Round up of today’s market news

North American News

Major indices close lower for the 3rd consecutive day

• Stocks on pace for a down week

The major US stock indices are closing lower for the 3rd consecutive day. That losing streak goes back to Friday. Remember markets were closed on Monday in the US.

The final numbers are showing:

• Dow industrial average -102.37 points or -0.30% at 33951.40
• S&P index -22.99 points or -0.52% at 4365.73
• NASDAQ index -165.10 points or -1.21% at 13502.19

The Russell 2000 of small-cap stocks fell -3.68 points or -0.20% at 1863.01

US sells 20-year bonds at 4.010% vs 4.028% WI

• Results of the 20-year sale

• Prior sale was 3.954%, six auction average 4.04%
• Bid to cover 2.87 vs 2.56 prior

Powell: Process of getting inflation back to 2% “has a long way to go”

• Powell’s prepared text released and notes that FOMC participants expect further rate hikes by year-end
• Nearly all FOMC participants expect it will be appropriate to raise rates somewhat further by year end
• Seeing some effects of tightening but it will take time to see full effects
• Labor market remains very tight but nominal wage growth showing signs of easing, job vacancies have declined
• Longer-term inflation expectations appear to remain well anchored
• Tighter credit likely to weight on economic activity but extent remains uncertain
• We will continue to make our decisions meeting by meeting
• Reducing inflation is likely to require a period of below-trend growth
• Highlights lower quits and falling job openings as signs of looser labor market
• Still significant labor market shortages
• The dollar’s status as the global reserve currency is very important
• We should focus heavily on inflation goal as we are far from that goal now
• Housing prices have flattened a lot
• We need to get inflation back to where people don’t even need to think about it
• Level for rates and speed of hikes are separate
• It may make sense to move rates higher, at more moderate pace
• Fed is now moderating the pace of rate hike’s
• banking regulation should be transparent, consistent not too volatile
• capital is central to banking regulation
• Factors contributing to inflation decline are happening but much later and all taking longer than we had hoped
• Service sector much less responsive to rate hikes and cost of capital
• We never use the word pause and wouldn’t use that here today. We agreed to maintain that rate at that meeting
• A big majority believes in raising rates twice this year

Fed’s Cook: We’re not there yet on getting inflation back to target

• Comments from Cook
• There’s a risk economic growth could slow

Fed’s Goolsbee: Decision last week was close call for me

• Feds’ Goolsbee is now speaking too
• Decision last week was a close call for me
• It is a perfectly appropriate to have a reconnaissance mission now
• Trying to figure out if we have done enough, how much more needs to be done
• Over next several months will get some markers on do we have a handle on inflation
• Job numbers are extremely robust
• At the same time hours worked went down
• Over the next couple months will get a sense if goods inflation is coming down
• By the fall, housing inflation should begin falling
• We should be able to get readings on persistence of inflation, not just confusing signals
• I’ve not decided the right decision in July
• We failed to prevent inflation, feds forecasting like private forecasts was mistaken
• Inflation is pervasive around the world
• Feds framework is ‘wait and see’
• Probably won’t gain enough info in 6 weeks, but will learn more
• The lags argument is a tremendously important one
• it’s worth recognizing how bizarre, unprecedented this pandemic has been
• Added to the ‘weirdness’ of the pandemic is the uncertain effect of credit tightening and the persistence of inflation
• The puzzle has been why haven’t goods price come down more, and when will housing prices come down
• Services inflation has proved very persistent

Fed’s Bostic: Wants to give economy more time to adjust to rate hike before doing more

• Comments from the Atlanta Fed President
• Pressing ahead now with additional rate increases could ‘needlessly drain’ momentum from the economy
• Policy hasn’t been restrictive long enough for effects to hit, so it’s prudent to wait
• Risk of waiting is that inflation rebounds, but ‘that’s not my baseline’
• Some further slowing of labor market may be necessary for inflation to return to 2%
• Bank contagion hasn’t materialized

Fed Powell: US dollar is still the dominant reserve currency

• As long as we have rule of law, relative price stability, open capital accounts, democratic institutions, we will retain dollar as reserve currency
• History shows this is not a permanent status but it is a lasting one
• There is not another economy with all the same features
• US dollar is still dominant reserve currency

US MBA mortgage applications W.E. 16 June +0.5% vs +7.2% prior

• Latest data from the Mortgage Bankers Association for the week ending 16 June 2023

• Prior +7.2%
• Market index 209.8 vs 208.8 prior
• Purchase index 165.6 vs 163.2 prior
• Refinance index 425.1 vs 434.1 prior
• 30-year mortgage rate 6.73% vs 6.77% prior

Canada April retail sales +1.1% vs +0.2% expected

• Canadian April 2023 retail sales data
• Prior was -1.4%
• April advanced estimate was -0.2%
• Ex autos +1.3% versus +0.4% expected
• Prior ex autos came in at -0.3%
• May advanced retail sales +0.5%
• Sales up 1.4% y/y, inflation adjusted but down 0.4% excluding autos

Canada new housing pricing data for May 0.1% versus -0.1% last month

• Canada new housing price data for May

• Prior month -0.1%
• The national index for new home prices in Canada increased by 0.1% month over month in May, marking the first increase since August 2022.
• Prices were up in 6 out of the 27 census metropolitan areas (CMAs) surveyed, down in 8 CMAs, and unchanged in the remaining 13 CMAs.
• Builders cited increased construction costs as the reason for the price growth in the Québec, Calgary, and Kelowna CMAs, which saw the largest month-over-month increases.
• Sudbury and Sherbrooke reported the largest month-over-month decreases, with weak market conditions as the reason for the decline.
• Nationally, new home prices were down 0.6% year over year in May, influenced by high interest rates impacting housing market activity.
• Victoria recorded the largest year-over-year decline in new home prices, followed by St. Catharines-Niagara and Edmonton.
• On the other hand, the Québec, Charlottetown, and St. John’s CMAs reported the largest year-over-year increases in new home prices.

Commodities

Silver plummets to a two-month low, below the 200-day EMA

• XAG/USD sinks below key $22.96, the 200-day EMA level.
• Bearish RSI and RoC indicate a strong sell-off, warranting further XAG/USD downside.
• XAG/USD upside resistance was found at a $23.00 handle, followed by a challenge of the 100-day EMA.

Silver price pierces below the 200-day Exponential Moving Average (EMA) of $22.96 as sellers pile in, dragging prices towards a new two-month low of $22.50, as high US Treasury bond yields pressure the precious metals segment. At the time of writing, XAG/USD trades at $22.75, while Gold spot exchanges hands at $1931.02, down 1.64% and 0.23%, respectively.

US crude oil settles at $72.53

• Up $1.34 or 1.88%

The price of WTI crude oil settles the day at $72.53. That is up $1.34 or 1.88%. The high price reaches $72.72. The low price reached $70.80. Looking at the daily chart, the 100-day moving averages about $74.62. The price is not closed above its 100 day moving average since April 24.

The weaker dollar helped to support the price of oil today.

Natural Gas price rebounds as US Dollar weakens following Powell testimony

• The US Dollar stalls giving Natural Gas a boost after Federal Reserve Chairman Powell’s testimony to Congress.
• Natural Gas finds support after Tuesday’s decline as higher-than-expected demand for Gas used in cooling puts a floor under prices.
• Concerns regarding Norwegian supply after data showed a slump in May and news of earlier-than-expected outages further supports.
• Possible bear flag on the four-hour chart bodes ill for prices and could tempt bears back into the fray. 

Natural Gas price consolidates on Wednesday after the sharp decline witnessed in previous sessions. Hotter-than-expected weather is one factor preventing deeper declines, with forecasts of temperatures in Texas reaching 100 degrees Fahrenheit this week, expected to put pressure on Gas supplies used in air conditioning, according to a report by Natural Gas World. 

EU News

European equity close: Third day of losses this week

• Closing changes in Europe

• Stoxx 600 -0.5%
• German DAX -0.6%
• UK FTSE 100 -0.1%
• Italy MIB 0.0%
• Spain IBEX 0.0%
• French CAC -0.6%

Ifo sees German recession to be sharper than expected

• Ifo forecasts that the German economy will shrink by 0.4% this year

That is a revision lower to their previous forecast that the German economy will contract by 0.1% in 2023. As for 2024, they also see softer growth with a forecast of 1.5% as compared to 1.7% previously. On the inflation front, Ifo notes that German inflation is expected to be at 5.8% this year before falling to 2.1% next year.

ECB’s Schnabel: Domestic inflation driven by profits and wages

• ECB’s Schnabel speaking
• Domestic inflation driven by profits and wages

ECB’s Nagle: Confident that inflation will come back to target

ECBs Nagel is on the wires saying:

• Confident that inflation will come back to target
• There is still a way to go until then
• We have to be stubborn because inflation is stubborn
• not seen a credit crunch
• It would be first order error to give up on raising rates too early

ECB’s Kazimir: Further policy tightening in September is not certain

• Remarks by ECB policymaker, Peter Kazimir

• For me, we would need to have core inflation under control to stop tightening
• We need more data ahead of September decision

UK May CPI +8.7% vs 8.4% y/y expected

• Latest data released by ONS – 21 June 2023

• Prior +8.7%
• Core CPI +7.1% vs +6.8% y/y expected
• Prior +6.8%

Food prices continue to stay elevated with the annual reading seen up by 18.4%, just slightly down from the 19.2% reading in March – which was the highest in over 45 years.

Citi revises higher BOE terminal rate expectation to 5.25%

• Adds that the risks are still skewed towards a more hawkish direction

UK June CBI trends total orders -15 vs -17 expected

• Latest data released by CBI – 21 June 2023
• Prior -17

Goldman Sachs raises BOE terminal rate forecast to 5.50% from 5.25%

• Goldman Sachs now sees a further hike in November

The market didn’t like today’s high UK core inflation reading and is signaling that the BOE will have to send the economy into a recession. Current market pricing shows a 57% chance of 25 bps tomorrow and 43% chance of 50 bps.

Pricing also shows a 75% probability the BOE will have to hike to 6% by late in the year, rather than the 5.5% that Goldman Sachs is forecasting.

Other News

China to continue to tax cut & exemption policies for NEV purchases in the next 4 years

China’s Finance Ministry exempts purchase tax for New Energy Vehicles to end 2025

• Cuts the tax in half for NEV purchases 2026-2027

BOJ’s Adachi: If there is a global recession, will have to keep easy policy

• Remarks by BOJ policy board member, Seiji Adachi

• A global recession would put big downward pressure on prices
• So, BOJ will have to keep easy policy in such an event
• If overseas growth rebounds and pushes up domestic prices, we will of course move to a phase of gauging the timing of a policy shift

BOJ’s Ueda: Will patiently maintain easy monetary policy to achieve 2% inflation target

• Remarks by BOJ governor, Kazuo Ueda

• Japan consumer inflation likely to slow towards middle of current fiscal year
• Japan economy is picking up

Cryptocurrency News

Fed Chair Jerome Powell calls stablecoins “a form of money”, and says CBDC is far from being a reality

• Federal Reserve Chair Jerome Powell testified in the House Financial Services Committee this week.
• Powell discussed the potential of CBDCs and the status of stablecoin in the Fed’s opinion.
• The Fed Chair also discussed inflation, reiterating that the Federal Reserve is committed to bringing it down to 2%.

With the Bitcoin price breaching the $30,000 mark, all eyes were on the crypto market on Wednesday. It seemed like the recovery investors had been waiting for had finally arrived. On the same day, US Federal Reserve (Fed) Chairman Jerome Powell presented his views regarding certain aspects of the crypto space, which left the community surprised.

Fed Chair Powell calls crypto an asset class

In his testimony to the House Financial Services Committee on Wednesday, Federal Reserve Chair Jerome Powell shed light on multiple topics pertaining to the crypto as well as TradFi markets. 

One statement that stood out was Powell calling stablecoins “a form of money”. He also urged that there was a need for central bank oversight in order to create stablecoin regulation. Powell stated,

“We do see payment stablecoins as a form of money, and in all advanced economies, the ultimate source of credibility in money is the central bank.We believe it would be appropriate to have quite a robust federal role.”

ADA whale accumulation propels Cardano price closer to $0.3; investors aim far higher

• Cardano price declined significantly during the early June crash, losing 30% of its value.
• The market-wide recovery has the altcoin up by almost 6% in the last 24 hours. 
• ADA might be able to print larger gains, as its whale holders are exhibiting major bullishness this week.

Cardano price, along with the rest of the crypto market, is bouncing back from the recent lows. As Bitcoin price nears $30,000, most of the altcoins are following the lead to note gains over the last 24 hours. ADA, however, in addition to the broader market cues, is finding support from a very important cohort.

Cardano price climbs back up

Cardano price is trading above $0.28 at the time of writing, closing the gap it witnessed following the early June crash.The third-generation cryptocurrency took a critical hit as it lost more than 30% of its value in a week. But presently the altcoin is nearing the $0.3 mark, fuelled by the bullishness of the market.

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