalty shoot outs England have lost over the years, at least he didn’t see any balls travelling past him on their way to the moon after soaring over the crossbar. Our three missed kicks were much more grounded. Congratulations to Italy. The better team won on the night. If it takes another 55 years for England to get to another major final then I’ll be 102. By then maybe it will be played in space! I can just see the FIFA press conference now announcing the winning joint bid from Mars and Venus!

Back on earth it’s likely to be an eventful week ahead for markets, with the US CPI reading for June (tomorrow) expected to set the tone after the reflation trade has deflated over recent weeks. We also have the first Treasury coupon issuance (today and tomorrow) since June 24th in what has been a very very squeezed Treasury market with 9 Fed open market operations since. Other big US data of note comes with PPI (Wednesday), various manufacturing readings (Thursday) and a big day for the consumer on Friday with retail sales and consumer confidence prints. The highlight outside the US may be the Q2 GDP reading from China (Thursday).

On the central bank side, investors will also be paying attention to Fed Chair Powell’s congressional testimonies (Wednesday and Thursday), as well as the Bank of Japan’s latest monetary policy decision (Friday). Earnings season gets going too, with a number of US financials reporting from tomorrow, whilst important meetings of policymakers include the Eurogroup meeting on Monday, and that between President Biden and Chancellor Merkel at the White House on Thursday.

Going through the main highlights in more details and we have to start with US CPI. Last month I said that this data release might be the most closely-watched inflation report of my career. It maybe was a for a few minutes but even though headline (5.0%) and core (3.8%) beat expectations by 0.3pp and were the highest for 12 and 29 years respectively, the report had limited follow through as most focused on the transitory elements. Subsequent concerns about the virus, the economy and strong technicals overshadowed the release. DB’s expectations this week are for energy prices to keep headline (+0.54% forecast vs. +0.64% last month) above core (+0.39% vs. +0.74%). The devil will all be in the detail though with used car prices for one likely to be a lot less troublesome than in recent months (they added nearly 30bps to last month’s release). Our economists will also be watching for signs that higher inflation in Covid-centric categories such as airfares and lodging away are spreading to other categories such as rents. They haven’t spread much yet so all eyes on this.

As we all know there has been a big battle to explain the rally in Treasuries after the huge inflation beats of the last couple of months. Some say it’s because of concerns over medium-to-long-term fundamentals, others say it’s technicals. Whatever the reason it’s been an impressive rally. If it is technicals, maybe we’ll get some clues this week as today sees the first Treasury coupon auctions since June 24th due to quirky calendar effects. Since then, there has been 9 near-consecutive Fed buyback operations, making this period the longest stretch of Fed OMOs without a supply event since the start of the pandemic. This week we see $120bn in coupon sales, with 3yr and 10yr auctions today and 30yr tomorrow. Perhaps the reversal from 1.25% on Thursday to 1.35% on Friday was a bit of preparation for the huge supply. DB’s Steven Zeng writes here that the broader treasury supply picture is still somewhat constrictive in the near term, and likely to stay low in July. However, this dynamic is expected to reverse after August as bill supply normalises.

It’s an eventful week ahead on the central bank side too, with four of the G20 central banks deciding on rates, including the Bank of Japan. In terms of what to expect there, our economist’s view is that they’ll maintain their present policy stance and only slightly revise their view in the quarterly outlook report. On top of those decisions, there’s also Congressional testimonies from Fed Chair Powell, who’s speaking before the House Financial Services Committee on Wednesday, and the Senate Banking Committee on Thursday, where he’ll be delivering the semi-annual Monetary Policy Report to Congress. It won’t stray too far away from the FOMC text but expect lots of questions on inflation from the various politicians.

Earnings season will begin to get going next week, with a number of US financials reporting, among others. Among the highlights include JPMorgan Chase, PepsiCo and Goldman Sachs tomorrow. Then on Wednesday we’ll hear from Bank of America, Wells Fargo, Citigroup and BlackRock. Thursday sees reports from UnitedHealth Group, Morgan Stanley, US Bancorp and BNY Mellon. Finally on Friday, we’ll hear from Charles Schwab.

In terms of the virus, the UK will continue to be watched closely today as we’ll get formal confirmation later as to whether the planned easing of restrictions will go ahead on July 19, with a press conference from Prime Minister Johnson. Attention will also focus on the Netherlands with a remarkable 800% rise in weekly cases on Saturday and to the highest levels since Christmas. The stunning rise in cases from very low levels has come after most restrictions were lifted towards the end of June with young people making up the bulk of the climb. Renewed social restrictions have again been put in place in response. This situation is certainly a concern to the opening up trade. Meanwhile in France, President Macron will be addressing the nation tonight, where he’s expected to talk about the spread of the more infectious delta variant, among other things. And on the other side of the Atlantic, the US also reported 33,933 new cases Saturday, the most since mid-May.

Overnight in Asia, equity markets have started the week on the front foot with the Nikkei (+2.20%), Hang Seng (+2.02%), Kospi (+0.96%) and Shanghai Comp (+1.58%) all moving higher, although S&P 500 futures (-0.17%) have lost ground somewhat. Data releases overnight have included Japan’s PPI reading for June, which came in at +5.0% yoy (vs. +4.8% expected), which is down slightly on the previous month’s upwardly revised +5.1%.

We also heard from ECB President Lagarde overnight where she said to Bloomberg TV that the next Governing Council meeting on July 22 would have “some interesting variations and changes”, and was “going to be an important meeting”. That follows the release of the Strategy Review last week in which they increased their inflation target to 2%, and made other adjustments including plans to further incorporate climate change considerations into the monetary policy framework. There doesn’t seem to be much in the way of market reaction to the story however, with EUR/USD down just -0.07% this morning.

Back to last week now and the main story remained the large moves in rates. Sovereign bonds rallied again and over the course of the week US 10yr yields fell -6.4bps, even with a +6.7bps rise on Friday, to end the week at 1.360% (1.248% at the Thursday lows). That was the 7th weekly decline in yields in the last 8 weeks, with the pullback last week driven mostly by a -4.7bps decline in inflation expectations. Various measures of the US yield curve are now back to mid-February levels. European sovereign bonds gained as well with 10yr bund yields decreasing -5.8bps, UK gilt yields down -4.8bps and French OAT yields down -4.1bps.

Over the last 6-8 weeks, coinciding with yields turning lower, the cyclical-over-growth trade has seen a stark reversal with technology shares in particular outperforming. A +1.13% gain on Friday led the S&P 500 to finish the week up +0.40% at a new record high even as banks (-1.45%) and energy (-3.36%) companies declined sharply on the week. The NASDAQ rose +0.43% on the week (+0.98% Friday), having now gained in 7 of the last 8 weeks. Small caps stocks struggled in particular, with the Russell 2000 declining -1.12% last week. So while the Nasdaq and S&P continue to climb to new highs, the Russell 2000 index has traded somewhat flat since its all-time highs reached in mid-March.

InEurope, equities were similarly subdued until Friday with the end-of week-rally helping the STOXX 600 increase +0.19% (+1.34% Friday), though the Italian FTSE MIB (-0.91%) and Spanish IBEX (-1.47%) saw notable losses. Asian equities struggled for a second straight week as the CSI 300 index (-0.23%) and the Hang Seng (-3.41%) in particular lagged as China proposed new rules to regulate companies seeking to IPO abroad.

Tyler Durden
Mon, 07/12/2021 – 07:53 Read full article at Zero Hedge

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