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Major US stock indices have predominantly increased as investors expected the G20 summit, hoping to get hints about trade negotiations between the US and China.

Trump and C are due to meet in Osaka on Saturday. It is expected that the two leaders will discuss trade issues, and investors will look for clues about whether China and the United States can make progress in ending the trade war. In the morning, market participants received conflicting reports on trade negotiations. The Chinese publication South China Morning Post said, citing anonymous sources, that officials from Washington and Beijing agreed on a preliminary truce in their trade dispute before the G20 summit this weekend. However, The Wall Street Journal reported later, with reference to Chinese officials, that the Chinese president intends to present the US president with a package of conditions that must be met by the United States before Beijing is ready to return to discussing a settlement of the trade dispute between the two countries. According to sources, among the preconditions - the requirement to lift the ban on the sale of US technology Huawei. In addition, Beijing wants the US to abolish all fines and abandon China’s demands for increasing imports from the United States in excess of the volumes proposed by Beijing at the Xi and Trump meeting in December 2018.

Investors also analyzed US macroeconomic data. Thus, the report of the Ministry of Commerce showed that GDP grew at an annualized rate of 3.1% in the first quarter of 2019, unchanged from the “second” estimate published last month. Economists had expected growth rates to remain unchanged at 3.1%.

Meanwhile, the Ministry of Labor announced that initial claims for benefits increased by 10,000 to 227,000, seasonally adjusted for the week ending June 22. The data for the previous week was revised to show 1,000 calls more than previously reported. Economists had forecast an increase in the number of applications for 220,000 last week.

In addition, the National Association of Realtors (NAR) reported that, taking into account seasonal fluctuations, the index of pending home sales increased by 1.1% in May, to 105.4 points compared to 104.3 points in April. Economists had expected the index to grow by 1.0%. Meanwhile, on an annualized basis, the index fell by 0.7%, registering its 17th monthly decline in a row.

Most of the components of DOW finished trading in positive territory (20 of 30). The growth leader was Walgreens Boots Alliance (WBA; + 4.31%). The Boeing Co. shares turned out to be an outsider. (BA; -2.59%).

Almost all sectors of the S & P recorded an increase. The sector of conglomerates grew the most (+ 0.8%). Only the raw materials sector declined (-0.4%).

At the time of closing:

Dow 26,525.09 -11.73 -0.04%

S & P 500 2,924.79 +11.01 + 0.38%

Nasdaq 100 7,967.76 +57.79 + 0.73%

According to CNBC, one of the key issues that will be discussed between U.S. and China officials at this week’s G-20 summit in Japan is getting a "balanced deal".

China believes any new agreement will need to be evenhanded, while U.S. Trade Representative Robert Lighthizer told his Chinese counterparts that balance won’t happen, according to CNBC’s Kayla Tausche, citing a person with knowledge of the White House position.

The reason why the U.S. will not prioritize balance is because of China’s past trade transgressions. Among other things, China has been accused for stealing U.S. technology.

TD Securities analysts are expecting Canada’s monthly GDP growth to moderate to 0.3% in April on the heels of a 0.5% gain the prior month.

• “We had originally called for 0.2% growth in April but were forced to revise our forecast after a significant upside surprise on April wholesale sales.
• Goods-producing industries should drive the headline print, reflecting further gains to energy output and strong residential construction, which will offset a modest drag from manufacturing, owing to a one-off decline in auto production.
• Elsewhere, services will benefit from a rebound in real estate activity and strong wholesale sales, although soft retail sales will weigh on the sector. A 0.3% headline print should provide some comfort to policymakers concerned over global headwinds, and keep Q2 GDP tracking well above the Bank of Canada's 1.3% projection from April.”

The National Association of Realtors (NAR) announced on Thursday its seasonally adjusted pending home sales index (PHSI) rose 1.1 percent m-o-m to 105.4 in May, up from 104.3 in April.

Economists had expected pending home sales to rise 1.0 percent m-o-m in May.

On y-o-y basis, the index dropped 0.7 percent. That was the 17th consecutive month of annual declines.

According to the report, the pending home sales rose in three of the four regions in m-o-m terms but fell in all regions compared to May 2018. Pending home sales in the South inched up 0.1 percent m-o-m to an index of 124.1 in May, which is 0.7 percent higher than last May. The PHSI in the Northeast climbed 3.5 percent m-o-m to 92.0 in May and is now 0.5 percent below a year ago. The index in the Midwest surged 3.6 percent m-o-m to 100.3 in May, 1.2 percent lower than May 2018. Meanwhile, the index in the West fell 1.8 percent m-o-m in May to 91.8 and dropped 3.1 percent below a year ago.

TD Securitiesэ analysts have pencilled in cuts by the Reserve Bank of New Zealand (RBNZ) for August and November this year.

• “Deteriorating fundamentals and a firmer NZD are catalysts for RBNZ cuts.
• Similar story to AUD, though we like buying AUDNZD dips towards 1.04. Rallies are likely capped in the short-term around the 1.07 level.
• Risk: The increase in capital requirements drives the RBNZ to cut in 2020 to 0.75%.
• Where we could be wrong: The likelihood of a truce between the US and China would remove pressure on Central Banks to ease. Any signs that spare capacity is being absorbed faster than anticipated and/or domestic consumption and investment picks up would provide the RBA and RBNZ time and hold off from easing.”

U.S. stock-index futures rose moderately on Thursday, supported by a report that the U.S. and China had agreed to a tentative truce in their trade dispute before a G20 summit this weekend, but gains were tempered by a decline in Boeing (BA) stock.

Global Stocks:

The data from the Labor Department revealed on Thursday the number of applications for unemployment benefits rose slightly last week.

According to the report, the initial claims for unemployment benefits increased 10,000 to a seasonally adjusted 227,000 for the week ended June 22.

Economists had expected 220,000 new claims last week.

Claims for the prior week were revised upwardly to 217,000 from the initial estimate of 216,000.

Meanwhile, the four-week moving average of claims increased to 221,250 from 219,000 the previous week..

(company / ticker / price / change ($/%) / volume)

Travelers (TRV) downgraded to Sell from Hold at Deutsche Bank

General Motors (GM) initiated with an Outperform at Credit Suisse

Ford Motor (F) initiated with an Outperform at Credit Suisse

Tesla (TSLA) initiated with an Underperform at Credit Suisse

NVIDIA (NVDA) initiated with an Outperform at Wedbush; target $184

Advanced Micro (AMD) initiated with an Outperform at Wedbush

Micron (MU) initiated with a Neutral at Wedbush

Intel (INTC) initiated with an Underperform at Wedbush

The Commerce Department reported on Thursday that its the "third" estimate revealed the U.S. gross domestic product (GDP) grew at a 3.1 percent annual rate in the first quarter of 2019, unchanged from the "second" estimate issued last month.

Economists had expected the growth rate to be unrevised at 3.1 percent.

In the fourth quarter of 2018, the economy expanded by 2.2 percent.

The increase in real GDP in the first quarter reflected positive contributions from exports, personal consumption expenditures (PCE), nonresidential fixed investment, private inventory investment, and state and local government spending that were slightly offset by a negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, declined.

Meanwhile, the acceleration in real GDP in the first quarter reflected an upturn in state and local government spending and accelerations in private inventory investment and in exports. These movements, however, were partly offset by a deceleration in PCE. Imports decreased in the first quarter after increasing in the fourth quarter.

Richard Franulovich, the head of FX strategy at Westpac, think the U.S. economy has lost some of the immunity from global uncertainties, hitherto a key backbone of USD strength.

• “May durable goods orders admittedly showed encouraging underlying resilience - a key fragility and focal point for the Fed– but a broad range of soft surveys have weakened in recent weeks.
• These weak surveys likely reflect the earlier threat of tariffs on Mexico (and maybe some waning of fiscal stimulus too). The good news is that Mexican tariffs have been abandoned implying a recovery in the surveys next month. The bad news is that the June data round is incomplete.
• The risk is that we see one more lunge lower in the USD (DXY low 95s) if ISM and payrolls are weak. But there are not many currencies in a position to capitalize on USD weakness; easing biases at the ECB, RBA and RBNZ will constrain EUR, AUD and NZD respectively, while Brexit drama will cap GBP, leaving JPY and CAD as the only real options. But even so we are not getting carried away; markets price in 75bp in Fed cuts this year and 115bp by end2020 - aggressive unless you’re forecasting a material slowdown, which we are not.”

Wallgreens Boots Alliance (WBA) reported Q3 FY 2019 earnings of $1.47 per share (versus $1.53 in Q3 FY 2018), beating analysts’ consensus of $1.43.

The company’s quarterly revenues amounted to $34.591 bln (+0.7% y/y), generally in line with analysts’ consensus estimate of $34.520 bln.

The company also reaffirmed guidance for FY2019, projecting EPS growth of ~flat versus $6.02 last year and analysts’ consensus estimate of $5.99.

WBA rose to $53.11 (+1.39%) in pre-market trading.

Germany's Federal Statistical Office reported on Thursday the country’s consumer price index (CPI) is expected to increase 0.3 percent m-o-m in June, following a 0.2 percent m-o-m advance in the previous month.

On the y-o-y basis, Germany’s inflation rate is seen to rise 1.6 percent this month after a 1.4 percent gain in May.

Economists had predicted inflation would increase 0.1 percent m-o-m and 1.4 percent y-o-y in June.

According to the report, food price growth accelerated to 1.2 percent y-o-y in June from 0.9 percent y-o-y in May, while energy inflation slowed to 2.2 percent y-o-y from 4.2 percent y-o-y. Services costs climbed 2.0 percent y-o-y following a 1.2 percent y-o-y jump in the previous month. 

Analysts at TD Securities are expecting the final release of US Q1 GDP numbers to show a minor revision to the upside, with growth improving a tenth to 3.1%.

• “A likely improvement in pending home sales for May and an expected deterioration in the Kansas City Fed manufacturing survey for June will also garner attention.”

Analysts at ANZ say that while the U.S.-China trade relationship remains a wild card, on a relative basis, they expect most Asian currencies to outperform EUR and GBP in the near term.

• “On EUR, we expect the broad downtrend in EUR/USD to continue amid elevated geopolitical, trade and economic uncertainties. The risk of a more negative deposit rate from the ECB and a resumption of quantitative easing is growing. We expect some Asian currencies (particularly KRW and SGD) to outperform EUR in the near term.
• For GBP, Brexit uncertainty has intensified. With the next Prime Minister likely to adopt a more hard-line approach, the risk of a hard Brexit (or a no-deal Brexit) has increased. GBP/USD could trade in the 1.20-1.25 range in Q3. We continue to recommend selling rallies in GBP/Asia crosses. GBP/CNH and GBP/SGD could head lower, potentially breaking key support levels.”

Bert Colijn, a senior eurozone economist at ING, suggests the marked drop in sentiment from 105.2 to 103.3 in June rounds out a weak quarter for the eurozone economy and can be seen as further justification for ECB action in July.

• "While eurozone PMIs have displayed improving growth in services and further weakening in manufacturing, this isn't the case for the Economic Sentiment Indicator (ESI).
• Declines across the board indicate that June was another month of weak growth, adding to expectations of a weak quarter in terms of GDP growth. Concerns about the manufacturing sector continue to intensify as trade conflicts are likely to drag on for some time. The export order book indicator deteriorated further, confirming global concerns as a major factor in the slowdown. Service sector sentiment declined as well as demand had been weaker than expected over past months. Confidence for the months ahead remains at high levels.
• With about a month to go before the July ECB meeting, evidence of weak growth environment keeps mounting. It's not just a weak growth picture that the ESI paints today which is concerning for the ECB, but take a look at selling price expectations, which have dropped significantly for manufacturing and remained stable in the service sector.
• This adds to the bleak outlook for price growth in the coming months and without significant improvements in data in the coming month, the ECB stands ready to act."

• To keep yuan exchange rate basically stable at reasonable level
• To strike balance between monetary easing and tightening
• To keep liquidity conditions reasonably sufficient
• To adopt countercyclical adjustment when appropriate

• Working towards extension of production cuts next week
• OPEC rollover would be at least at the same level as current cut
• There are some ideas for a deeper cut among OPEC members

Among the preconditions, Chinese officials with knowledge of the plan told the WSJ, Beijing is insisting the U.S. remove its ban on the sale of U.S. technology to Chinese telecom giant Huawei.

In addition, China wants the U.S. to lift all punitive tariffs and drop efforts to get China to buy even more U.S. exports than Beijing said it would when the two leaders last met in December.

"Despite his preconditions, Mr. Xi isn’t expected to take a confrontational tone with Mr. Trump”, the officials added.

Sean Callow, analyst at Westpac, suggests that financial markets will of course be a lot more interested in bilateral meetings in the upcoming G20 meet, especially between US President Trump and Chinese President Xi.

“Recall risk appetite improved last week when President Trump tweeted that the pair would have “an extended meeting.” But the schedule from the White House allows only about 90 minutes for the meeting, before Trump is due to meet Turkey’s Erdogan. This raises the suspicion that the meeting will largely be a rubber stamp of a pre-agreed policy tweak. According to media reports, unless Trump has a last minute change of heart, “the truce cake seems to have been baked,” with the US to suspend the threat of 25% tariffs on the $300bn or so of China goods imports that are not already subject to tariffs. This is hardly the basis for a major improvement in the risk mood but is at least better than delivery of Trump’s 5 May declaration that the 25% tariffs would be imposed “shortly.”

According to Danske Bank analysts, global central banks are now facing a situation where they need to deliver.

“In the case of the euro area, inflation expectations have gradually erased around half of the jump we saw last week after the Sintra conference. An ECB sources story yesterday suggested that the ECB is looking into the technical details of a potential restart of QE. The question is what, how and when the ECB would announce new policy measures and if this could bring growth and inflation higher. The global cyclical momentum will be conditioned on the result of the ongoing trade war (where the TrumpXi meeting this weekend is focal) and the size of the stimuli of global central banks, such as the Fed and ECB. Some FOMC members suggested a 50bp cut would be overdone, which took its toll on markets yesterday. For the Fed, market pricing currently points to -72bp lower central bank pricing by the end of the year, while EONIA pricing (ECB) is -15bp lower by year-end.”

According to the report from Eurostat, in June 2019, the Economic Sentiment Indicator (ESI) decreased markedly in both the euro area (by 1.9 points to 103.3) and the EU (by 1.5 points to 102.3).

The deterioration of euro-area sentiment was driven by lower confidence in industry and, to a lesser extent, in services and among consumers, while confidence improved in retail trade and, particularly, construction. The ESI decreased in all of the largest euro-area economies, most so in Germany (-2.9), followed by Italy, the Netherlands (both -1.5), France (-1.0) and Spain (-0.6).

Industry confidence posted a sharp decline (−2.7), which constitutes, together with a commensurate drop in April, the most significant decrease in about eight years. The latest deterioration brought the indicator for the first time since autumn 2013 slightly below its long-term average. The decline in services confidence (−1.1) was driven by managers' more pessimistic views on all its components, i.e. the past business situation and past demand, as well as demand expectations. Consumer confidence eased (-0.7), reflecting households’ more negative views on all its components, namely their past and future financial situation, their expectations about the general economic situation and their intentions to make major purchases. Retail trade confidence improved (+1.0) on the back of managers’ better assessments of the present and expected business

situation. Construction confidence bounced back (+3.6) from a sharp decline in May, thanks to a strong rebound in managers’ employment expectations and a slight improvement in the appraisals of the level of order books. Finally, financial services confidence (not included in the ESI) remained broadly unchanged (−0.3).

European Automobile Manufacturers’ Association (ACEA) on Thursday revised its forecast for 2019 passenger car registrations downwards to -1%.

ACEA’s initial forecast, published earlier this year, was for growth of up to 1% compared to 2018. The association now expects a slightly negative result for the full year 2019, with total EU car sales projected to be just above 15 million units at the end of this year.

“Aside from the uncertainty due to Brexit and changing macroeconomic conditions, this represents a natural stabilisation of the market,” said ACEA Secretary General, Erik Jonnaert. “Indeed, the pace of growth has been slowing down in recent years.” This is also in line with the European Commission’s downward revision for projected EU GDP growth, as car sales strongly mirror economic growth.

Japan publicly cautioned the two candidates vying to replace Prime Minister Theresa May that Japanese investment could leave the country if there is a no-deal Brexit, urging Boris Johnson and Jeremy Hunt to avoid such a scenario.

Japan, one of the biggest investors in the British economy, is very concerned about a disorderly Brexit that would have a very negative impact on Japanese firms in Britain, Foreign Minister Taro Kono told.

“Please, no no-deal Brexit,” Kono said. “Some companies are already starting to move their operations to other places in Europe.”

Asked whether investment could leave Britain, Kono said: “It could be that there is going to be less investment.”

Goldman Sachs Group Inc pulling down its forecasts for U.S. Treasury yields, incorporating expectations for a prolonged hit from the U.S.-China trade war, along with the dovish shift by key central banks.

Goldman’s strategists slashed their year-end 10-year U.S. yield call to 1.75% -- matching JPMorgan’s updated prediction from May 31. That’s down from Goldman’s 2.80% projection reiterated last Sunday. Goldman also cut its yield forecasts for Japan, the euro region and other developed nations.

“The global rally in yields is likely to continue, driven by accommodative central banks, near-term weakness in data, and an asymmetric set of risks” including the trade war, Middle East tensions and Brexit, Goldman strategists led by Praveen Korapaty wrote in a note.

The Research Team at Bank of America Merrill Lynch (BAML) offers their expectations from the much-awaited G20 meeting between the US President Trump and his Chinese counterpart Xi.

• The best we can hope for is a truce, not a deal.

• A likely ceasefire, delays in tariffs agreed to on both sides.

• Given the scope of disagreement between the two side, a major deal is unlikely.

• A truce is at least a positive but will soon evolve into worry unless sides move towards a deal.

TD Securities analysis team is looking for German HICP to edge a tick lower to 1.2% y/y in June, compared to consensus of 1.3% y/y.

“Underlying that, we look for the contribution from energy prices to decline, given the fall in crude oil prices that we saw into the beginning of June. Core inflation should pick up a bit, although this is the big question mark as core CPI has been incredibly volatile so far this year. We look for core CPI to regain its 1-handle though, rising to about 1.1% y/y.”

Danske Bank analysts point out that in the euro area, we get a first hint of where inflation is headed in June with the German and Spanish HICP figures out already today.

“It will be interesting to see if they point to the rise in core inflation we expect to see in tomorrow's euro area figures. The EC's economic confidence indicator for June will also be on the agenda, providing the last piece to the puzzle of how consumer and business sentiment has fared in Q2. On an otherwise light day on the data front, markets will continue to look out for clues ahead of tomorrow's G20 meeting in Japan. Tensions are high ahead of the meeting, with Trump warning of additional tariffs if there is lack of progress after G20, while it was also suggested that the US and China have agreed on a tentative truce, according to scmp.”

Bank of Japan Deputy Governor Masazumi Wakatabe warned of growing economic risks from the simmering U.S.-China trade war, reinforcing market expectations the central bank's next move could be to ramp up stimulus.

Wakatabe also said unconventional monetary tools used to fight the 2008 global financial crisis, such as quantitative easing and negative interest rates, will remain in the central banks' "arsenal" to combat the next economic downturn.

"We need to pay increased attention to heightening risks to the BOJ's scenario" that Japan's economy will expand moderately as a trend. The BOJ will guide policy to ensure Japan never falls into deflation again," said Wakatabe.

Wakatabe said U.S.-China trade tensions, if prolonged, would hit the global economy not just through higher tariffs, but by discouraging firms from investing and hurting market sentiment.

According to the report from Society of Motor Manufacturers and Traders (SMMT), UK car production fell for the 12th month in a row in May, as output dropped 15.5%. The  21,239 fewer units were manufactured, with demand both at home and abroad falling by double-digits as softening in the UK and key global markets, and the effects of model changes, caused the negative performance to continue.

In the month, manufacturing for domestic buyers fell by -25.9%, while overseas orders were down -12.6%. Exports accounted for 80.9% of all cars made, reemphasising the importance of maintaining free and frictionless trade. In the year to date, UK car production is down -21.0% with 557,295 new models rolling off production lines – almost 150,000 fewer compared with the same point in 2018. This is due, to a certain extent, to the decision by some manufacturers to bring forward summer shutdowns to April in anticipation of the expected March date for the UK to leave the EU.

Bolstered by improving sales and better margins, profits for China's industrial companies rose in May, bucking a months-long downtrend, data from the National Bureau of Statistics revealed Thursday.

Industrial profits increased 1.1 percent year-on-year in May, to 565.6 billion yuan ($82.21 billion), reversing a 3.7 percent drop in April.

During January to May, industrial profits fell 2.3 percent compared to the same period last year. Profits had decreased 3.4 percent in January to April period.

The uptick in May was driven by quicker sales and slower increases in corporate costs, Zhu Hong of the statistics bureau said in a statement accompanying the data, adding that better margins in equipment manufacturing and the coal sector attributed to the bulk of the increase.

At the same time, liabilities of industrial firms with annual revenue more than CNY 20 million, increased 5.3 percent at the end of May.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1490 (3505)

$1.1468 (3878)

$1.1448 (4422)

Price at time of writing this review: $1.1351

Support levels (open interest**, contracts):

$1.1295 (2704)

$1.1247 (2774)

$1.1198 (3109)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date July, 5 is 70989 contracts (according to data from June, 26) with the maximum number of contracts with strike price $1,1300 (4422);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2826 (1190)

$1.2794 (738)

$1.2771 (375)

Price at time of writing this review: $1.2680

Support levels (open interest**, contracts):

$1.2629 (1664)

$1.2589 (1406)

$1.2544 (2043)

Comments:

- Overall open interest on the CALL options with the expiration date July, 5 is 17200 contracts, with the maximum number of contracts with strike price $1,2950 (2722);

- Overall open interest on the PUT options with the expiration date July, 5 is 15984 contracts, with the maximum number of contracts with strike price $1,2500 (2200);

- The ratio of PUT/CALL was 0.93 versus 0.92 from the previous trading day according to data from June, 26

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.