Good morning,
 
It finally felt like summer last week. Most major US indices ended the week modestly higher, after trading in a pretty tight range, consolidating right around all-time highs. The week’s inflation data was largely in line with expectations causing rate hike expectations to ease. The 2yr ended the week down a couple of basis points but yields at the long end moved higher. This has been a global phenomenon as investors struggle with increasing supply and shun duration. ICE Brent traded back up to the high 80’s as a deal with Iran remained elusive. The administration is pivoting to economic pressure with new measures expected to be released this week.
 
It is a pretty quiet start to the week. S&P futures were modestly higher for most off the overnight session but have pulled back after a Sr. Iranian official warned of an escalation in the Strait and across the region if diplomacy fails. Oil prices have ticked up modestly. Not too much in the way of corporate headlines with the focus shifting to retail earnings starting tomorrow. Tech is bid up in the pre-market after a strong overnight session in Asia (DRAM +4.5%, SMH+1%). Investors are sifting through 13fs. S&P futures are unchanged while R2k and Dow futures are off ~0.3%.
 

 
The Empire manufacturing current conditions index jumped to 20.6 its highest level since 2022. New orders improved while unfilled orders jumped sharply as delivery times lengthened. Employment components held steady. Prices were mixed with prices paid increasing, but prices received moderating suggesting some potential margin pressure (though this hasn’t shown up in EPS over the last year). Goldman said after the recent economic data that a September hike is “very unlikely”. Treasury yields have ticked up a couple of bps after the Iran headlines with a continued steepening of the curve. The 30yr yield hit a new YTD high earlier 5.29% while the 10yr is sitting below its previous high of 4.75%.The USD index is moving modestly lower with most of the weakness coming from the GBP/Euro.
 

• US 2yr -0bps to 4.18%, 5yr +1bps to 4.37%, 10yr +1bps to 4.71%, 30yr +2bps to 5.28%
• USD index: -$0.21 to $99.35

 
Markets in Asia were mixed overnight. South Korea was closed for holiday. The Nikkei ended modestly higher helped by strength in tech stocks (Kioxia +15%, Advantest +2.5%) however, breadth was poor. Financials, healthcare and retail stocks were all lower. Q2 GDP came in below estimates. The Yen is hovering around unchanged unwinding some modest overnight strength. Local yields continued to move higher up ~4bps across the curve. In China the economic data once again disappointed with industrial production, retail sales, unemployment and FAI all missing estimates. Local indices ended with gains amidst building speculation of policy support. Recent IPO CXMT rallied ending up >10% despite the White House pushing back against Apple using the company’s chips. European indices have turned modestly lower along with US markets.
 

 
Oil prices are up ~1% trading just under last week’s highs. US nat gas is down ~2% giving back some of last week’s bounce. Prices in Europe are modestly higher. Metals are modestly higher but off the best levels. Ag is mixed. Crypto is recouping some of last week’s losses. The administration is expected to meet with crypto and prediction market executives on Wednesday.  


 
Economic Data:
US:

• Empire Manufacturing:20.6  vs. 11 cons., prior 15.6
• 10:00 NAHB Housing Markets
• 10:00 NOPA Crush

Global:

• China Industrial Production: 4.5% vs. 5.0% cons., prior 5.3%
• China Retail Sales: 0.6% vs. 1.5% cons., prior 1%
• China FAI: -6.7% vs. -6.2% cons., prior -5.7%
• China Home Prices: -3.2% prior -3.3%
• China Unemployment: 5.2% vs. 5.1% cons., prior 5%
• Japan Q2 GDP: 0.3% vs. 0.5% cons., prior 0.5%
• Canada CPI: 0.5%/3% m.m/y.y vs. 0.4%/2.9% cons., prior -0.4%/2.8%