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Morning Briefing: July 3, 2023

Market Outlook

This first day of the new month, quarter, and second half of the year is set to commence with a mixed sentiment in the stock market. The equity futures market has shown limited movements, reflecting a lack of conviction from both buyers and sellers. Part of this hesitation can be attributed to holiday conditions, with market participants opting for an extended July 4 break.

In the wake of Friday’s close, market participants are mulling over the capital return plans announced by the banks. Anticipation is also building for the ISM Manufacturing PMI report, which will be released at 10:00 a.m. ET.

Global Market Snapshot

China’s Caixin Manufacturing PMI remains in the expansionary territory for the second consecutive month but has experienced a marginal decline to 50.5 from 50.9.

A surge in Pakistan’s key equity index, following the nation’s initial $3 billion loan agreement with the International Monetary Fund, has bolstered Asian stocks, assuaging fears of default.

In Europe, the performance of AstraZeneca Plc has led health-care shares lower due to concerns that its new cancer medication may not meet expectations based on the outcomes of a high-level study.

Schedule Reminder

A reminder for all: the stock market will close early today at 1:00 p.m. ET, followed by the Treasury market at 2:00 p.m. ET.

U.S. Economic Data

Today’s U.S. economic data for review include:

  • 9:45 a.m. ET: June IHS Markit Manufacturing PMI – Final (Prior 48.4)
  • 10:00 ET: May Construction Spending ( consensus 0.4%; Prior 1.2%)
  • 10:00 ET: June ISM Manufacturing Index ( consensus 47.1; Prior 46.9)

Treasury Yields

Treasury yields have been on the rise. The 2-yr note yield is up seven basis points to 4.94%, and the 10-yr note yield has increased by five basis points to 3.86%.

Corporate Updates

Tesla (TSLA 278.34, +16.58, +6.3%): Reported Q2 deliveries of 466,140 vehicles.

Apple (AAPL 193.50, -0.47, -0.2%): Goldman Sachs is reportedly seeking to end its partnership with Apple, and American Express (AXP) may take over the card deal, according to WSJ. Apple has reportedly made significant cuts to its Vision Pro production forecasts, as per FT.

AstraZeneca (AZN 67.09, -4.48, -6.3%): The company announced that Datopotamab deruxtecan met its dual primary endpoint of progression-free survival in patients with advanced non-small cell lung cancer in the TROPION-Lung01 Phase III trial. The data for the other dual primary endpoint of overall survival (OS) are yet to mature. An early trend in favor of datopotamab deruxtecan over docetaxel was observed, although it did not meet the pre-determined threshold for statistical significance in this interim analysis.

Netflix (NFLX 439.03, -1.46, -0.3%): The company is planning to overhaul its advertising strategy, according to FT.

Morgan Stanley (MS 86.43, +1.03, +1.2%): The company plans to increase its quarterly dividend to $0.85/share from $0.775/share and

reauthorize a share repurchase program of up to $20 bln.

Oil: Prices jumped as Saudi Arabia and Russia extended oil supply cuts. This move bolstered European energy shares, which outperformed the broader Stoxx Europe 600 Index.

Future Market Predictions

Investors are tempering expectations for stocks in the second half of the year after strong gains thus far. Hawkish central bank rhetoric, signs of moderating US inflation, and strong tech sector performance have propelled substantial gains. Market participants are eagerly awaiting the upcoming earnings season and data such as Friday’s nonfarm payrolls for indications on the economy’s health.

The potential for a US recession is also being closely watched, especially given the strong performance of stocks in the first half of the year.

Key Events to Watch

Key events to keep an eye on this week:

  • US construction spending, ISM Manufacturing, light vehicle sales
  • Australia interest rate decision
  • US Independence Day national holiday. Financial markets closed
  • China Caixin services and composite PMI
  • Eurozone S&P Global Eurozone services PMI, PPI
  • OPEC International Seminar, speakers including OPEC+ oil ministers, begins in Vienna
  • FOMC issues minutes on June policy meeting
  • New York Fed President John Williams in “fireside chat” at the Central Bank Research Association meeting at the New York Fed
  • US initial jobless claims, trade, ISM services, job openings
  • Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at the CEBRA meeting
  • US unemployment rate, nonfarm payrolls
  • ECB’s Christine Lagarde addresses an event in France

Finally, U.S. Treasury Secretary Janet Yellen’s trip to Beijing on July 6-9 is expected to be in focus as the world’s two largest economies aim to mend ties following a recent spate of bilateral tensions.




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