Good morning,
Equities shot higher on Monday following news of a US-Iran peace deal as well as proof you can win an NBA championship with a small guard as your #1. Not surprisingly details of the deal remain murky as we await the full text of the agreement. There’s skepticism both within the US government and amongst allies, especially Israel. The key question for markets of when flows through the Strait of Hormuz return to normal remains to answered. Regardless, the S&P added 1.7%. Large cap tech drove the gains (NYSE 100 +3.5%) as the equal-weight lagged (+0.5%) and the Russell 2000 added 0.7%.
Ahead of tomorrow’s Fed rate decision- and the debut of Kevin Warsh as Fed chair- S&P futures have traded in a tight range overnight and on either side of unchanged. SpaceX announced it will be purchasing AI provider Cursor for $60B in an all-stock deal. The two companies had previously formed a strategic partnership that gave SpaceX a purchase option, so this is not out of left field. Speaking of options, SpaceX options begin trading today. Robinhood announced a 10% headcount reduction. Chemical manufacturer Huntsman will merge with Olin, valuing HUN at ~$2.4B in an all-stock deal. GM is reportedly in talks with Lockheed Martin to manufacture parts used by Lockheed in munitions production.
Treasury yields are lower this morning following oil, with some curve flattening. There’s a 20Y auction at 1pm. The US Dollar Index is around unchanged. Housing Starts of 1.177M fell 15% from last month and were below estimates, reaching levels not seen since 2020. Building permits fell slightly as well. Average weekly ADP employment change was 25.5K, slightly lower than last week’s 29K. Import Prices rose 1.9% m.m, above consensus and just below last month’s 2.0% increase.
- US 2yr -2bps to 4.05%, 5yr -4bps to 4.16%, 10yr -4bps to 4.44%, 30yr -4bps to 4.94%
- USD index: -$0.01 to $99.37
European markets are mostly higher. Energy companies are falling along with oil. Industrials and financials are among the leaders. Autos continue to come under pressure from concerns around Chinese imports. Germany’s government rejected Unicredit’s bid for Commerzbank. Investor optimism jumped in the latest ZEW survey. Japan’s Nikkei followed up Monday’s sharp gains with more modest gains overnight. The BOJ raised rates by 25bp as expected and JGB’s sold off toward the long-end in particular (10y +5bp). In China Shanghai fell slightly while the Hang Seng saw a steeper drop. Economic data was mixed, with Retail Sales declining for the first time since Dec 2022. DeepSeek raised $7.4B at a $50B valuation in its first funding round. The RBA left Australian rates unchanged after three straight hikes.
Crude continues to fall with Brent down another 4% and trading below $80. Gas is slightly higher in the US and lower in Europe. Qatar is expected to ramp-up LNG production rapidly after the Strait reopens according to reports. Metals are higher while Ag is trading lower. After sharp gains yesterday Bitcoin and Ether are seeing more modest gains today, with Bitcoin trading just under $67K. Kraken launched crypto perpetual futures in the US (CFTC-regulated) on its Binomial exchange. ZCash continues to rebound from an exploit-triggered selloff earlier this month.
Earnings:
- After-Market (Mon): DOMO, PLAY
- Pre-Market: VNCE, WLY
- After-Market: LZB
Economic Data:
US:
- ADP Weekly Employment Change: 25.5K vs prior 29K
- Housing Starts: 1.177M vs 1.43M cons, prior 1.423M
- Building Permits: 1.413M vs 1.42M cons, prior 1.423M
- Import / Export Prices m.m: 1.9% / 1.3% vs 1.0% / 1.2% cons, prior 2.0% / 3.5%
- 1:00pm 20Y auction
- 4:30pm API Crude Inventories
Global:
- BOJ rate decision: Raise 25bp to 1.00% as expected
- RBA rate decision: Hold at 4.32% as expected
- China May Industrial Production y.y: 4.5% vs 4.3% cons, prior 4.1%
- China May Retail Sales y.y: -0.6% vs 0.0% cons, prior 0.2%
- China Fixed Asset Investment (YTD): -4.1% vs 2.0% cons, prior -1.6%
- China House Prices y.y: -3.5% vs prior -3.5%
- Germany ZEW Economic Sentiment: 10.5 vs -6.0 cons, prior -10.2
- EU ZEW Economic Sentiment: 9.5 vs -7.2 cons, prior -9.1