Wednesday's Markets Update (July 5, 2023)

06 Jul 2023 by rate3

On Wednesday, FOMC minutes hinted at more rate hikes ahead. However, NASDAQ (open: 13,772, close: 13,791) persisted in closing higher on Meta's Threads rollout. BTC (open: 30,321, close: 30,431) followed with a minor uptick during the daily session, followed by a roller coaster ride in after-hours trading.

Details
According to the FOMC minutes Fed left the fed funds rate steady in June, as they wanted to assess the economy's progress. However, most officials still anticipated raising rates this year. Some favored a 25bps hike, but most favored a more moderate pace of tightening. Powell and some of his cronies have reinforced the need to raise rates further this year.

Notable Macroeconomic Updates:
Brazil: Private sector activity expanded for the fourth consecutive month in June, but at a slower pace. The S&P Global Brazil Composite PMI fell to 51.5 from 52.3 in May, below market expectations. The services sector led the growth, while manufacturing contracted for the eighth consecutive month. Input cost inflation eased to the lowest level in three years. Both sectors are optimistic about incoming business.

UK: Private sector output growth slowed in June, as manufacturing production fell for the second consecutive month. However, the services sector continued to expand at a solid pace. New orders grew only marginally, employment rose, and backlogs of work fell. Input cost inflation was the lowest since February 2021, while prices charged increased at the slowest pace in 26 months.

France: Private sector business activity contracted in June, with the composite PMI falling to 47.2, the lowest level since February 2021. The services sector saw a renewed downturn, while manufacturing activity continued to plunge. Overall new orders declined at the fastest pace since November 2020, and backlogs of work fell. However, solid growth in services employment supported hiring during June. Price pressures abated, with rates of input cost and output price inflation easing to 27- and 25-month lows, respectively. Looking forward, business confidence slipped to a 32-month low.

Commodities
Silver: Prices rose past $23 per ounce, outperforming gold prices as low supply and strong industrial demand outweighed pressure from the Fed's hawkish outlook. Regulatory changes in Mexico and declining silver production in Peru are expected to further tighten supply. Meanwhile, growing demand for solar panels is boosting industrial demand for silver (14% of a global demand, compared to 5% in 2014).

Uranium: Prices fell below $56 per pound, but remained 14% higher year-to-date. The decline was driven by macroeconomic headwinds, but longer-term demand and supply risks supported prices. The US and Europe approved bans on Russian uranium imports, which could tighten global supply. Major economies are also increasing nuclear power capacity, which could boost demand for uranium in the long term.