Daily Market Color

Data Week Starts with Relatively Quiet Session

Rates decline slightly to kick off PCE week. Swap rates fell 1-3bps today in a quiet session, with most attention geared toward GDP and inflation figures set to be released on Thursday and Friday. Dallas manufacturing headlined today’s data, increasing slightly in June from May’s 4-month low. Meanwhile, equities generally sold off as NVDA declined nearly 7%, extending a 3-day streak. The NASDAQ led major equity indices with a 1.09% drop.

Fed voter Daly warns of potential labor market inflection point. San Francisco Fed President Daly stated today that the US labor market is no longer “frothy.” She explained that “the labor market has adjusted slowly, and the unemployment rate has only edged up. But we are getting nearer to a point where that benign outcome could be less likely.” She largely attributed the risk to curtailed consumer demand, which will be needed if the Fed is to achieve its 2% inflation goals.

German business outlook falls. Contrary to expectations and for the first time since December, a key measure of German business expectations fell to ~89 from last month’s 90.3 reading. The reading highlights a bumpy road to recovery after last year’s 0.3% economic contraction, which contributed to Europe’s mild recession. Despite rising wages, the country’s manufacturing sector reported order backlogs and retail data was “bad,” according to the president of the organization that publishes the index, Clemens Fuest. Commerzbank chief economist Joerg Kraemer believes that “most economists are still too optimistic” with respect to the growth outlook, and he expects German GDP to contract another 0.3% this year.

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