Morning Report

July 3, 2023

“Friday’s PCE inflation data came in softer than expected, down from 4.3% in April to 3.8% in May, and on the back of this, we saw some dollar weakness. Today, traders will look ahead to the ISM Manufacturing PMI for the US, which is a leading indicator of economic health. “

Tim Hallinan – Trading Director

Main Headlines

According to a report from broker Gallagher Re on Monday, property catastrophe reinsurance rates in the U.S. surged by up to 50% during a significant renewal date on July 1. This increase is attributed to the growing frequency of wildfires and hurricanes, particularly impacting states like California and Florida. Reinsurers, who provide insurance to insurance companies, have been raising rates due to escalating losses, partially attributed to the effects of climate change. The rise in reinsurance rates can influence the premiums charged by insurers to their policyholders. In other news, the Supreme Court’s ruling against the student debt relief program will reverse over $300 billion in costs to the current budget as the U.S. Treasury had allocated just over $430 billion for that and a few other schemes. This prevented a steep decline in the fiscal 2022 deficit, lowering it to $1.375 trillion from the previous year’s $2.775 trillion.

Buckingham Palace announced on Sunday that King Charles will meet President Joe Biden at Windsor Castle on July 10. The White House confirmed that Biden will travel to Europe later this month, with planned meetings in the UK, Lithuania, and Finland. In London, he will also meet with the current British PM, Rishi Sunak. In other news, the  UK public’s near-term inflation expectations rose in June, while long-term expectations eased. The survey by Citi and YouGov will inform the Bank of England’s interest rate deliberations. Inflation expectations for the next 12 months increased to 5.0% from 4.7%, but expectations for 5-10 years fell to 3.3%. Long-term expectations are now at pre-pandemic levels, while short-term expectations remain below the high levels of last year.


Sterling is level against the Euro and weaker against the Dollar this morning. Earlier we received the Final Manufacturing PMI for the UK. This report assesses the business conditions in the manufacturing industry by surveying around 600 purchasing managers. Over the past five months, the reports have shown a remarkable level of stability, with the projected figures closely aligning with the actual results. This month’s reporting was very much similar from this previous trend, with the forecast of 46.2 being exceeded with the actual figure being 3bps higher at 46.5 . In other news, British markets rose in early trading this morning, the FTSE 100 gained 0.2%, while the more domestically focussed FTSE 250 rose 0.4%.


The Euro is weaker than most major currencies in the early morning trade. This morning we received Manufacturing PMIs from several Eurozone countries, including France, Germany, and Italy, as well as the overall Eurozone report. These PMIs assess the business conditions in the manufacturing industry by surveying around 3,000 purchasing managers across the Eurozone. Over the past five months, the reports have exhibited a high level of stability, with the forecasted numbers closely matching the actual results. The total Eurozone forecast was 43.6, with the actual being 2bps lower at 43.4, however this was in stark difference to the other states individual reporting, as Germany was 4bs lower than expected at 40.6, France being 5 bps higher at 46.0, and Italy trailing the pack with the number 16bps lower at an actual figure of 43.8 . We have also received the French Government’s budget balancing report, which shows the difference in value between the Government’s income and the spending for the year-to-date. The current reporting shows that they are in a 107.2Bn budget deficit, which is around 25bn higher than last month’s reporting.


The Dollar is well bid against most major currencies overnight. Today, we look to the release of the Institute for Supply Management (ISM) Manufacturing PMI. This report measures the relative state of business conditions within the manufacturing industry by surveying approximately 300 purchasing managers in the industry. In the past five months, the reports have presented a mixed picture, with only two instances where the numbers significantly differed from the projected values, while the rest remained relatively close to the anticipated levels. Currently, the forecast stands at 47.2, and it remains to be seen if this pattern will persist. We will also be receiving the Construction spending report from the US Census Bureau, which measures the change in total amount spent on construction products in the last month. The current forecast is 0.4%, which is double what has been forecast the last 5 months, which have also had significant deviations from the actual numbers.


Stocks kicked off the new quarter with gains, supported by positive momentum from Wall Street and signs of moderating US inflation. Mining and energy stocks led the advance in Europe on Monday, while a gauge of Asian equities climbed more than 1%. Shares of Asian electric-vehicle makers and related suppliers advanced, benefiting from Tesla Inc. and BYD Co. setting sales records in the second quarter. Japan’s Topix index rose as it continued to reach highs last seen in mid-1990 amid improved confidence among big manufacturers. Futures for the S&P 500 were flat and those for the Nasdaq 100 edged up. The US tech index climbed almost 2% last week and notched its best ever first-half of a year. The S&P 500 reached the highest since April 2022 and posted its best first half since 2019.

Main Economic Data/Central Banks/Government (All Times CET)

7:00 a.m.: Netherlands June Manufacturing PMI
8:30 a.m.: Switzerland June CPI
8:30 a.m.: Sweden June Manufacturing PMI
9:15 a.m.: Spain June Manufacturing PMI
9:45 a.m.: Italy June Manufacturing PMI
9:55 a.m.: Germany June Manufacturing PMI
10:00 a.m.: Euro-Area June Manufacturing PMI
10:30 a.m.: UK June Manufacturing PMI
3:45 p.m.: US June Manufacturing PMI
4:00 p.m.: US May Construction Spending
4:00 p.m.: US June ISM Manufacturing


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