Thursday's Markets Update (July 6, 2023)

07 Jul 2023 by rate3

On Thursday, with ADP Employment and Services PMI higher and job vacancies lower, NASDAQ (open: 13,653, close: 13,679) managed to close the day in the green while still keeping its morning downside gap open. Meanwhile, BTC (open: 30,600, close: 30,309) stumbled on technicals, still below 31K.

Details
The ISM Services PMI jumped to 53.9 in June, the highest level in four months. Production and new orders rose sharply, while employment and price pressures eased. Supplier deliveries improved and inventories rose for a second month. However, businesses remain cautious about inflation and the future economic outlook.

Private businesses in the US added 497K jobs in June, the most since Feb 2022. Services added 373K jobs, led by leisure/hospitality, trade/transportation/utilities, and education/health. Goods-producing added 124K jobs due to construction and mining, while manufacturing lost 42K jobs. Small and medium-sized establishments created 299K and 183K jobs, respectively. Wage growth slowed for both job changers and job stayers.

Also, the unemployment benefits rose to 248,000, but remained well below historical averages.

Notable Macroeconomic Updates:
Germany: Country's construction PMI fell to 41.4 in June, the lowest level since February 2021. Activity and new orders contracted at a faster pace, employment fell for a 15th straight month, and input costs fell the most in 14 years. Housing activity was the worst-performing construction category.

Malaysia: Central bank kept its policy rate steady at 3%, saying the stance is slightly accommodative and supportive of the economy. Inflation is easing, but core inflation remains elevated. Growth is likely to be driven by resilient domestic demand.

The Malaysian Central Bank's reasonable policy of very moderate rate hikes while waiting for inflation to subside as a result of the market's natural adjustment and self-regulatory mechanisms confirms how misinformed the Fed's current stance on inflation is.

Commodities
Steel: Steel rebar futures edged higher on supply concerns, but demand worries capped gains. Extreme heat in Sichuan and deteriorating air quality in Tangshuan forced capacity cuts. However, slowing economy and sinking new yuan loans weighed on demand. Beijing considers reducing steel output by 2.5%.

Lumber: Futures dipped below $550 per thousand feet, after a nearly 10% rally in June. Concerns about policy tightening and housing demand weighed on prices. Supply disruptions and a slowdown in European shipments are expected to support the market.

Oil: Prices held near $72 per barrel on Thursday, supported by supply cuts from major producers and a drawdown in US crude stockpiles. Saudi Arabia and Russia extended production cuts, while US inventories fell by 4.382 million barrels. However, PMI data pointed to weakening manufacturing activity, clouding the outlook for global growth.