North American News
Anticipation Mounts for Nvidia Earnings as US Equities Soar to Impressive Gains
- Closing changes
Midway through the trading day, a momentary stumble befell US stocks as 10-year yields surged to levels unseen since 2007, breaking October’s previous highs. However, even this formidable challenge proved transient in the face of mounting excitement surrounding Nvidia’s impending earnings report later this week. With an impressive 8.5% surge, Nvidia propelled itself skyward, and in tow, lifted the entire Nasdaq index to a near-session peak at the close.
- S&P 500 +30 points, or +0.7%
- DJIA -0.1%
- Nasdaq Comp +1.6%
- Russell 2000 -0.2%
New York Fed finds Americans expect record income to start new jobs
- Research from the New York Fed
- NY Fed finds pay needed to accept a new job at $78,645 up from $72,873 a year ago
- Out of those employed four months ago, 91.4% still maintain their jobs, showing a marginal dip from 91.8% in July 2022.
- Only 19.4% reported looking for a job recently, down from 24.7% last year.
US 10-year yield breaks the October high — now highest since pre-financial crisis
- Breakout for bonds
US 10-year yields are now up 9.7 basis points on the day, breaking the October high of 4.33% and rising to 4.35%.That’s the highest since November 2007. The high of this century is 5.33%, which is still a full point away but there’s now plenty of talk about 4.50% as the next level to watch.
The bond market is running everything right now and this move higher in yields has sent the S&P 500 back to flat and the US dollar higher across the board.
Bond yields rise to dangerous levels
- Long-dated bond yields rise 7 bps
Bonds and the yuan are the story of the month so far.
China is pushing USD/CNH down but are they selling Treasuries to do it? US 10-year yields are up 7.3 bps to 4.32% today, which is just a shade below Thursday’s high and the October 2022 cycle high. We could see a real puke in bonds if 4.33-4.34% breaks.
Higher US Treasury yields have brought the market back closer to what the Fed is thinking – DB
Remarks from Deutsche Bank Securities economists on higher yields, saying the Federal Reserve will welcome these due to how strong the US economy is given recent data and GDP projections.
Main points:
- Higher yields will serve to tighten financial conditions and lending
- “I think that the Fed should be comfortable with higher rates, tighter financial conditions, because you know, some of the things that they need to see are slower growth and a labor market that’s coming into better balance.Tighter financial conditions will help with that,”
- “I’m not of the view that they are thinking this is an inappropriate tightening of interest rates”
- Financial conditions had eased a lot earlier in the year
- The recent pickup in yields has actually brought the market into better alignment with the Fed’s thinking about rates over this year and next
Barclays says there is space for higher US yields, questions if Fed policy “is even tight”
Barclays on US Treasuries, say that despite the selloff already that have pushed 10- and 30-year yields to their highest levels since 2007 and 2011 “yields are not stretched”.
Higher rates are being driven by:
Canada July new housing price index -0.1% vs +0.1% prior
- New housing price data from Statistics Canada
- Prior was +0.1%
- Of the 27 census metropolitan areas surveyed in July, prices were unchanged in 12, down in 8 and up in 7.
- Nationally, new home prices were down 0.9% year over year in July
Commodities
Silver threatens the 200-day SMA ahead of eventful week
- The XAG/USD gained ground rising towards the 200-day SMA seeing more than 2% daily gains
- The 20-day SMA is about to cross below the 200-day SMA; further downside may be on the horizon.
- Rising US yields may limit the silver´s upside.
Silver rose near the 200-day Simple Moving Average (SMA) towards the $23.20 area, mainly driven by a softer USD. Investors await Thursday’s annual Jackson Hole Symposium, which may cause volatility in bond markets and the Silver price dynamics. As for now, US yields are rising, limiting further Silver´s gains.
On Thursday, Jerome Powell from the Federal Reserve will deliver a speech at the annual Jackson Hole Symposium, which will likely ramp up volatility in the USD and the US bond market price dynamics.
As for now, the US economy is holding firm and inflation is seeing a mixed picture, so clues regarding forward guidance will set the pace for the US yield dynamics and affect the non-yielding Silver.
WTI crude oil settles down $0.53 at $80.12
- Price test it’s a 200 hour moving average at session highs. Breaks back below 100 hour moving average at $80.41
The price of crude oil futures is settling down $0.53 at $80.12.
The high price for the day reached $81.75. The low price is now extending to new session lows in post-settlement trading at $79.97.
Brent: China’s weak economy & property debt implosion is weighing, but oil use holding up
Analysts have argued that China’s oil-consumption figures have held up. An RBC commodity strategist note says:
- while Chinese macro data has underwhelmed over recent weeks, end-use refined product data looks far from terrible
- Chinese product inventories are tight and although diesel inventories have recently rebounded from the recent low, gasoline stocks have fallen for 13 consecutive weeks.Demand has been strong enough to keep product inventories subdued even with refinery utilization surging since exiting turnaround season in June
EU News
European equity close: Small gains as the week gets underway. Italy leads
- Closing changes
- Stoxx 600 +0.1%
- German DAX +0.1%
- FTSE 100 -0.1%
- French CAC +0.5%
- Italy MIB +0.8%
- Spain IBEX -0.1%
SNB total sight deposits w.e. 18 August CHF 476.2 bn vs CHF 484.8 bn prior
- Latest data released by the SNB – 21 August 2023
- Domestic sight deposits CHF 466.4 bn vs CHF 474.7 bn prior
Germany July PPI -1.1% vs -0.2% m/m expected
- Latest data released by Destatis – 21 August 2023
- Prior -0.3%
The big chunk of the decline continues to be energy-driven with energy prices having fallen by 2.5% compared to June. The good news at least is that if you strip that out, producer prices were also still seen down 0.4% on the month.
Other News
JP Morgan says expects China to cut RRR by 25 bps in the current quarter
- Well, the likelihood of such a move would be quite large I would say
This is a similar view shared by Citi and Barclays as well quite a number of other analysts. Beijing already lacked in response to cutting the lending policy rates today but with mounting pressure on the economy and especially the property sector, further liquidity injections via RRR cuts would be much needed.
China’s major state-owned banks reportedly seen mopping up offshore yuan liquidity today
- Reuters reports, citing sources familiar with the matter
As concerns surrounding China’s economic prospects grow deeper, so is the pressure on the yuan currency. That continued today as well after the PBOC delivered a less-than-convincing rate cut. And as mentioned at the time last week, these stop-gap measures won’t really do. Where is the fiscal help, more importantly? Beijing has to dig deeper and fast.
Citigroup lowers China 2023 GDP forecast to 4.7% from 5.0%
- Citi takes China estimate lower
I don’t think the market is overly worried about 0.3 pp of Chinese growth.
What it’s worried about is that China isn’t dead-set on hitting economic targets anymore and boosting growth. The central bank cut rates today but not as aggressively as assumed.
Japan MOF raises assumed long-term interest rate for the coming fiscal year
- Kyodo News reports on the matter
The assumed long-term interest rate for the fiscal year 2024/25 was previously at a record low of 1.1% but that has now been tweaked to 1.5%.The report says that the revision higher is due to rising yields after the BOJ’s latest policy tweak last month. This does suggest that policymakers are willing to embrace a different outlook to Japan’s policy path but for now at least, they are keeping a bit of a lid in 10-year JGB yields near 0.65%. So, let’s not get too carried away just yet.
PBOC Loan Prime Rates (LPR) CUT: 1-year 3.45% (prior 3.55%) & 5 year 4.2% (prior 4.20%)
- The surprise is no cut to the 5-year rate
A cut to the one-year rate of 10bp vs. 15 that was widely expected.
And no cut to the 5 year rate at all. Thats a shock.
PBOC’s Loan Prime Rate (LPR)
- It is an interest rate benchmark used in China, set by the People’s Bank of China each month. While set on the 20th (the 21st this month given the 20th fell on a Sunday) the new LPR takes effect on the first day of the following month.
- The LPR serves as a reference rate for banks when they determine the interest rates for (primarily new) loans issued to their customers.
- Its calculated based on the interest rates that a panel of 18 selected commercial banks in China submit daily to the PBOC.
- The panel consists of both domestic and foreign banks, with different weights assigned to each bank’s contributions based on their size and importance in the Chinese financial system.
- The LPR is based on the average rates submitted by these panel banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked, and the median rate becomes the LPR.
Cryptocurrency News
Market dynamics: bybit and bitget surge as binance and coinbase face challenges
The cryptocurrency market is currently going through a significant shift. Coin prices are currently on the move once again, and investors are looking into whether this surge or drop can last. However, one thing is sure – for many investors, exchanges remain the primary point of entry. And, for anyone looking to capitalize on the market, exchanges will be the perfect way to do so.
That said, exchanges themselves are also facing an interesting inflexion point at the moment. After months of stagnating performance, there appears to be a shift in the level of trust that investors have in these platforms. As such, volumes and coins held on many of these exchanges are starting to dwindle significantly.
Let’s take a look at how some of the biggest exchanges have done so far and what to expect from them going forward:
Market overview
At the moment, the largest centralized exchange remains Binance. The exchange has maintained its position for years, and it doesn’t seem like anything can erase that.
Binance currently holds a 51.7% share of the exchange market – although its spot trading volume dropped to $235.3 billion in June 2023. That marked a drop of 8.1% month-on-month, with Binance’s volumes dropping considerably since February 2023 when it reported $217.6 billion
However, several exchanges have also done well to improve their standing in the market.
Most notable is Bitget, whose native token BGB outperformed all other CEX tokens, reaching all-time highs several times within a year. The exchange has done a great deal to weather the storm, thriving in an environment where many of its competitors have struggled.
All eyes will be on Bitget going forward as investors would want to see if the exchange is able to bolster its position and grow even more. And, as analysts predict, a place in the top 5 won’t be too far again.
Binance Coin kickstarts its 35% crash liquidating BNB bridge hacker’s position on Venus Protocol
- Binance Coin price triggered a breakdown from its multi-year descending triangle setup.
- This move works in favor of Binance and against the BNB bridge hacker and his open position on Veenus Protocol.
- Binance co-founder Ye-Hi said that the exchange will be responsible for burning the additional BNB
- A breakdown of $221 followed by a flip of the $186 support level will add confirmation to this bearish outlook and trigger a potential 36% crash to $118.
Binance Coin price has produced a weekly candlestick close below the key support level at $221. This development has two major ramifications. The first being that a breakdown of $221 barrier confirms the start of a downtrend for BNB. Additionally, the sudden down move has caused liquidation of BNB bridge hacker’s position on the Venus Protocol.
Venus Protocol liquidtes BNB bridge hacker’s position
In October 2022, the Binance Coin chain bridge was compromised that led to the bad actor doing away with 2 million BNB tokens. The hacker then used multiple cross-chain platforms to send money to different DeFi protocols. The borrowed tokens were then used to open several trades on the Venus Protocol. After Bitcoin price crashed suddenly between August 17 and 18, some of the hacker’s positions were under threat. There was a partial liqudation of the bad actor’s position on August 18, lead to the liquidation of 1.104 million BNB position worth $5.5 million at the time.
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