North American News
US equities experienced a rebound from their earlier lows but later relinquished some of those gains
- The bears win this round
The Nasdaq finished only fractionally lower but there was some late selling in the S&P 500 after an attempt a returning to unchanged a couple hours ago.
- S&P 500 -21 points, or -0.47%
- Nasdaq Comp -0.16%
- Russell 2000 -0.4%
- DJIA -0.7%
Atlanta Fed GDPNow ticks to 1.9% from 1.8% for 2Q growth estimate
- Atlanta Fed GDPNow 2Q growth estimate
The Atlanta Fed GDPNow estimate for Q2 growth ticked up to 1.9% from 1.8% on June 15. The housing starts report saw real estate residential investment growth increase from -2.1% to +2.2%. The next report will be released on June 27.
US May housing starts 1.631m vs 1.400m expected
- US May housing starts and building permits data
- Prior was 1.401m
- Starts change +21.7% vs +2.2% prior
- Building permits 1.491m vs 1.420m expected
- Prior building permits 1.417m
- Permits up 5.2%
Fed’s Williams sticks to commenting on bank regulation and culture
- Comments from Williams
The Fed’s Williams and Barr speak on regulation and culture.
Williams:
- Improving banking culture is ‘long game’
- Important regulators around world looking at bank culture
- Sees progress in improving bank culture
Barr:
- It’s key for banks to have systems that challenge risk decisions
- Silicon Valley Bank had cultural failings
Philadelphia Fed nonmanufacturing business activity index -16.6 versus -16.0 in May
- Philadelphia Fed nonmanufacturing business activity index firm June 2023
- Prior month -16.0
- Firm level business activity index -7.5 in June versus -9.5 in May
- New orders index -16.2 versus a 2.7 in May
- Full-time employment index -14.3 versus 14.9 in May. Big shift in the employment component.
- Part-time employment -8.8 versus -1.3 last month
- Average work week -20.4 versus 5.6 last month
- Wage and benefit cost index 22.2 versus 35.3 in May
- Average work week -20.4 versus 5.6 last month
- Unfilled orders -1.3 versus 1.8 last month
- Inventories -7.1 versus -3.9 last month
- Capital expenditures for plant 4.5 versus 9.6 last month.
- Capital expenditures for equipment 8.6 versus 22.2 last month
- Sales/revenues -10.6 versus 9.3 last month
US air passenger data hits the highest since 2019
- TSA data shows highest single-day screenings since 2019
Air travel is certainly back as consumers return to the skies after years of covid-related curbs.The TSA reports that on Friday it screened 2.785m people, which is the highest number of passengers in a single day since 2019.
The question for the Fed is whether this indicates that rates need to go significantly higher, or whether the lag of monetary policy needs time to work.
Commodities
Gold tumble’s amidst strong USD, Fed’s Powell testimony looms
- XAU/USD trades at $1932.42 after a sharp fall due to a stronger USD, with traders watching for Fed Chair Powell’s testimony.
- Despite Fed officials’ predictions of a 50 bps increase to FFR, market participants anticipate only a 25 bps hike.
- Depending on his tone, Fed Chair Powell’s testimony could impact USD and Gold prices.
Gold price tumbled sharply in the North American session as trading resumed after a holiday in the United States (US). A stronger US Dollar (USD) is the main reason behind Gold’s fall, as the US Treasury bond yield slid, with traders eyeing Federal Reserve (Fed) Chair Jerome Powell’s testimony at the US Congress.
Silver collapses more than 3%, approaches the 200-DMA
- XAG/USD has moved downward after breaking support levels, remaining above the 200-day EMA at $22.96, which is now under pressure.
- Oscillators such as the Relative Strength Index (RSI) and three-day Rate of Change (RoC) indicate a negative scenario for Silver.
- If the price surpasses the May 26 low, Silver could potentially drop to the $21.00 level.
- If buyers can push XAG/USD back above the 100-day EMA at $23.54, a challenge to $24.00 could be expected.
Silver price plunges more than 3%, and sellers are eyeing a challenge of the 200-day Exponential Moving Average (EMA), as overall US Dollar (USD) strength drives the financial markets on Tuesday. Fed speakers will cross newswires, while the Fed Chair Jerome Powell’s testimony at the US Congress dampened the market mood. At the time of writing, XAG/USD exchanges hands at $23.14 after hitting a daily high of $24.02.
Crude oil settles at $71.19
- Down $-0.74
WTI crude oil futures settled at $71.19, down $0.74, down -1.02%
The move to the downside was helped by China growth concerns and by a stronger USD after much better-than-expected housing starts and Building permits.
Natural Gas price drops over 4% as US Dollar strengthens on upbeat US data
- Natural Gas price peaks and rolls over after the release of upbeat macroeconomic housing data from the US, which supports the US Dollar, weighing on XNG/USD.
- Gas pares earlier gains reached after Norwegian data showed lower-than-expected production in May, sparking supply fears.
- Despite bullish fundamentals, the longer-term technical trend remains bearish as long as prices stay below $3.079 MMBtu.
Natural Gas price declines sharply after rolling over from the day’s highs, on Tuesday, following the release of US housing data which unexpectedly beats expectations.The data increases demand for the US Dollar and weighs on Natural Gas which is predominantly priced in USD.
Earlier in the day Natural Gas rose to a new peak after data from the Norwegian Petroleum Directorate (NPD) showed a shortfall in supply in May.
Norway is now the primary supplier of Natural Gas to Europe after sanctions hit imports from Russia, so prices are extra sensitive to related news flow out of the Scandinavian producer.
EU News
European equity close: DAX falls
- Closing changes for the main European bourses
- Stoxx 600 -0.6%
- German DAX -0.6%
- French CAC -0.4%
- UK FTSE 100 -0.3%
- Spain IBEX +0.1%
- Italy MIB -0.6%
Eurozone April construction output -0.4% vs -2.4% m/m prior
- Latest data released by Eurostat – 20 June 2023
- Prior -2.4%; revised to -1.7%
Eurozone April current account balance €4.0 billion vs €31.2 billion prior
- Latest data released by the ECB – 20 June 2023
- Prior €31.2 billion
Germany May PPI -1.4% vs -0.7% m/m expected
- Latest data released by Destatis – 20 June 2023
- Prior +0.3%
- PPI +1.0% vs +1.7% y/y expected
- Prior +4.1%
Switzerland May trade balance CHF 5.48 billion vs CHF 2.60 billion prior
- Latest data released by the Federal Statistics Office – 20 June 2023
- Prior CHF 2.60 billion; revised to CHF 2.56 billion
ECB’s Villeroy: The duration of terminal rate is more important than the level
- That’s an interesting way of looking at it
That’s an interesting comment because yesterday Stournaras was talking about 6 or 12 months at the peak. That’s a wide window and highlights that the next big debate the ECB will have isn’t a September hike but when to start signalling lower rates.
- Future rate decisions to depend on inflation data
- Inflation is past the peak in France and the eurozone
BOE’s Hall: Moves in UK yields have tested resilience of liability-driven investment funds
- Recent moves in yields have once again tested liability-driven investments funds
There’s some relief today from higher yields as UK 2s are down 13.7 bps after touching 5% in each of the past two days.
ECB’s Vujčić: Core inflation pressures remain in the euro area
- Remarks by ECB policymaker, Boris Vujčić
- Sometimes a soft landing is not possible
- Have to consider risks of doing too much versus doing too little
Other News
HSBC slashes China 2023 GDP forecast to 5.3% from 6.3% previously
- Add that to the list
This follows from Goldman Sachs here. The consensus is growing that China needs to do a whole lot more to spur demand in order to bolster economic activity, as the post-Covid rebound has faded rather quickly over the last few months.
Stephen Roach says China’s growth problem driven by ideology, won’t be solves by stimulus
Yale University senior fellow Stephen Roach spoke in an interview, saying any short-term stimulus package won’t solve China’s longer term economic malaise.
- “I think there is a tradeoff here between the cyclical stimulus majors that are going to be taken, and the ongoing longer-term issues that China has with respect to growth”
RBA Dep Gov Bullock says higher rates are the only tool the RBA has to curb inflation
Reserve Bank of Australia Deputy Governor Bullock speaking, indicating there are further rate hikes to come from the Bank. The comment on ‘need to slow demand’ is a clear indication. The Bank’s tool right now is rate hike, that’s how it’ll slow demand for goods and services.
- need to slow demand for goods, services, and labour
- higher rates are the only tool the RBA has to curb inflation
- its important that the government does not add to demand and wages not rise too fast
Cryptocurrency News
Bitcoin surges above $28,000, reaching its highest level since May 29
- Trades to a high of $28,149
The run to the upside in Bitcoin is continued with the digital currency now above its 100-day moving average at $27,619. The price also extend above a topside general trend line at $27,388.
The high price just reached $28,149. The current price trades above and below the $28,000 level.
A close back above the 100-day moving average would be the first since June 6. If the price can stay above the 100-day moving average, the next upside target comes against the May 29 high at $28,452.
Crypto lender Vauld’s creditors to receive payback soon, firm owes over $400 million
- Singapore-based crypto lending platform Vauld’s payback scheme has been approved and creditors could receive payback soon.
- Over 90% of the creditors who participated voted in favor of the payback scheme.
- Creditors’ INR balances will likely be paid out within the next four to six weeks.
Vauld, a Singapore-based crypto lender and exchange, is in preparation to pay back INR balances to creditors by August 2023. The exchange’s payback scheme was approved by 91.85% of creditors and the platform is likely to start paying creditors back soon.
The lender proposed paying creditors back in excess of 100%, offering a better outcome than liquidation.
How Vauld ended up with $400 million debt to creditors
The crypto lender backed by several noteworthy investors including Peter Thiel’s Valar Ventures, Pantera Capital and Coinbase Ventures halted operations on July 4, 2022.
The exchange cited financial difficulties and volatile market conditions when faced with mass withdrawals by users. Vauld then filed for protection against creditors and lawsuits in a Singapore court, and came up with a restructuring plan to pay back its debt.
Vauld offers different payback tracks to creditors, prepares for INR returns
In its detailed restructuring plan’s Q&A section, the lender explains that creditors with INR balances are creditors of Flipvolt and not Vauld. These creditors are not bound by the payback scheme. However, the exchange proposed that INR balances be paid out in full, using Flipvolt’s assets.
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