|
|
A 40-Year Currency Break Is About to Reroute Global Flows |
|
|
A major Asian currency just cracked to lows nobody has seen since 1986, and central bankers are loading their intervention tools in silence. |
Chip stocks kicked off Q3 with a face-plant that wiped roughly $129 billion in a single session. And the June jobs print is about to reset the whole Fed trajectory. |
|
|
|
|
|
|
|
|
The Big Picture |
Japan |
Tokyo Loads the Ambush |
|
|
The yen slid to a 40-year low against the dollar this week, and Japanese officials are done telegraphing their moves. |
Reuters sources say the Ministry of Finance has shifted to what they call ambush tactics, aimed at squeezing short sellers and raising the cost of betting against the currency. |
That matters far beyond Japan. The yen carry trade, borrowing cheap in Tokyo to buy US tech and credit, has been a quiet fuel line for this rally. |
When Japan intervenes, that trade unwinds fast, and it hits everything from Nasdaq futures to high-yield spreads. |
South Korea is showing similar strain. Seoul's vice finance chief warned Thursday that the won is significantly misaligned with fundamentals, and the country is coordinating with Japan on FX issues. |
Meanwhile, Korean inflation hit a 2-1/2 year high, cementing bets that the BOK hikes on July 16. |
If the yen finally bounces, US mega-cap tech loses a bid it has depended on. Watch the dollar-yen. A move back through 155 is your tell. |
|
|
|
|
AI Infrastructure |
Chips Trip on Their Own Rally |
|
|
Semiconductors just had one of the greatest quarters in history. Micron has surged nearly 797% over the past 52 weeks. Then Wednesday happened, and Micron dropped 11%, erasing roughly $129 billion of market cap in a single session. |
The trigger was a analysts note flagging Meta's admission of excess compute capacity, which reignited the AI-bubble debate. The Info Tech S&P sector dropped 1.84% on the day while Financials climbed 2.13%. |
That kind of rotation isn't noise. That's the market questioning whether Q1 2027 hyperscaler capex numbers hold up. |
Analysts still expect S&P 500 earnings growth of 13.5% for 2026 but analysts's own writers are pushing back on how much of that is real versus buyback-driven optical growth. |
When a name up nearly 797% cumulatively drops double digits on a sentiment note, positioning is stretched. |
You don't need to short the AI trade. But you should be thinking about how much of your book is directly or indirectly leveraged to hyperscaler spend. |
If you're 40% tech in a diversified portfolio, you're probably 60% AI beta. |
|
|
|
|
|
|
|
|
Geopolitics |
USMCA Enters Sunset Mode |
|
|
The trade chiefs of the US, Mexico, and Canada sat down Wednesday for what was billed as a routine review of the pact. |
In reality, it kicked off a 10-year sunset process, with the Trump administration demanding structural changes to force more manufacturing back to US soil. |
That's a slow-motion catalyst that changes cost structures for autos, industrials, and ag. |
The White House has also launched investigations into 60 countries for tariffs ranging from 10% to 12.5%, and is prepping a subsidies probe that could unwind last year's China deal. |
You won't see the impact in tomorrow's CPI print. But the second-order effects, reshoring capex, higher input costs, and disrupted supply chains, are already showing up in earnings guidance from the industrials. |
Watch Q2 conference calls for language changes on North American sourcing. |
|
|
|
|
Poll: What's your view on U.S. housing over the next 12 months? |
|
|
|
|
|
|
Metrics to Watch |
📊 10Y Treasury Yield
Sitting at 4.47%, up 5 basis points on the day. The market is pricing an 88% probability of at least one rate hike this year, up from 57% a week ago. That's a real regime shift, and it's compressing equity multiples in rate-sensitive corners.
📈 ISM Manufacturing Prices
Came in at 73.0, well below the 79 estimate and down from 82.1 the prior month. Factory-gate input costs are actually cooling, even as PCE inflation runs at 4.1% YoY. That split is what makes Warsh's job messy.
💹 ADP Employment
Businesses added just 98K jobs in June, well below the 113K estimate and down from 122K the prior month. Softer than the headlines suggest, and it sets up Thursday's official BLS print as a real reset moment.
💰 Gold
Trading around $4,082/oz up 22% year-over-year but down more than 8% in the past month. That's the correction that showed up right after Warsh signaled his inflation focus. Silver at $60.39 is up 65% YoY on structural supply deficits, not just macro fear.
🏦 Fed Balance Sheet
Still $6.736T. Warsh confirmed Wednesday any changes to balance sheet policy will be well-telegraphed, meaning no near-term shock, but the runoff bias is now official policy tone.
|
|
|
|
|
Market Movers |
🏛️ Warsh's Hawkish Debut
The new Fed Chair is signaling that inflation expectations, not employment, are his north star. |
He also announced a task force reshaping how the Fed uses real-time data, with results within a year. Translation: fewer rate cuts, more skepticism of official government stats. |
🌍 Yen Carry Unwind Risk
Japan's ambush intervention posture, plus BOJ tightening, is threatening the largest carry trade in global markets. |
Any sudden yen strength could force violent deleveraging in US tech and high-yield credit. This is the tail risk portfolio managers are watching closest. |
💵 Dollar Dominance
DXY at multi-month highs backed by yield differentials and safe-haven flows. That's tightening global financial conditions and pressuring emerging market currencies. |
The Indian rupee hit a three-week low; the Korean won is officially misaligned per Seoul's own admission. |
📉 AI Bubble Chatter
Meta's excess capacity admission plus a widely-shared analysts note has traders questioning the durability of hyperscaler capex. |
Chip stocks led Q2 gains and are now leading Q3 losses. Rotation into Financials and Healthcare is where fresh flows are heading. |
|
|
|
|
Market Impacts |
📈 Equities: Wall Street closed a choppy Wednesday lower as tech dragged. S&P 500 sits at 7,483, Nasdaq at 26,040. The Info Tech sector fell 1.84% while Financials gained 2.13%. |
This is the rotation I've been waiting for. If it holds, laggard sectors could lead H2. |
🏦 Bonds: 10-year yield climbed to 4.47%, 30-year to 4.99%. The curve steepened modestly with the 10Y-2Y at 31 basis points. |
Rate hike odds keep firming, pulling long-end yields with them. TIPS breakevens have collapsed to 2.2%, the lowest since October 2024. |
💱 Currencies: Dollar firm across the board. Yen at 40-year lows and staring down intervention risk. Rupee at three-week lows. |
Won officially misaligned. This is a dollar wrecking-ball move, and it's not done unless Warsh blinks or Tokyo unloads reserves aggressively. |
🛢️ Commodities: Brent slid to $70.56 after US-Iran talks concluded in Doha, the third straight day of declines. Gold at $4,082 catching a Warsh-inflation bid. |
Silver climbing on structural supply deficits. Copper at $6.14 up 19% YoY on AI grid demand. Nat gas soft at $3.18. |
|
|
|
|
|
|
|
|
Key Indicators to Watch |
📅 July 2. June Employment Situation - The headline jobs report releases at 8:30 AM ET. Prior consensus was 115K nonfarm payrolls with the unemployment rate holding at 4.3%.
Goldman flagged that World Cup hiring could add 40K to the number. Anything above 150K reinforces the rate hike trade.
📅 July 6. ISM Services PMI - The services side of the economy has been the resilience story. A hot services print with elevated Prices Paid would seal the rate hike odds and pressure long duration.
📅 July 7. International Trade Balance for May - First real read on how tariffs are showing up in trade flows. Watch the goods deficit and services surplus for early evidence of the reshoring narrative.
📅 July 8. FOMC Minutes - First minutes under Warsh's chairmanship. Language on inflation, the balance sheet, and the new task forces will move markets. This is the biggest calendar event of the week.
|
|
|
|
|
Everything Else |
🤖 An AI ranks every stock across Buffett quality, deep discounts, and big money movement and delivers the top 10 daily free. ⚽ Goldman thinks the World Cup could give June hiring a temporary lift, potentially adding 40,000 jobs to the payroll report. 💼 Private payrolls rose less than expected in June, giving markets another sign that the labor market may be cooling. 💴 Japan’s yen jumped as traders grew more nervous about possible intervention and the next currency move. 📉 U.S. job growth likely cooled in June after a run of stronger gains, putting more attention on the economic slowdown.
|
|
|
|
|
That’s it for today’s edition—thanks for reading! Reply to this email with any feedback or let me know which macro trends or markets you’d like me to cover next. |
Best Regards,
—Noah Zelvis
Macro Notes |
|
Tidak ada komentar:
Posting Komentar