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US stocks are pointing to a weaker start as traders return from the Independence Day holiday. Weakening growth in China and news that China is placing curbs on exports of metals used in the semiconductor industry are weighing on sentiment ahead of the FOMC minutes later today. The markets will look to the minutes for clues over the future path for interest rates.

US futures

Dow futures -0.41% at 34230

S&P futures -0.5% at 4426

Nasdaq futures -0.49% at 15198

In Europe

FTSE -0.65% at 7470

Dax -0.7% at 15930

• FOMC minutes will be released later
• Chip stocks fall after China restrictions & weak data
• USD rises on safe-haven flows
• Oil looks to OPEC+, API inventory data 
   

China restricts exports of chip-making metals

US stocks are pointing to a modestly weaker open after China announced curbs on chip-making material exports, as service sector growth slowed, hurting sentiment and as investors look ahead to the minutes from the June FOMC meeting.

As traders return following the Independence Day holiday, the mood has been dampened by news that China will restrict the export of metals used in the semiconductor industry in the latest tit-for-tat move in an escalating US- Sino tech trade war.

Attention is now turning to the minutes from the June FOMC meeting, where the Fed paused its rate hiking cycle after 10 straight rate hikes but pointed to two more hikes this year.

Fed Reserve Chair Powell sounded hawkish again when he spoke at the ECB annual conference last week. The committee believes that more work needs to be done, but the market will look for clues over any divisions over where the peak rate could be.

The market is pricing in a 88% probability of a 25 basis point hike in July, but the market is not convinced that the Fed will hike for a second time this year. The minutes could provide further clues. However, given the data released since the June FOMC meeting, including cooling inflation, the minutes could be considered outdated.
 

Corporate news

Nvidia and Micron Technology are falling pre-market due to the China restrictions.

Netflix rises after Goldman Sachs upgraded the stock and price target to $400 from $230, thanks in part to the crackdown on password sharing.
 

Nasdaq 100 outlook – technical analysis

After a steep run-up, the rally in the Nasdaq 100 appears to be running out of steam. The price ran into resistance above 15200 last week and has eased back, testing the multi-month rising trendline support. A break below the support exposes the 20 sma at 14955, ahead of 14680, last week’s low. A break below here creates a lower low. On the flip side, should the rising trendline support hold, buyers could look for a rise above 15240, last week’s high, ahead of 15290, the 2023 peak.

(Click on image to enlarge)

FX markets – USD rises, EUR steady

The USD is edging cautiously higher on safe-haven flows amid concerns over slowing global growth and ahead of the FOMC minutes due later today.

EURUSD is holding steady as investors digest softer business activity in June and cooling inflation. PPI fell more than expected, dropping -1.9% MoM and -1.5% YoY in May. The data suggest that CPI could continue cooling. Meanwhile, the eurozone composite PMI fell more than expected to 49.9 from 52.8 and into contraction.

GBPUSD is holding steady as investors digest the latest business activity data. The services PMI slowed to 53.7 in June, down from 55.2, in line with preliminary estimates, despite inflation cooling. This is still above the 50-level separating expansion from contraction. However, it was still the biggest monthly decline since August 2022.

EUR/USD +0.03% at 1.0885

GBP/USD +0.02% at 1.2710
 

Oil trades flat as OPEC+ meets

Oil prices are holding steady but still remain only marginally higher in the week despite both Russia and Saudi Arabia announcing further production cuts on Monday, ahead of the OPEC+ meeting, which kicked off today.

Both cuts from Russia and Saudi Arabia came in addition to a previously agreed OPEC+ deal to limit supply into 2024, decided in April, and brings the total output reductions announced to 5 million barrels per day or around 5% of global oil output. However, these surprise cuts have failed to result in a sustained rise in oil prices.

Oil prices remain subdued for several reasons, including concerns over the recovery in China losing momentum, higher interest rates for longer, and rising US output.

China services PMI eased to 53.9 and comes after manufacturing PMI data eased earlier in the week. Slowing China growth and higher interest rates in the US and globally are weighing on the oil demand outlook.

US API inventory data is due later and is expected t show a draw of 1.8 million barrels in the week ending June 30.

• WTI crude trades +0.1% at $71.50
• Brent trades at +0.4% at $76.15
   

Looking ahead

• 15:00 US factory orders
• 19:00 FOMC minutes

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