Round up of today's market news *

North American News

US stocks close higher for the 3rd consecutive day

Major indices are encouraged by softer CPI

US stocks closed higher for the 3rd consecutive day. Softer CPI gave the buyers the go-ahead to push higher. YoY headline CPI moved from 4% to 3%.The core inflation moved from 5.3% to 4.8% (or expected 5.0%)

The NASDAQ index led the gains today (the Dow Industrial Average led the gains on Monday and Tuesday).

The final numbers are showing:

Dow industrial average rose 85.01 points or 0.25% at 34347.42
S&P index rose 32.90 points or 0.74% at 4472.15
NASDAQ index rose 158.27 points or 1.15% at 13918.97

The small-cap Russell 2000 also gained with a rise of 20.01 points or 1.05% at 1933.376.

With more than half the week behind us, the major indices are on pace for gains on the week:

Dow industrial average up 1.82%
S&P index is up 1.66%
NASDAQ index is up 1.89%
Russell 2000 is up 3.685%

Some big gainers today included:

Meta rose 3.7%
Nvidia shares rose 3.53%
Moderna rose 3.10%
AMD rose 2.93%
Intuit rose 2.83%
First Solar rose 2.82%

Looking at the Dow 30:

Salesforce rose 2.82%
Intel rose 2.04%
Goldman Sachs rose 1.72%
Microsoft rose 1.42%
Dow rose 1.35%

J.P. Morgan rose 0.52%.They will report earnings on Friday along with Bank of America.

US June CPI y/y 3.0% versus 3.1% expected

US June 2023 consumer price index data

Prior 4.0%
CPI MoM 0.2% % versus 0.3% expected
Prior MoM 0.1%
CPI YoY 3.0% versus 3.0% expected
Core CPI MoM 0.2% versus 0.3% expected. Last month 0.4%
Core CPI YoY 4.8% versus 5.0% expected. Last month was 5.3%
Shelter 0.4% versus 0.6% last month. Year on year 7.8% versus 8.0% last month
real weekly earnings month to month 0.5% versus -0.1% last month

The US treasury auctions of $32 billion of 10 year notes at a high yield of 3.857%

WI level at the time of the auction was 3.847%

High-yield 3.857%
WI level at the time of the auction 3.847%
Tail 1.0 basis points versus six-month average of 1.8 basis points
Bid to cover 2.53X versus six-month average of 2.38X
Directs (a measure of domestic demand) 19.9% versus six-month average of 20.0%
Indirects (a measure of international demand) 67.7% versus six-month average of 61.8%
Dealers (take the rest) 12.4% versus six-month average of 18.2%

US MBA mortgage applications w.e. 7 July +0.9% vs -4.4% prior

Latest data from the Mortgage Bankers Association for the week ending 7 July 2023

Prior -4.4%
Market index 208.4 vs 206.5 prior
Purchase index 165.3 vs 162.4 prior
Refinance index 416.0 vs 421.3 prior
30-year mortgage rate 7.07% vs 6.85% prior

Highlights of the Fed’s Beige Book: Overall economic activity increases slightly since May

Fed’s Beige Book for July 2023

Overall Economic Activity:

Overall economic activity experienced a slight increase since late May.
Five districts reported slight/modest growth, five saw no change, and two noted slight/modest declines.
Consumer spending patterns were mixed, with growth seen in services but a shift away from discretionary spending in some areas.
Tourism and travel activities were strong, predicting a busy summer season.
Auto sales remained constant or showed moderate growth in most districts.
Manufacturing activity increased in half of the districts, while the other half saw a decline.
Transportation activity was mostly down or flat, attributed to high inventory levels and labor shortages.
Banking conditions remained subdued, with a continuing decrease in lending activity.
Despite higher mortgage rates, demand for residential real estate held steady, but sales were limited by low inventories.
Both residential and commercial construction activity was slightly down.
Geographically mixed agricultural conditions softened overall, with an expectation for more softening throughout 2023.
Energy sector activity decreased.
The economic forecast for the upcoming months anticipates slow growth.

Richmond Feds Barkin: Inflation is still too high

Richmond Fed Pres. Barkin speaking

The 1st comments from a Fed official post the CPI comes from Richmond Fed Pres. Barkin who simply says:

Inflation is still too high
Demand remains elevated at the same time supply is constrained, process of getting back to balance has been slow
Demand seems to be settling down, but still looking to be convinced that will feed through to inflation
Still a question whether inflation can settle while labor market remains as strong as it is
Comfortable doing more with policy if incoming data does not confirm inflation will return to target

Feds Kashkari: Fed fight against inflation must succeed

Minneapolis Fed Pres. Kashkari speaking

If high inflation persists, that may need to raise rates further.
Fight against inflation must succeed.
Higher rates could increase pressure on banks.
Bank supervisors should ensure all banks are prepared to withstand higher rate environment.
Supervisors could run high-inflation stress test to identify at risk banks and force fixes.

US NEC Director Brainard (and former Fed Governor): CPI data was encouraging

Lael Brainard, the NEC Director (and former Fed Governor), is on the wires saying:

June CPI was encouraging
US labor market is in much better balance than just 6 months ago
Biggest risk to economy was the threat of debt default, and that has been taken off the table
New evidence today suggests the US is on a path to more moderate inflation
Recent nonhousing core services inflation is close to pre-Covid levels
Liquidity at banks is being managed much better than before
Says it is important for bank executives to continue to manage risks

Bank of Canada raises rates by 25 basis points to 5.0%

July interest rate decision

The Bank of Canada lifted rates by 25 basis points to 5.0% as expected.

The Bank of Canada today increased its target for the overnight rate to 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is also continuing its policy of quantitative tightening.

Highlights of the Bank of Canada economic forecasts from Monetary Policy Report

Bank of Canada raises rates by 25 basis points and projects higher inflation/higher GDP growth

Bank of Canada monetary policy report forecasts:

CPI (Consumer Price Index): Sees higher inflation in 2024 and 2023 to remain elevated at 3.7%

2023 CPI: Projected at 3.7%, matching consensus expectation (BoC’s previous forecast was 3.5%).
2024 CPI: Projected at 2.5%, above consensus expectation of 2.3% (BoC’s previous forecast was 2.3%).
2025 CPI: Projected at 2.1%, slightly above consensus expectation of 2.0% (BoC’s previous forecast was 2.1%).

GDP (Gross Domestic Product) Growth: Sees higher growth

2023 GDP Growth: Projected at 1.8%, above consensus expectation of 1.3% (BoC’s previous forecast was 1.4%).
2024 GDP Growth: Projected at 1.2%, above consensus expectation of 1.0% (BoC’s previous forecast was 1.3%).
2025 GDP Growth: Projected at 2.4%, significantly above consensus expectation of 1.8% (BoC’s previous forecast was 2.5%).

Neutral Rate/Output Gap:

The BoC maintains that the midpoint of the neutral range is within 2-3%, unchanged from previous estimates.
The BoC estimates that the output gap is between 0% and 1% in Q2. Previously, the BoC estimated that the output gap was between 0.25-1.25%.

Highlights of prepared remarks from BOC’s Macklem press conference

BOC raise rates by 25 basis points to 5% today

Further rate decisions will be guided by assessment of incoming data and outlook for inflation.
Monetary policy is working but underlying inflationary pressures are proving more stubborn.
Higher interest rates are needed to slow growth of demand in the economy and relieve price pressures.
Labor market remains tight, even if there are some signs of easing.
Bank of Canada is prepared to raise rates further – Governor Tiff Macklem.
We are trying to balance the risks of under and over tightening monetary policy.
If we don’t do enough now we’ll likely have to do even more later.
Governing council’s decision to raise the policy rate reflected persistence in both excess demand and underlying inflationary pressures.
Consensus in governing council was that monetary policy needed to be more restrictive to bring inflation back to 2% target.
Governing council did discuss possibility of keeping rates unchanged, but cost of delaying action was larger than the benefit of waiting.
With increases in policy rate in June and July, our outlook has inflation going gradually back to 2% target.

BOCs Macklem: Concerned that if not careful, the progress to price stability could stall

Press conference Q&A has begun

We are concerned if we are not careful, the progress to price stability could stall
If you get some upward surprises, inflation could even move back higher
There was clear consensus among governing Council members
There was not a big benefit of waiting to raise rates
In the banks forecast, there is path back to price stability while maintaining growth

Commodities

Silver surges past $24.00 as US inflation slumps

Silver price leaps toward $24.00, gaining over 4% as US inflation decelerates, indicating a softer stance from the Fed.
Technical outlook shows the XAG/USD uptrend could gather strength with a break above $24.20.
Should XAG/USD fail to hold above $24.00, potential losses with critical support levels are highlighted in the $23-$23.50 range.

Silver price surged toward the $24.00 region on Wednesday following the release of the US Consumer Price Index (CPI), which showed inflationary pressures tumbling, suggesting the Federal Reserve (Fed) would not need to tighten as aggressively expected. The XAG/USD is trading at $24.07, gaining more than 4%, after hitting a low of $23.11.

WTI crude oil futures settle at $75.75

Up $0.92 or 1.23%

Despite a large build in crude oil inventories this week of 5.946 million (expectations were for a build of 0.483 million), the price of WTI crude oil settled up another $0.92 or 1.23% at $75.75.For the week, the price is up 2.57%. A sharply lower dollar is helping to contribute to the rise as is lower interest rates.

Crude oil inventories increase by 5.946M barrels vs 0.483M estimate

Weekly EIA inventory data

Crude oil sees a build of 5.946M versus 0.483M estimate
gasoline inventories draw of -0.003M versus a drawdown of -0.727M estimate
Distilates inventories see a build of 4.815M versus a expected draw of -0.262M estimate

In late NY session news yesterday, the private API inventory data hinted of a build:

Crude build of 3.026 million. The expectations for EIA data today are for a build of 0.483M
Gasoline build of 1.004 million. The expectations for EIA data today are for a drawdown of -0.727M
Distillates build of 2.908 million. The expectations for EIA data today are for a drawdown of -0.262M

EU News

European major indices close sharply higher as risk-on flows dominate

Better US CPI sends stock confidence higher

The major European indices are piggybacking on the better-than-expected US CPI data and subsequent risk-on a flows. Gains of well over 1% are seen across the major indices.

Looking at the closing levels:

German DAX, +1.5%
Frances CAC, +1.64%
UK’s FTSE 100 +1.91%
Spain’s Ibex +1.37%
Italy’s FTSE MIB (delayed 10 minutes), up 1.9%

Benchmark 10 year yields are lower in Europe as well:

Germany -9.7 basis points
France -9.7 basis points
UK -14.0 basis points
Italy -13.3 basis points
Spain -10.5 basis points.

Spain June final CPI +1.9% vs +1.9% y/y prelim

Latest data released by INE – 12 July 2023
HICP +1.6% vs +1.6% y/y prelim

BOE’s Bailey: UK economy, financial system have been resilient so far

Remarks by BOE governor, Andrew Bailey, after the financial stability report

FPC will remain vigilant as impact of higher rates feed through
Tighter bank lending standards reflect appropriate risk judgement
Strong UK labour market reduces stress on households from higher rates

ECB’s Vlucic: September ECB meeting is very open

ECB’s Vlucic speaking

Latest reading is maybe pointing to services sector softening.
September meeting is very open
I put more weight on observables, like inflation data and real activity, and lending data
China is risk to GDP outlook
Slowing down pace of rate hike’s certainly a possibility
Even if we pause we will say we can resume hiking

ECB’s Lane: Full economic impact of tightening will play out over the next couple years

ECB’s Lane is a speaking

The typical length and monetary transmission mean that full economic impact of tightenings over the last year will only play out over the next couple of years
In relation to the banking channel, transmission will continue to strengthen with ongoing repricing of bank funding, while the repricing of maturing fixed rate loans will place further upward pressure on aggregate lending rates
Any deterioration in the macroeconomic environment would also reinforce the banking channel by reducing loan demand and increasing credit risks
In combination with broader banking, financial and economic incoming data, the July BLS will help us to update our assessment of the banking channel of monetary policy tightening
In particular, as cumulative tightening in monetary policy gains further traction, the countervailing impact of these factors will plausibly decline, with fading profits or a slowdown in household incomes amplifying the impact of the credit channel

Other News

RBA’s Lowe says “deadly serious” about getting inflation back to target

Further remarks from Lowe

Confident that higher interest rates are working
Have an open mind on whether have to tighten policy further
Possible some further tightening will be required to return inflation to target
Remains to be determined whether monetary policy has more work to do
Complex picture on inflation, significant uncertainties regarding outlook
At the August meeting, the board will have updated economic forecasts and new data
There has been a “significant and rapid” tightening of monetary policy
monetary policy operates with lag, full effects yet to be felt
be subdued over next couple of years, will take time for inflation to return to target
Determined to return inflation to target within reasonable timeframe

North Korea appears to have launched another ballistic missile

Info via Japanese Coast Guard and South Korea military

Reserve Bank of New Zealand leave cash rate unchanged at 5.5%, as widely expected

RBNZ Monetary Policy Review and official cash rate announcement. OCR remains at 5.5% as basically unanimously expected.

In brief from the Bank’s statement:

The level of interest rates are constraining spending and inflation pressure as anticipated and required.
The Committee agreed that the OCR will need to remain at a restrictive level for the foreseeable future, to ensure that consumer price inflation returns to the 1 to 3% annual target range, while supporting maximum sustainable employment.
Global economic growth remains weak and inflation pressures are easing.
Global inflation rates continue to decline, assisted by the normalisation of international supply chains, and the decline in shipping costs and energy prices.
The weaker global growth has led to lower export prices for New Zealand’s goods.
In New Zealand, inflation is expected to continue to decline from its peak, and with it measures of inflation expectations. Core inflation is expected to decline as capacity constraints ease.
While employment is above its maximum sustainable level, there are signs of labour market pressures dissipating and vacancies declining.
The Committee is confident that with interest rates remaining at a restrictive level for some time, consumer price inflation will return to within its target range of 1 to 3% per annum, while supporting maximum sustainable employment.

Cryptocurrency News

US Department of Justice moves 9,000 BTC seized from Silk Road

The addresses that are assumed to be controlled by the US Department of Justice moved $270 million worth of BTC in three separate transactions.
The same addresses also sold over 9,800 BTC back in March after moving 40,000 BTC worth over $1 billion.
Even if these 9,000 BTC are to be sold by the government, Bitcoin price would not be impacted much as it only represents 2.1% of the daily trading volume.

The United States Department of Justice (DoJ) seems to be taking measures to move the Bitcoin it holds with a view to potentially selling it off. This is evidenced by the sudden move in the BTC held by them, which raised concerns among investors on Wednesday.

US DoJ moves Bitcoin, again

Back in November 2021, the DoJ seized about 50,000 BTC worth over $3 billion at the time.The BTC seized was affiliated with James Zhong, who was accused of stealing the digital assets by committing wire fraud back in September 2012.

Since seizing the BTC, the DoJ has sold off a substantial amount of the assets, one of which was the sale of 9,800 BTC in March worth about $300 million. This was followed by the federal department moving over 40,000 BTC worth more than $1.2 billion at the time, which resulted in high volatility in the crypto market as investors assumed the supply was being sold.

However, since March, the DoJ has not moved any of the Bitcoin obtained from the Silk Road robbery until July 12. Three confirmed transactions highlight that about 8,200 BTC worth over $250 million has been moved by the federal department, and another 824 BTC is in the queue waiting to be moved by the DoJ.

XRP fate hangs in balance after SEC vs LBRY judge fails to rule on LBC token status

The final ruling in the SEC vs LBRY case is in.
Presiding Judge Barbadoro refused to clarify whether LBC token is a security.
The Judge exercised judicial restraint, differing from January’s hearing where Deaton had persuaded the judge that secondary market sales did not involve securities.
XRP holders await Judge Analisa Torres’ ruling in the SEC vs Ripple lawsuit amidst the conservative outcome in the SEC vs LBRY case.

Paul Barbadoro, the presiding Judge in the SEC vs LBRY case, took a completely different stance on the status of LBC token being or not a security than the one he had taken in the January ruling. Back then, it had been clarified that the judge’s order does not apply to secondary market sales of the LBC token. In the final ruling on July 11, Judge Barbadoro decided to exercise judicial restraint and refused to comment on the status of the LBC token as a security or non-security in secondary market transactions.

The SEC vs Ripple lawsuit has a similar situation where XRP holders are awaiting the judge’s clarification on secondary market sales of the token. XRP token’s fate therefore hangs in the balance until Judge Analisa Torres releases the verdict.

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Round up of today’s market news

ByBilals Tech