Daily Market Color

Risk Assets Rally into 4th of July Weekend

US stocks are advancing while Treasurys are trading mixed as central bank stimulus optimism and stronger-than-expected US economic data overshadowed the Brexit uncertainty.  Despite the political and financial instability caused by last week’s referendum, two of the UK’s largest banks, HSBC and Barclays, both said they will remain based in London.  There had been warnings leading up to the vote that London could see a large exodus of financial sector jobs in a post-Brexit environment, but it remains to be seen if that will come to fruition.  Both the European Central Bank and Bank of England said they were prepared to loosen policy yet again, which markets have responded to favorably.

In terms of new US data releases, the ISM Manufacturing report surprised to the upside, rising to 53.2, up from 51.3 in May.  The June pace was the fastest in over a year, and became the fourth consecutive month that the headline index has been in expansionary territory.  Exports experienced the highest reading since November 2014, and the employment sub-index rose above 50.0 for the first time since November.  Adding to the upbeat tone, a separate report showed the US auto industry was poised to record its best June sales in over ten years. 

The US bond market will close today at 2pm ET and remain closed until Tuesday, July 5th, in honor of the July 4th holiday.  All three major US stock indexes are currently up between 0.25% and 0.50%, while Treasury yields and swap rates are both 1-2 bps higher in the front end and belly and 1-3 bps lower in the long end of the curve. 

Have a great holiday weekend!

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