Financial Markets Morning Commentary
Financial Markets Morning Commentary
Tom Pawlicki
- Interest Rates
Financial Markets Morning Commentary
By: Tom Pawlicki, Senior Specialist, Market Intelligence
Economic
- 10-year futures are +2/32. Yields are -0.9 bps at 4.518%. S&P futures are -30.00. President Trump announced yesterday afternoon that the Apache helicopter that was downed earlier yesterday was a result of Iranian fire, and that a proportional strike on Iran would be undertaken. That strike took place a few hours later, when 20 targets were hit. Iran responded with drones fired at Jordan and possibly Bahrain. Rhetoric has been turned up since then, with Iran saying that they will leave no attack unanswered, and President Trump saying that negotiations have taken too long and that he is close to ordering new strikes against Iranian power plants and bridges. Trump’s comments were made just after 6 am CDT, causing oil prices and interest rates to jump, while stocks and precious metals moved lower. The CPI data was in-line with expectations, but interest rates fell slightly and stocker recovered.
- Preliminary data on Strait of Hormuz transits shows 5 crossings on Tuesday compared to 10 crossings on Monday.
- On the economic data calendar this week, PPI and jobless claims are due on Thursday, and Michigan sentiment on Friday.
- (Reuters) US CPI was +0.5% m/m in May vs. +0.5% expected and +0.6% previously. CPI was +4.2% y/y vs. +4.2% expected and +3.8% previously. Core CPI was +2.9% y/y vs. +2.9% expected and +2.8% previously.
- (Bloomberg) Devon Energy rises about 1% after the oil and gas producer boosted its production forecast for the full year and said it was undergoing a portfolio review to concentrate assets in the Permian Basin.
- (Bloomberg) Casey’s General Stores Inc. is up 2% after the convenience store chain reported revenue for the fourth quarter that beat the average analyst estimate.
- (Bloomberg) Cracker Barrel jumps 9% after the restaurant chain boosted its revenue guidance for the full year, beating the average analyst estimate.
- (Reuters) Bank of Japan Governor Kazuo Ueda has been hospitalized for medical treatment and will miss the June 15 to 16 policy meeting, the central bank said on Wednesday. The central bank is widely expected to raise interest rates next week to levels unseen in three decades to counter mounting inflationary pressures from the Iran war.
Geopolitical
- (Reuters) President Donald Trump on Wednesday said Tehran has taken too long to negotiate a deal and would now "have to pay the price" after Iran and the United States exchanged strikes in the region amid reported efforts to continue talks. Trump's comments come as an official with knowledge of the situation told Reuters that Qatari negotiators traveled to Tehran on Wednesday morning in an effort to finalize an agreement, after consultations with the United States. Trump added that he is close to ordering new strikes against Iranian power plants and bridges.
- (Reuters) US officials said that nearly 20 targets were struck in Iran by US forces in retaliation for the downing of a US Apache helicopter in the Persian Gulf. Officials are not aware of any reports of harm to US personnel or known damage to US locations.
- (Reuters) Iran's Revolutionary Guards said that they had targeted four sites at the U.S. al-Azraq base in Jordan using long-range missiles. Jordanian armed forces said on Wednesday they intercepted and shot down five missiles launched from Iran toward al-Azraq area in Jordan. Debris from the interception operation fell on Jordanian territory but caused no injuries or material damage.
- (Reuters) A cargo vessel reported being approached by a small craft carrying six armed people about 88 nautical miles southwest of Yemen's Balhaf on Wednesday, the United Kingdom Maritime Trade Operations said. There was an exchange of fire between the small craft and the vessel's armed security team, and the craft then turned away, UKMTO added.
- (Reuters) Ukraine's military said that it had struck several key facilities at the Russian-occupied port of Mariupol, in an attack that has limited the site's capacity. In a statement, Kyiv's drone forces said the port was left without power after strikes on energy, repair and management infrastructure, and that the attack had "significantly limited" Mariupol's use as a military logistics hub.
- (Reuters) Ukraine's military has struck the West Horizon tanker in the Black Sea, which it described as part of Russian "shadow fleet", the Ukrainian General Staff said on Wednesday.
- (Reuters) Russia on Wednesday condemned an EU decision to authorize EU military vessels in the Mediterranean to stop and inspect foreign ships suspected of being part of a "shadow fleet" transporting Russian oil, and said it would take all necessary legal and other measures to protect them. The EU said on Monday it had expanded the mandate of Operation IRINI, its naval mission in the Mediterranean that was originally set up to enforce a U.N. arms embargo on Libya.
Energy
- WTI is -$0.69/bbl at $88.89/bbl, while Brent is +$0.82/bbl at $92.27/bbl. Natural gas is +$0.083/MMBtu at $3.223/MMBtu.
- (Reuters) API crude stocks fell by 9.12 million barrels in the week ended June 5. Gasoline inventories fell by 1.19 million barrels, while distillate inventories rose by 1.32 million barrels compared with a week earlier.
- (Reuters) Oil stockpiles in the world's largest economies are headed toward the lowest levels since at least 2003 as inventories are drawn down at a record pace due to the lost output from the Iran war, the U.S. Energy Information Administration said on Tuesday.
- (Reuters) Kuwait Petroleum Corp (KPC) has offered prompt-loading fuel products on a spot basis for the first time since the start of the Iran war, four sources familiar with the matter said. Separately, KPC was offering 4 million barrels of crude via tender. The oil, which is outside the Persian Gulf, is offered to buyers in Asia, a fifth source with direct knowledge of the matter said.
Metals
- Gold is -$110.10/oz, trading at $4,176.30/oz, while silver is -$0.65/oz at $64.59/oz.
- The dollar index is -0.066 points at 99.843.
- (Reuters) Gold slid to a more than two-month low on Wednesday as fresh fighting in the Middle East dimmed hopes of a resolution to the U.S.-Israeli war with Iran, heightening concerns about inflation and interest rate hikes.
- (Reuters) Indian gold prices dropped nearly 2% on Wednesday to their lowest since early May, falling below pre-duty-hike levels following a sharp decline in global bullion prices. India last month raised import tariffs on gold and silver to 15% from 6%, as part of efforts to curb overseas purchases of the metals and ease pressure on the country's foreign exchange reserves. "Gold jewelry demand has been subdued in recent weeks. The correction in prices could encourage buyers to return," said a Mumbai-based bullion dealer with a private bank.
- (Reuters) Copper sank to its lowest in three weeks on Wednesday as hostilities in the Middle East and concerns about the implications for global economic growth outweighed the market impact of reduced inventories.
- Interest Rates
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