The Daily Fix – Politics inspired volatility, but traders buy into weakness

• European politics impacts the CAC40 and the EUR
• US equity moves and the leads for Asia
• Apple prints a bearish reversal as its WWDC fails to ignite a spark
• Crude rallies 3%, with gold holding its range lows
• What to focus on in Asia

The French CAC40 saw good activity from clients, notably on the break of the long-term range low of 7900, likely aided by a solid 12bp sell-off in French 10-year govt bonds (to the highest levels since November) on rising fiscal concerns. However, calmer heads prevailed as the session wore on, and many were reminded just how poor a representation the French equity market is of the economy - where only 15% of the index constituent’s revenue is sourced within France - and as we see in the intraday tape the index closed on its highs – and what could be technically significant, the index remains closed back inside the range, at least for now.

While there were hardly fireworks in the EUR plays, but the EUR was the laggard in G10 FX, with EURSEK the weakest link (-1%), with EURAUD also seeing good downside activity. EURUSD gapped down and traded to a low of 1.0732 and like the CAC40 has come off the lows, with traders not wanting to go too hard on amassing USD length ahead of tomorrow's US CPI and FOMC meeting.

The various US indices treated traders to a bit of a chop fest through European trade and into the US cash open, but those positioned on the long side will claim the session as a small victory – partly because we saw the S&P500 and NAS100 close at record highs, but also because the index etched out a small low to high trend day. Either way, equity cash volumes were ok (8% above the 30-day average in the S&P500), even if breadth was poor (56% of S&P500 members closed high), with utilities, energy, and comms services outperforming.  

Apple has seen the bulk of equity trading activity, with 25m shares traded on the day, with traders focused on its formal entrance into AI at its WWDC conference. As we wrote yesterday, the risk of a ‘sell-on-fact scenario’ playing out was high, and the bearish daily reversal suggests that it has played out to an extent, where a break below $192.15 in upcoming trade will confirm that change in structure.

We have seen some exciting features being rolled out, but most of these are geared to the iPhone 15, so one can assume this plays nicely into an upgrade cycle – either way, I’m not sure we heard anything that has truly surprised and the stock trades -1.9%.

Elsewhere Microsoft added 1%, with Amazon continuing its form gaining 1.5%. Nvidia closed at $121.79 post-split and added 0.8%.

In commodity land, crude has found solid buyers pushing 3.4% higher, with an eye on improved demand and the upcoming IEA and OPEC+ report due over the next couple of sessions. Having pushed nicely back into the range of $81 to $76.50 it held through May, we’ll see if it settles here or breaks above $80. Gold has held its own range lows of $2285 and seen a session gain of 0.8%, where the upside supply may kick in around $2325 – one for the gold scalpers to focus on. Copper and SGX iron ore futures both sit +1.5%.

In Asia, we see the various bourses reopening after holidays in HK and Australia yesterday and despite S&P500 futures essentially unchanged from the respective cash closes (on Friday), we see Aus SPI and HK index futures both -0.9% from their cash close and as such the ASX200 and HK50 should unwind to this extent. There is little on the event risk side to trouble investors or traders today, and NAB business confidence won’t move the dial, so is not a risk event that I have concerns about holding AUD or equity exposures over.

In the UK we get wage and jobs data at 4 pm AEST, and that could have an impact on UK rates and the GBP by extension – UK politics aside, where a Labour landslide is seen as supportive for both the GBP and FTSE100, the debate is still firmly focused on whether the BoE cut in September, where we see a 50/50 chance this priced for this meeting and just 30bp of cumulative cuts priced for December. I like EURGBP lower but would be selling closer to 0.8480 than at current spot levels. We also see US NFIB small business confidence, which again should influence the USD or markets given the landmines seen in the US data flow tomorrow.

Good luck to all.