North American News
US Equity Market Holds Steady in Anticipation of Non-Farm Payrolls Report
- Closing changes for the main US stock market indexes
- S&P 500 -0.2%
- DJIA -0.1%
- Nasdaq Comp flat
- Russell 2000 -0.2%
In after hours, the major earnings releases showed more BEATS (on top and bottom lines) vs MISSES (with a miss on top or bottom or both lines). There were 10 BEATs, and 3 MISSES
Apple Inc (AAPL) – BEAT
- EPS: 1.26, expected: 1.19
- Revenue: $81.80 billion, expected: $81.69 billion
- Apple shares are trading at $189.59 down -0.67%
DraftKings Inc (DKNG) – BEAT
- EPS: -0.17, expected: -0.25
- Revenue: $875 million, expected: $760 million
- shares are trading up 9.34% $32.79
Microchip Technology Inc (MCHP) – MISS
- EPS: 1.21, expected: 1.64
- Revenue: $2.29 billion, same as expected
- Shares are trading down 4.49% $85.50
EOG Resources Inc (EOG) – BEAT
- EPS: 2.49, expected: 2.32
- Revenue: $5.57 billion, expected: $5.31 billion
- shares are trading down 0.71% $130.75
Block Inc (SQ) – BEAT
- EPS: 0.39, expected: 0.36
- Revenue: $5.53 billion, expected: $5.1 billion
- Shares are trading down -3.87% at $70.70
Coinbase Global Inc (COIN) – BEAT
- EPS: -0.42, expected: -0.77
- Revenue: $0.663 billion, expected: $0.63 billion
- shares are trading down -1.13% at $89.72
Fortinet Inc (FTNT) – MISS
- EPS: 0.38, expected: 0.34
- Revenue: $1.29 billion, expected: $1.3 billion
- shares are trading down -17.25% at $62.69
Airbnb Inc (ABNB) – BEAT
- EPS: 0.98, expected: 0.76
- Revenue: $2.48 billion, expected: $2.42 billion
- shares are trading down -1.35% $138.98
Stryker Corp (SYK) – BEAT
- EPS: 2.54, expected: 2.38
- Revenue: $5 billion, expected: $4.82 billion
- shares are trading up 2.68% at $283
Gilead Sciences Inc (GILD) – MISS
- EPS: 1.34, expected: 1.64
- Revenue: $6.60 billion, expected: $6.44 billion
- shares are trading up 0.69% at $76.05
Amazon.com Inc (AMZN) – BEAT
- EPS: 0.65, expected: 0.35
- Revenue: $134.4 billion, expected: $131.5 billion
- Amazon shares are trading up 6.73% $137.52
Amgen Inc (AMGN) – BEAT
- EPS: 5.00, expected: 4.49
- Revenue: $6.99 billion, expected: $6.68 billion
- shares are trading up 0.4% at $231.62
Booking Holdings Inc (BKNG) – BEAT
- EPS: 37.62, expected: 28.80
- Revenue: $5.5 billion, expected: $5.17 billion
- shares are trading up 12.68% at $3200
NFP Preview: Forecasts from 9 major banks, moderate downward trend in job growth
Nonfarm Payrolls are expected to add 200K jobs in July vs. 209K in June, while the Unemployment Rate is expected to remain steady at 3.6%. Average Hourly Earnings are expected to ease to 4.2% YoY against the former release of 4.4%.
Commerzbank
We expect 200K new jobs and an unchanged unemployment rate of 3.6%. This would make it clear that the US economy did not slip into recession in July either. However, it is difficult to assess the risk of recession in the coming months on the basis of the labor market, as it is at best a coincident indicator. Certainly, however, the risk of recession would increase if labor incomes stopped growing because this would hit private consumption. The decisive variable here, i.e. the product of employment, average working hours and average hourly wages, is the index of ‘aggregate weekly payrolls of all employees’. In June, labor income was still 0.8% higher than in May.
Credit Suisse
We expect payroll gains to slow slightly further to 200K in July.We expect growth in average hourly earnings to slow marginally to 0.3% MoM, which would cause YoY wage growth to edge lower to 4.2%.
TDS
We expect gains to have stayed above trend in July, registering a firm 260K increase. Payrolls have clearly lost momentum over the past year, but they remain above levels that are consistent with a gradual rise in the UE rate. In fact, we forecast the UE rate to drop again by a tenth to 3.5% following its unexpected jump to 3.7% in May, as we expect the participation rate to remain largely steady at 62.6% amid still strong job creation. Wage growth likely fell a tenth to 0.3% MoM, dragging the YoY pace lower at 4.2% from 4.4% in June.
RBC Economics
We expect the unemployment rate to hold steady at 3.6%, and NFP employment to rise 185K in July. Labour markets remain firm, but we look for unemployment to drift higher during the second half of the year.
NBF
Hiring could have slowed if previously released soft indicators such as S&P Global’s Composite PMI are any guide but this may have been offset by a decrease in the number of layoffs. With these two trends cancelling each other, we expect job creation to have remained roughly unchanged in the month at 215K. The household survey could show a similar gain, something which would translate into a one-tick decline in the unemployment rate to 3.5%.
SocGen
We look for job growth moderation in July with total NFP climbing by just 190K workers. We believe any gain above 150-175K jobs remains strong. Such a gain, overtime, supports further declines in the unemployment rate.Even with job gains slowing, we expect the unemployment rate to dip back to 3.5% in July from 3.6% in June.The reading in June is a rounded-up figure. We see gains in the number of jobs that imply the unemployment rate could still dip. Wages are likely to rise 0.3% for July.
CIBC
Initial jobless claims eased over the July survey reference period, suggesting that a healthy 185K jobs could have been created in the US. That’s in line with the climb in participation seen lately in the prime-age working group, which coincides with a drawdown of excess savings. Still strong demand for workers, as evidenced by elevated job openings, suggests that new labor force entrants are being absorbed quickly into vacant positions. The unemployment rate could have remained steady at 3.6%, while a rise in participation also would have left more room for hiring without putting additional upwards pressure on wages, which likely slowed to 0.3% MoM. We’re slightly lower than the consensus on hiring which could result in bond yields falling.
Citi
After the first downside surprise to NFP growth in 15 months in June, we expect a strong bounce-back in July job growth, with total NFP rising by 290K. We expect average hourly earnings to again rise by 0.4% MoM, although this increase would be close to rounding to 0.3%. Note, however, that the Fed’s preferred measure of labor costs, the employment cost index, showed a modest slowing to 1.0% QoQ in Q2, in data released last week.We also expect the unemployment rate to decline further in July to 3.5%, as the unrounded unemployment rate was already very close to 3.5% at 3.57% unrounded in June with an unchanged participation rate at 62.6%.
Wells Fargo
We look for a softer, but still robust, addition of 210K new jobs in July as the labor market moves closer into balance.We also look for the unemployment rate to stay flat at 3.6%.Wages appeared to be cooling on trend, but faster-than-expected wage growth in June and upward revisions to prior months have forced a reassessment. Overall, we expect average hourly earnings to increase 0.3% over the month.
Initial US jobless claims 227K vs 227K estimate.Continuing claims 1.700M vs 1.700M est
- US initial jobless claims in continuing claims for the current week
- Prior week 221K.That remained unrevised
- Initial jobless claims came in as expected at 227K.That is an increase of 6000 from the previous weeks on revised 221K
- 4 week moving average 228.25K a decrease from 233.75K last week
- Continuing claims 1.700M vs 1.700M estimate.
- +21,000 from the previous week’s revised level or 1.679M (was 1.690M previously reported)
- 4 week moving average 1.712M vs 1.717 (revised)
US July Challenger layoffs 23.70k vs 40.71k prior
- Latest data released by Challenger, Gray, and Christmas Inc – 3 August 2023
- Prior 40.71k
US factory orders for June 2.3% versus 2.2% expected
- Factory orders for June 2023
- Prior month 0.3%
- Factory orders 2.3% versus 2.2% expected. Best since June 2021
- Ex transportation 0.2% versus -0.4%
- Orders are up 6 of the last 7 months
- Shipments of factory orders rose by 0.1%
- Unfilled orders of factory orders increase by 1.8%
- Inventories of factory orders was unchanged
Revisions to durable goods – a component of factory orders showed:
- Durable goods orders 4.6% vs 4.7% preliminary. Best since mid-2020
- Durable goods Ex Defense 6.0% versus 6.2% preliminary
- Durable goods ex Transport 0.5% versus 0.6% preliminary
- Nondefense capital goods orders ex air 0.1% versus 0.2% preliminary (proxy for capital investments by businesses)
- Shipments of manufactured durable goods increased by 0.2% versus 2.0% last month
- Unfilled orders of durable goods rose by 1.8% versus 0.8% in May with transportation equipment leading the gain with a rise of 2.9%
- Inventories of durable goods up 6 last 7 months increase by 0.1% versus +0.2% last month.
US Q2 unit labor costs +1.6% vs +2.6% expected
- US second quarter 2023 unit labor cost data
- Advance reading was +4.2%
- Prior reading was +6.3%
- Q2 productivity +3.7% vs +2.0% expected
S&P Global final US services PMI 52.3 vs 52.4 prelim
- The final revisions to the US services PMI from S&P Global
- Lowest since Feb
- Prelim was 52.4
- Prior was 54.4
- Final composite PMI vs 52.0 prelim
- Prior composite PMI was 53.2
- Business activity and new orders increased again, albeit at slower rates
US July ISM services 52.7 vs 53.0 expected
- July 2023 US services survey from the Institute for Supply Management
- Prior was 53.9
Details:
- employment index 50.7 versus 53.1 prior
- new orders index 55.0 versus 55.5 prior
- prices paid index 56.8 versus 54.1 prior
- new export orders 61.1 versus 61.5 prior
- imports 52.3 versus 54.6 prior
- backlog of orders 52.1 versus 43.9 prior
- inventories 50.4 versus 55.9 prior
- supplier deliveries 48.1 versus 47.6 prior
- inventory sentiment 56.6 versus 54.0 prior
What’s next for bonds — watch the calendar
- US 10-year yields up 10.5 basis points today to the highs of the year
What’s next for the bond market is all about non-farm payrolls. The Friday jobs report is expected to show 200,000 jobs created but if there’s a disappointing reading, the market will read that as a sign that the Fed hiking cycle is over.
Moreover, talk about a recession will return and there will be a demand for the safety of bonds.
Bill Ackman speaking today:
I have been surprised how low US long-term rates have remained in light of structural changes that are likely to lead to higher levels of long-term inflation including de-globalization, higher defense costs, the energy transition, growing entitlements, and the greater bargaining power of workers. As a result, I would be very surprised if we don’t find ourselves in a world with persistent ~3% inflation
US credit rating downgrade concerns are valid but I’m not worried – Warren Buffett
- Buffett comments on CNBC
He adds that Berkshire Hathaway bought $10 billion in US Treasuries on Monday and that “the only question for next Monday is whether we will buy (another) $10 billion in 3-month or 6-month”.
Fed’s Barkin: Further economic slowing ‘is almost surely on the horizon’
- Barkin speaks on “Recession Revisited” in Montgomery
- Inflation remains too high
- Fed’s objective isn’t to cause a recession but to reduce inflation
- Consumer spending, while weaker, is ‘far from weak’
- Efforts to address inflation have pushed several industries into ‘mini-recessions’
Commodities
Silver bulls step up following negative data from the US
- Silver dropped to a daily low of around $23.37, but the bulls managed to push the price back to $23.60.
- The USD retreated following weak Services and Labour market data.
- Still, US Treasury yields will limit the metal’s advance.
Silver’s spot price traded soft on Thursday but cleared daily losses. The USD reversed following soft Services PMI, allowing the metal to gain ground but rising US yields may limit the Greenback’s losses.
WTI crude oil futures snapback higher today
- Saudi Arabia announced it will extend its voluntary 1 million barrel per day oil production cut earlier today
Earlier today, Saudi Arabia announced that it will extend its voluntary 1 million barrels per day (mbpd) oil production cut through September.They added that the cuts could potentially be extended or deepened.
Following this announcement, Crude oil prices increased by more than $1.The momentum has continued. The price is currently up over $2.12 or 2.63% to $81.57.
Saudi Arabia to extend voluntary 1mbpd oil production cut through Sept
- Saudi Arabia says cut can be extend further or deepened
Brent prices are up more than $1 after this announcement, which was a Reuters poll showed was expected by 15 of 22 oil analysts. That means it wasn’t fully priced in and you can see that from the reaction.
The state news agency carried the headlines and said the cut could be extended further or deepened.
Full statement:
EU News
European equity close: A third day of heavy selling
- Closing changes for the main European bourses
- Stoxx 600 -0.8%
- German DAX -1.1%
- UK FTSE 100 –0.6%
- French CAC -0.9%
- Italy MIB -1.2%
- Spain IBEX -0.4%
Eurozone June PPI -0.4% vs -0.2% m/m expected
- Latest data released by Eurostat – 3 August 2023
- Prior -1.9%
- PPI -3.4% vs -3.1% y/y expected
- Prior -1.5%; revised to -1.6%
Eurozone July final services PMI 50.9 vs 51.1 prelim
- Latest data released by HCOB – 3 August 2023
- Prior 52.0
- Composite PMI 48.6 vs 48.9 prelim
- Prior 49.9
Italy July services PMI 51.5 vs 52.2 expected
- Latest data released by HCOB – 3 August 2023
- Prior 52.2
- Composite PMI 48.9
- Prior 49.7
Spain July services PMI 52.8 vs 53.4 expected
- Latest data released by HCOB – 3 August 2023
- Prior 53.4
Switzerland July CPI +1.6% vs +1.6% y/y expected
- Latest data released by SECO – 3 August 2023
- Prior +1.7%
- Core CPI +1.7% y/y
- Prior +1.8%
France July final services PMI 47.1 vs 47.4 prelim
- Latest data released by HCOB – 3 August 2023
- Prior 48.0
- Composite PMI 46.6 vs 46.6 prelim
- Prior 47.2
Germany June trade balance €18.7 billion vs €15.0 billion expected
- Latest data released by Destatis – 3 August 2023
- Prior €14.4 billion
Germany July final services PMI 52.3 vs 52.0 prelim
- Latest data released by HCOB – 3 August 2023
- Prior 54.1
- Composite PMI 48.5 vs 48.3 prelim
- Prior 50.6
UK July final services PMI 51.5 vs 51.5 prelim
- Latest data released by S&P Global – 3 August 2023
- Prior 53.7
- Composite PMI 50.8 vs 50.7 prelim
- Prior 52.8
BOE raises bank rate by 25 bps to 5.25%, as expected
- The Bank of England announces its monetary policy decision for August 2023
- Prior 5.00%
- Bank rate vote 8-1 vs 7-2 expected (Dhingra dissented, Haskel and Mann voted for 50 bps)
- Current monetary policy stance is restrictive
- Labour market remains tight but there are some indications that it is loosening
- CPI inflation remains well above the 2% target
- It is expected to fall significantly further, to around 5% by the end of the year
- Risks around the modal inflation forecast are skewed to the upside, albeit by less than in May
- Some key indicators, notably wage growth, suggest that some of the risks from more persistent inflationary pressures may have begun to crystallise
- If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required
A summary of the comments by topic by the BOE Bailey
Inflation and Prices:
- Bailey expects inflation to drop to about 7% in July and to around 5% by October.
- A more gradual decrease in energy prices compared to the Euro Zone contributes to this trend.
- Food and drink inflation seems to have peaked, with an expectation for food price inflation to gradually fall this year.However, the decline of food price inflation has been slower than anticipated, partly attributed to global factors like less impactful Russian restrictions on grain exports.
- For non-energy prices, it’s less clear how quickly they will reduce.
- Despite volatile elements, a persistent strength in service price inflation could suggest a continuation of high inflation.
Monetary Policy:
- Bailey acknowledges the clear impact of the higher bank rate, affirming that there’s more than one path for rates that could bring inflation back on target.
- The BOE will assess the most suitable path for rates based on evidence.
- There’s a need to balance risks, as some risk relative to May has materialized.
- A 50 basis point rate increase was not deemed necessary at this time. The central bank is not at its peak on rates and remains evidence-driven, with no set path for interest rates from here.
- It’s too soon to speculate on when the BOE might cut rates.
Labour Market and Wages:
- The condition of the labour market and pay rates have a significant impact on the economy.
- Recent pay growth is considerably above the Bank’s May forecast, suggesting that secondary effects of wage inflation might take longer to fade.
- Despite other elements of the labor market softening, the pay element has not.
Economic Growth and Resilience:
- Projections for economic activity have weakened since May, with some unpleasant surprises in June but also some recovery.
- Unemployment remains historically very low, demonstrating the resilience of the economy.
- Despite the challenges, Bailey avoids describing the impact of the policy as “painful” and hopes to achieve the expected path without a recession.
Housing Market:
- Bailey doesn’t perceive the situation as a crisis for the housing market.
BOE’s Ramsden: We have not made a decision on QT pace for September
- Comments from the BOE deputy
- Personally, I see a case for slightly increasing the pace of QT
- We are seeing bond markets react to developments, including in the US
- I don’t think there’s a structural change going on in the bond market
NatWest cuts Bank of England peak rate to 5.50% from 6.00%
- NatWest no longer sees the Bank of England hiking rates to 6.00%
The tone from the Bank of England was less-hawkish today and that’s led NatWest to cuts its terminal peak rate forecast to 5.50% from 6.00%.
Market pricing puts the terminal rate at 5.70% next March. For the upcoming meeting on Sept 21, the market is at a 61% chance of a 25 bps hike with the remainder on ‘no change’.
ECB’s Panetta: It is too early to commit now on what to do in September
- Remarks by ECB executive board member, Fabio Panetta
- Will decide in September whether or not to pause on rate hikes
Other News
Japan Chief Cabinet Secretary Matsuno says watching FX moves closely
Verbal intervention comments from Japan’s Chief Cabinet Secretary Matsuno:
- Govt closely watching FX moves and their impact on Japan’s economy, prices
- Working closely with BOJ
Also says:
- Hope the BOJ works closely with govt, guide policy appropriately to sustainably, stably hit 2% inflation target
- Govt is always closely communicating with the BOJ, won’t comment on specifics
Japanese officials are concerned when yen depreciation is rapid, as it has been since the Bank of Japan meeting last Friday. These sorts of remarks on the currency are intended to slow the fall.
Bank of Japan intervenes to buy an unlimited amount of 5 to 10 year JGBs
Australia June exports -2% m/m (prior +4%) & Imports -4% m/m (prior +2%)
Australian June 2023 trade data
June goods and services exports -2% m/m
- previous: 3%
Imports -4.0% m/m
- previous +3%
Trade Balance is a surplus of 11.32bn
- expected 11.25bn
- prior 11.79bn
Australian Q2 Retail Sales -0.5% q/q (prior -0.8%)
Australia Retail Sales excluding inflation for Q2 2023 come in at -0.5%, for the third consecutive quarterly fall
- expected was -0.5%
- prior revised to -0.8% (from -0.6%)
Morgan Stanley expect a final rate hike from the Reserve Bank of Australia in November
Morgan Stanley on a Reserve Bank of Australia rate hike still to come:
- The RBA now appears comfortably in data-dependent mode, with little suggestion that it needs to front-load the tightening that is incorporated in its forecasts
- However, its inflation path suggests little room for surprises
- As such, we now expect a final rate hike at the next forecast update in November, lowering our terminal rate forecast from 4.60% to 4.35%. The risk to our forecast is a more extended period on hold.
China Caixin July Services PMI 54.1 (expected 52.5, prior 53.9)
Caixin / S&P Global Services PMI for July is a beat and an improved 54.1 and a seventh consecutive month of expansion
- expected 52.5, prior 53.9
The Composite, however, is down from June at 51.9
- prior 52.5
“In terms of policies, the top priorities should still be guaranteeing employment, stabilizing expectations and increasing household income,” said Wang Zhe, senior economist at Caixin Insight Group.
Cryptocurrency News
Binance defies regulatory FUD with 22 million new registered users in three months, BNB price drops 30%
- BNB price is down 30% since May, a three-month period that has seen 22 million new users join Binance exchange.
- The disparity comes amid regulatory clampdown against the exchange and its CEO Changpeng Zhao, which worsened broader bear market woes.
- Undeterred, the exchange boasts several advancements, including a Japan re-launch, Dubai MVP licensure, and doubled launch pools, among others.
BNB, the ticker for the Binance Coin crypto, is trading horizontally after a stark drop from the April highs.
The sideways move comes as the broader cryptocurrency market continues without a catalyst, with Bitcoin (BTC) price leading the altcoins in the steady slide.
For Binance Coin, however, the dormancy comes as the BNB network remains subject to regulatory scrutiny, with both the exchange and its CEO facing civil charges from US regulators.
Binance network bullish developments fail to impart on BNB
BNB price is stuck within a range despite numerous positive network news and efforts by Binance CEO Changpeng Zhao to fight off fear, uncertainty, and doubt (FUD). The token is down 30% since May, during which several value-additions have been recorded on the network.
Mad admits to being the original Bitfinex hacker
- Ilya “Dutch” Lichtenstein was the Bitfinex hacker. He was later caught laundering the money
The original Bitfinex hacker has finally been identified.
Ilya “Dutch” Lichtenstein, a resident of New York, has admitted to being the original Bitfinex hacker. The coins were worth $71 million at the time and the value eventually grew to $4.5 billion.
Lichtenstein and his wife Heather Morgan were charged in 2022 with laundering money connected to the theft but it wasn’t clear who was behind the heist, which led to a 20% drop in the price of bitcoin.
Lichtenstein has been held without bond since his arrest and the pair haven’t seen each other since. CNBC report that Lichtenstein smiled at his wife and blew her a kiss during their moment of eye contact, the first time they had seen each other in more than a year.
The pair has pleaded guilty to money laundering and you have to imagine that the hacking admission will add a considerable penalty for Lichtenstein and Morgan.
A Netflix series is underway on the couple as Morgan had achieved some level of infamy before the arrest with her ‘crocodile of wall street’ persona.
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