OPEC+ Ministers Divided, China PMI's Fall

Asian indices mainly green, with Chinese Tech leading the way...

06:59 BST

FX remains very flat, U.S. futures and yields haven't moved much either. Month & quarter end today should see things pick up on that front.

Official Chinese PMI's (June) were released overnight:

  • Manufacturing PMI at 50.9 vs May's 51 (poll 50.8)

  • Non-manufacturing PMI at 53.5 vs May 55.2

  • Composite PMI at 52.9 vs May 54.2

The Reuters headline is misleading (or wrong).

Rate of growth has slowed, but all of the readings are still above 50, and in growth territory.

The input price sub-index of 61.2 vs output price index of 51.4 highlights how manufacturing firms haven't been able to pass on the higher input costs to consumers.

The government crackdown on commodity prices has seen that input index drop from 72.8 however, and new domestic orders are ticking higher, while new export orders fell again (possibly linked to port disruptions).

BBG

More FedSpeak

Fed's Waller: "Unemployment Rate Would Have To Drop Fairly Substantially, Or Inflation Would Have To Stay High, To Have 2022 Rate Hike, But I'm Not Ruling It Out"

Waller said he would be "all in favor" of phasing out MBS purchases first.

"Right now the housing markets are on fire; they don't need any other unnecessary support," he said. "And it's an easy sell to the public."

The economy has improved much more quickly than he and other policymakers had expected last December, he said, when they pledged to keep buying assets at the current pace until there is "substantial further progress" toward the Fed's goals of full employment and 2% inflation.

"I think everybody anticipates that tapering could move up earlier than when they originally thought," Waller said. "Whether that's this year, we'll see, but it certainly could."

Inflation is running above 2%, as the Fed had wanted, while inflation expectations remain anchored, he said. The labor market, though, is still a "long way" from its pre-pandemic level.

"I myself would like to see tapering over before we consider raising rates; therefore if you think you may have to raise rates in late '22 or early '23, you pretty much want to get tapering done by the end of next year if possible," he said.

OPEC+ Delay Talks to 'Resolve Differences'

Apparently, Saudis and Russia have differing views on the need for more supply.

Nobody could have guessed!

Russia want to increase output, the Saudis want to do so more gradually.

There's a stronger demand argument now.

Goldman forecasts oil demand to rise by an additional 2.2 mb/d by year-end, leaving a 5 mb/d supply shortfall.

They estimate that the global oil market is currently in a 2.3 mb/d deficit, with remaining excess inventories down to 330 mb.

API Private survey data adds weight to the improving demand picture.

(ING) The API reported that US crude oil inventories declined by 8.15MMbbls over the last week, which was larger than the almost 4MMbbls drawdown the market was expecting.

If EIA numbers later today confirm a drawdown, it would be the sixth consecutive week of declines.

API numbers also showed that crude inventories at Cushing declined by 1.32MMbbls.

Month/quarter end flows usually see a pickup in volatility, and today should be no different.

This short thread on JPMorgan's Equity Fund roll is an excellent read šŸ‘‡šŸ‘‡šŸ‘‡

 Everyone's favorite fund is up to the plate to roll their $SPX put spread collar tomorrow. Given current market pricing, the fund will be selling the 4425 SepQ call (3.1% OTM). Given current AUM of $18bn, the quantity is around 49k(!!!) contracts.ā€” Pat Hennessy, CMT (@pat_hennessy) June 29, 2021 

 Take a look at how the $SPX has traded the last few quarters. Flat/slightly lower into quarter end followed by massive upside in the first couple of weeks of the quarter. pic.twitter.com/r7iTA3sZKGā€” Pat Hennessy, CMT (@pat_hennessy) June 29, 2021 

Main data today will be the U.S. ADP employment (even though everyone knows the correlation to NFP's isn't great), & Chicago PMI's.

EU inflation data this morning is unlikely to move markets.

ECB's Villeroy said earlier that "inflation should increase a bit in 2021 before going down again in 2022 and 2023."

We can declare it extinct in 2024.

EUR/USD 1.1850 (293M), 1.1900 (272M), 1.2010-20 (650M), 1.2065 (522M)

USD/JPY 109.45-50 (1.6BLN), 110.20-25 (1.6BLN), 110.50 (1.9BLN), 110.70-75 (1.5BLN), 110.95-00 (750M), 111.50 (415M)

EUR/GBP (500M), 0.8600-10 (355M)

AUD/USD 0.7450 (360M), 0.7505 (670M)Source: DTCC