North American News
Dow Jones Continues Remarkable Streak: Records 11th Consecutive Day of Gains as Major Indices Close Higher
- S&P and NASDAQ index lag a bit
The majors US stock indices are closing higher. The Dow industrial average is up for the 11th consecutive day and was the biggest gainer of the major indices. The NASDAQ index was the laggard.
A snapshot of the market shows:
- Dow industrial average rose 183.3 points or 0.52% at 35411.25
- S&P index rose 18.30 points or 0.40% at 4554.65
- NASDAQ index rose 26.05 points or 0.19% at 14058.86
The small-cap Russell 2000 rose 5.422 points or 0.28% at 1965.67
U.S. Treasury auctions off $42 billion of 2-year notes at a high yield of 4.823%
- WI level at the time of the auction 4.820%
- High-yield 4.823%
- WI level at the time of the auction 4.82%
- Tail 0.3 basis points versus six-month average of 0.1 basis point tail
- Bid to cover 2.78X versus six-month average of 2.74X
- Dealers 13.8% versus six-month average of 17.1%
- Directs 20.8% versus six-month average of 19.9%
- Indirects 65.5% versus six-month average of 63.0%
US July flash S&P Global services PMI 52.4 vs 54.0 expected
- The manufacturing and services flash surveys from S&P Global
- Prior was 54.4
- Manufacturing 49.0 vs 46.2 expected
- Composite 52.0 vs 53.2 prior
- “Challenges in foreseeing future demand trends weighed on expectations for the outlook over the coming year, driving confidence to the lowest in 2023 to date. Relatively subdued optimism stemmed from the service sector, where predictions for business activity weakened. Manufacturers, however, expressed greater positive sentiment towards the outlook, as expectations reached the strongest since April 2022”
Here is the overall assessment from S&P Global:
US companies signalled a further rise in business activity during July, with the service sector continuing to drive growth. Nonetheless, the rate of expansion eased to the slowest for five months, as service providers registered a softer upturn in output and manufacturers reported broadly unchanged levels of production at the start of the third quarter. New orders remained in expansion territory, albeit rising at a softer pace. A sustained rise in new export orders for services helped support the upturn as domestic demand lost some momentum, often due to higher interest rates. On the price front, elevated cost pressures continued to be led by the service sector. However, manufacturers saw a renewed rise in input prices, and services firms reported a slower uptick in operating expenses.
They don’t always publish the price indexes but they did this month:
Earnings start to heat up tomorrow with Alphabet and Microsoft scheduled to release
- Verizon, GM, 3M, GE all report before the open tomorrow
The impact of the earnings season will start to be felt a little more starting tomorrow with Microsoft and Alphabet/Google scheduled to release the earnings after the close. Before the open, Verizon, GM, 3M, GE, Raytheon will release earnings.
Today Verizon announced that they will boost wireless internet prices by $10.Verizon shares are trading up $0.32 or 0.94% to $34.21.Microsoft shares are trading at $1.17 or 0.34% at $344.91.Google is up $1.56 or 1.29% $121.56.
June US Chicago Fed national activity index -0.32 vs -0.15 prior
- The national composite index from the Chicago Fed
- Prior was -0.15 (revised to -0.28)
- Thirty-one of the 85 individual indicators made positive contributions to the CFNAI in June, while 54 made negative contributions
- Thirty-three indicators improved from May to June, while 51 indicators deteriorated and one was unchanged
- Production-related indicators contributed –0.27 to the CFNAI in June, down from –0.20 in May
Bank of Canada survey higlights the expected end of rate hikes
- Market participants think the Bank of Canada is done hiking rates
The Bank of Canada today released its Q2 survey of market participants and this was the most-notable question. It indicated that the BOC’s latest rate hike to 5% will be the last and that the 24% chance of a hike priced in for September will dwindle.
The gradual return to 2.50% should also be relief for home owners on variable rate mortgages and set the stage for a mid-decade improvement in the economy. Comparatively, Canada is also looking good with consensus GDP forecasts for 2024 currently the highest for Canada among major developed economies.
Commodities
Gold price falls back as more interest rates from Fed in pipeline
- Gold price comes back inside the woods despite a recovery in the US Dollar Index.
- One more interest-rate hike from the Fed is widely expected to return the United States stubborn inflation to 2%.
- Diverging views among Fed officials and investors about interest-rate guidance likely to keep the US Dollar Index on edge.
Gold price (XAU/USD) has climbed above $1,960.00 after portraying a non-direction performance ahead of the interest-rate decision by the Federal Reserve for further guidance.The precious metal is expected to continue its lackluster performance as a small interest-rate hike from the Fed is widely expected despite softening inflation and loosening labor market conditions.
There is little doubt among investors that the Fed will increase interest rates to the 5.25-5.50% range as the core Consumer Price Index is still stubbornly high partly due to the resilience in consumer spending. A catalyst to which investors are keeping an eye is the interest-rate guidance from the Fed. Fed officials and investors have divergent views about where interest rates will peak for the current year as the former signaled that two more interest-rate hikes are appropriate while market participants are expecting that the upcoming interest-rate increase will be the last one this year.
WTI crude oil settles above the 200-day moving average for the first time since August
- WTI crude oil settles up $1.67 to $78.74
WTI crude oil settled above the 200-day moving average for the first time since August in a rare win for the bulls this year.
The rally above the 200dma improves the technical picture for oil and doesn’t leave much standing in the way to a return to the April high of $83.55.
Brent Oil to embark on an extended rebound on a break past $83.65 – SocGen
Economists at Société Générale analyze Brent Oil technical outlook.
Crucial support zone aligns at $78/77
Brent defended the low of March near $70 and evolved within a small base. It has given a break above the upper limit and in recent brief pullback, it has successfully held on to that band near $78/77.
A revisit of the 200-DMA can’t be ruled out. $83.65, the 76.4% retracement of last wave of pullback is a potential hurdle. If this is overcome, Brent is expected to embark on an extended rebound towards April high of $87.50.
Low formed last week near $78/77 is crucial support zone.
EU News
European equity close: UK leads the way while Spain lags
- Closing changes for the main European bourses
- Stoxx 600 +0.1%
- German DAX flat
- France’s CAC flat
- UK’s FTSE 100 +0.3%
- Spain’s IBEX -0.4%
- Italy’s FTSE MIB +0.2%
Eurozone July flash services PMI 51.1 vs 51.5 expected
- Latest data released by HCOB – 24 July 2023
- Prior 52.0
- Manufacturing PMI 42.7 vs 43.5 expected
- Prior 43.4
- Composite PMI 48.9 vs 49.7 expected
- Prior 49.9
Germany July flash manufacturing PMI 38.8 vs 41.0 expected
- Latest data released by HCOB – 24 July 2023
- Prior 40.6
- Services PMI 52.0 vs 53.1 expected
- Prior 54.1
- Composite PMI 48.8 vs 50.3 expected
- Prior 50.6
France July flash services PMI 47.4 vs 48.4 expected
- Latest data released by HCOB – 24 July 2023
- Prior 48.0
- Manufacturing PMI 44.5 vs 46.0 expected
- Prior 46.0
- Composite PMI 46.6 vs 47.8 expected
- Prior 47.2
UK July flash services PMI 51.5 vs 53.0 expected
- Latest data released by S&P Global – 24 July 2023
- Prior 53.7
- Manufacturing PMI 45.0 vs 46.1 expected
- Prior 46.5
- Composite PMI 50.7 vs 52.4 expected
- Prior 52.8
SNB total sight deposits w.e. 21 July CHF 489.3 bn vs CHF 494.7 bn prior
- Latest data released by the SNB – 24 July 2023
- Domestic sight deposits CHF 478.5 bn vs CHF 484.2 bn prior
The latest IMF global growth forecasts are set to be released on Tuesday
- Not a market mover but a good indication on which way the momentum is pointing
The estimates are released quarterly, with the prior edition from April 11 and showing:
- 2023 global GDP +2.8% vs 2.9% in January
- 2024 GDP at +3.0%
- China 2023 GDP at 5.2% and 2024 at 4.5% (these are likely going lower)
- Eurozone GDP at +0.8%
- UK and German GDP contracting slightly this year
- US GDP growth at 1.6% vs 1.4% in January
Spanish election – Incumbent PM Sánchez poised to remain prime minister
Incumbent Prime Minister Pedro Sánchez is poised to remain the Spanish prime minister as a result of Sunday’s national election.
None of Spain’s major parties secured a governing majority – an as expected result. 176 seats are needed to control the Spanish parliament.
- Popular Party 136 seats (won the most votes but was left with no clear path to form a government)
- Socialists 122
- far-right Vox 33
- left-wing Sumar 31
Politico has more detail:
- The outcome opens the door to Sánchez remaining in power. Together with Yolanda Díaz’s left-wing Sumar coalition, the prime minister’s Socialist Party could form a coalition that controls 153 seats in parliament, but in order to govern he’ll need to forge deals with a variety of political groups with wildly different objectives. Sánchez is unlikely to be able to obtain the backing of the 176 MPs needed to be confirmed as prime minister the first time the new parliament discusses the matter, but he could make a bid during the second round of voting
Other News
China’s Politburo: Domestic demand is insufficient, economic recovery will be ‘tortuous’
- The Politburo says the Chinese economy is facing new difficulties and challenges
- Will continue to implement prudent monetary policy
- Will adjust and optimise property policies at appropriate time
- Will keep yuan exchange rate basically stable
- External environment is complex and severe
- Will actively expand domestic demand conditions
- To also boost consumption of household products, promote tourism
- Will stabilise trade and foreign investment, enliven capital market to boost investor confidence
What are the expectations ahead of the major central bank decisions this week?
- Let’s take a look at what markets are expecting at the moment
The three main central bank policy decisions to watch this week will be the Fed (Wednesday), ECB (Thursday), and BOJ (Friday). So, what are markets expecting?
- Fed funds futures are showing a near 100% pricing for a 25 bps rate hike
- Money markets are also pricing in a near 100% pricing (99.8%) for the ECB to raise rates by 25 bps
- After Ueda tempered with market expectations, the view now is that the BOJ isn’t going to tweak policy
China’s State Planner says confidence in private firms has not fully recovered
The National Development and Reform Commission of the People’s Republic of China (NDRC) is China’s State Planner.
Confidence in private firms has not fully recovered due to weak demand.
Some private investors have no clear investment direction
Private investment excluding real estate sector grew 9.4% y/y in H1
China’s state planner to boost private investment in construction projects
The National Development and Reform Commission of the People’s Republic of China (NDRC) has issued plans to boost private capital in key construction projects.
The NDRC is China’s ‘State planner’, its also directing institutions to provide better financial support for private investment.
Cryptocurrency News
Pro-XRP John Deaton argues SEC vs Ripple ruling is sound, cites Celsius bankruptcy example
- Attorney John Deaton cited the Celsius case as an example, arguing XRP holders did not suffer financial losses like the lenders’ creditors.
- Deaton explains that the bankrupt crypto lender’s case makes it clear there is no horizontal commonality with the Ripple ruling under the existing law.
- Deaton assuages XRP holders’ concerns and explains that Judge Analisa Torres’ decision in the SEC vs Ripple case is sound.
Bankrupt crypto lender Celsius’ progress in bankruptcy court made the headlines last week as the firm finalized its strategy to repay creditors.Pro-XRP attorney John Deaton cited the Celsius bankruptcy case to explain that, unlike the bankrupt crypto lender’s case, XRP holders or traders did not lose their funds to Ripple, since many were unaware of the firm’s existence.
Deaton believes several XRP holders acquired the token for its relevance and high market capitalization when compared to other altcoins. This argument weakens the Securities and Exchange Commission’s (SEC) narrative of “common enterprise” and secondary market sales of XRP tokens are unlikely to be considered as securities transactions.
Sam Altman’s Worldcoin rolls out with massive rally
- Sam Altman’s project Worldcoin launched its WLD token and mainnet early on Monday.
- Worldcoin launch implies that the project’s migration to Optimism network will be finalized by developers soon.
- WLD tokens are not available to US-based users in light of the recent regulatory crackdown on cryptocurrencies.
Worldcoin, Sam Altman’s digital ID project to verify users’ identity and tackle the advances and challenges that are likely to arise with higher adoption of artificial intelligence, launched early on Monday.
The protocol’s mainnet and token launched, fueling a massive rally and yielding nearly 60% gains for traders on centralized crypto exchanges.
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