Morning Commentary - June 28th, 2022

Morning Commentary (June 28th, 2022): Yesterday saw a continuation of risk-back-on sentiment as major US equity indices hovered around +4.5-5% off of last week’s lows. Despite record high inflation prints, this latest pullback to slightly above bear market territory has signaled at least near-term exhaustion with local lows.

 

Equities

This morning is primed to be a cautiously optimistic open as domestic futures are buoyed along by overnight risk assets (FTSE +1.25%, DAX +0.73%, HIS +0.85%, SSE +0.89%).

 

Overnight News

In Asia, China easing restrictions on quarantine times for international travelers and taking another step toward re-opening. Remains to be seen how the re-emergence of one of the world’s largest consumer economies impacts crude (WTI +1.6%, Brent 1.8%).

 

Fixed Income

Although bonds are unlikely to find respite soon in this 75bp hike regime, as of this morning the 10yr has come ~25bp off of its recent YTD highs of 3.5% while front-end rates remain just shy of the highs. We continue to expect a flatter treasury curve overall, but with the relief rally perhaps we’ll see a mild re-steepening.

 

Economic Data

A few data points from the economic calendar today, notably S&P Case-Shiller U.S. home price index saw a 20.4% increase in April, nearly flat to the 20.6% growth in the previous period. Looking ahead to 10:00 AM EST we have June’s Consumer Confidence Index (median forecast 100.0) which has hung around 5-Year ex-pandemic lows this year.

 

Perhaps “no new news” will be enough to keep risk assets stable today as we enter a brief summer lull ahead of Q2 corporate earnings.