North American News
S&P 500 Ends the Day with a Modest Uptick, Demonstrating Resilience
- Bids Surge in the Last 5 Minutes of Trading, Injecting Late-Day Momentum
Closing changes:
- S&P 500 +0.1%
- Nasdaq Comp +0.1%
- Russell 2000 -0.3%
- DJIA +0.2%
Treasuries Conclude the Day with Minimal Price Fluctuations. The 2-yr note yield rose one basis point to 4.97% and the 10-yr note yield settled unchanged at 4.26%.
Apple Gears Up for a Comeback After Significant Losses, Bolstered by the Performance of Other Mega-Cap Stocks. Treasury Yields Show Resilience, Hovering Near Yesterday’s Settlement Levels. Lingering Concerns Over Gas and Oil Prices Dampen Market Enthusiasm, Contributing to Light Trading Volume at the NYSE.
US July wholesale sales +0.8% vs -0.2% expected
- US wholesale sales
- Prior was -0.7% (revised to -0.8%)
- Inventories -0.2% vs -0.1% expected
- Prior inventories -0.1%
Manheim August used vehicle index +0.2% m/m
- Manheim August used vehicle index -7.7% y/y vs -11.6% y/y prior
- Prior was -11.6%
- Prices up 0.2% m/m
“August brought a stop to wholesale price declines, though it was only a small reversal of the larger magnitude declines so far this spring and early summer,” said Chris Frey, senior manager of Economic and Industry Insights for Cox Automotive. “Historically speaking, the monthly figure aligns with the 0.3% average we’ve seen since 1997… Used market conditions have been quite consistent for a few months and are not likely to change much, even with the larger push toward balance; sales are slightly stronger than expected, inventory remains tight, and prices are holding at levels around 6% below last year at the same time. These factors are expected to prevent any substantial decline in wholesale prices through year-end.”
US household net worth rises to record $154.28 trillion – Fed
- That’s a lot of cheese
The amount of wealth in the United States is truly staggering, something the Q2 Fed household net worth underscores.
- Real estate values rose by $2.5 trillion in Q2
- Stock market values rose by $2.6 trillion in Q2
- Total non-financial debt rose at 6.3% annualized rate in Q2
- Fed govt debt rose at 12.7% annualized rate in Q2
ICYMI – Nvidia CEO Jensen Huang sells $42 mn in shares
ICYMI, the report:
- New filings from the company showed Huang sold shares over the past several trading sessions. Two separate filings from Nvidia revealed Huang exercised stock options in blocks of 29,688 shares with an exercise price of $4. Three separate transactions saw this amount of common shares exercised through options from Sept. 1 to Sept. 6.
- The acquired shares were then sold in three blocks over the same time period with prices of the shares ranging from $466.13 to $497.17.
- Based on the filings, Huang made proceeds of around $14 million in each of the three sale blocks, with a total of $42,828,053 from the stock sales.
HSBC like even more upside for the USD into 2024 – 4 reasons for a higher dollar
HSBC has revised its view on the USD, predicting more upside for the greenback going into 2024. Previously, the bank had forecasted a winding down of cyclical weakness in European currencies, but this has materialized faster than anticipated. HSBC cites looming tightening by major central banks and resilient U.S. economic data as contributing factors to a stronger USD.
Key Points:
• Revised Stance: HSBC shifts its view to anticipate more strength in the USD through to 2024.
• European Weakness: Cyclical weaknesses in European currencies have ended sooner than expected, contributing to a bullish outlook for the USD.
• Central Bank Actions: Tightening policies from major central banks worldwide are likely to increasingly impact currencies, further supporting the USD’s strong position.
• Resilient US Data: Despite signs that the narrative of ‘US exceptionalism’ may be waning, HSBC argues that this won’t necessarily be a headwind for the USD, particularly given the broader implications for global growth.
• Interest Rates: Even though U.S. yields are expected to fall, the bank suggests that further rate cuts could be discounted more in other economies, thereby supporting the USD.
The Federal Reserve blackout starts at midnight
- CPI and retail sales are out next week
The market probability is just 7% and there has been no pushback from anyone meaningful about changing that ahead of the Sept 20 meeting. But there are two top-tier economic data releases next week and perhaps two big surprises would change the Fed’s thinking.
US July consumer credit outstanding +10.4B vs +16.0B expected
- US consumer credit data for July
- Prior was +17.85B (revised to +14.02B)
A slew of major US data to come in the week ahead
- None bigger than the US CPI report on Wednesday
Considering how markets are extremely sensitive to US data at the moment, it is best to be prepared for more potential landmines to come before we get to the next FOMC meeting later this month. In the next week, there are going to be some major economic releases.
- US August CPI figures – Wednesday, 13 September
- US August PPI figures – Thursday, 14 September
- US August retail sales – Thursday, 14 September
- US weekly jobless claims – Thursday, 14 September
- US September Empire Fed manufacturing index – Friday, 15 September
- US September University of Michigan consumer sentiment – Friday, 15 September
The big one to watch will be the CPI report on Wednesday but don’t discount the impact of the other data releases as well, especially if there are going to be surprises along the way.
BNP has flipped its S&P 500 forecast to end 2023 at 4150, from 3400 previously
Bloomberg with the info from an interview with BNP’s head of US equity and derivative strategy.
He was previously forecasting a big drop by year-end to 3400 for the benchmark US index. Is now targeting 4150. The new projection is because analysts at the bank now think the US will avoid recession:
- “Our outlook for this year was always predicated on the idea of seeing a recession in the US”
- “I think us, along with many people on the Street, have been surprised at the resilience of the data in the US”
Fed’s Logan says it could be appropriate to skip an FOMC rate hike at September meeting
Dallas Federal Reserve Bank President Lorie Logan:
- ‘Could be appropriate’ to skip interest-rate increase in Sept
- There is ‘work left to do’ to get to sufficiently restrictive policy
- Skipping does not imply stopping rate hikes
- Not yet convinced we’ve extinguished excess inflation
- Fed needs to calibrate policy ‘carefully,’ must proceed gradually
- Significantly lower inflation in recent months ‘encouraging,’ but too soon to confidently say on path to 2% in timely way
- Job market strength suggests we have not finished the job of restoring price stability
- If stronger economic activity continues, could lead to a resurgence of inflation
Fed’s Barr says ‘a long way’ from a central bank digital currency
- Comments from Michael Barr
- No comments on monetary policy
- Fed is ‘a long way’ from any decision on CBDC
- Would only proceed with clear support of executive branch and legislation from Congress
- Says he remains ‘deeply concerned’ about stablecoin issuance without strong federal oversight
Fed’s Goolsbee says inflation is above where we want it, monetary policy is working
Federal Reserve Bank of Chicago President Austan Goolsbee speaking in a radio interview.
Headlines via Reuters:
- It’s possible we can get on ‘golden path’
- Monetary policy is working
- Overall level of inflation is above where we want it
- Clearly there are risks
- China, US govt shutdown are among possible risks
- We have also had false dawns on inflation before
- Want to see progresson core inflation, especially goods and housing
- Market’sexpectations on inflation also has a major influence
- I’d pay less attention to wage growth as an indicator of inflation
- We are very rapidly approaching time when are argument is not about how high should rates go, but rather how long rates have to stay high
- Collectively Fed forecast is that rates will have to stay up for a relatively extended period
- You can’t change the inflation target until you’ve hit your inflation target
- We have to get to the 2% inflation target, retain credibility
- A possible UAW strike could have an impact, it could be material to our decisions
Canada August employment +39.9K vs +15.0K expected
- Canadian August jobs report
- Prior was -6.4K
- Full time +32.2K vs +1.7K prior
- Part time +7.8K vs -8.1K prior
- Participation rate 65.5% vs 65.6% prior
- Average hourly wages permanent employees +5.2% y/y vs +4.7% expected (+5.0% prior)
- Total average hourly wages 4.9% y/y vs 5.0% prior
- Unemployment rate 5.5% vs 5.5% prior
- Participation rate 61.9% vs 62.0% prior
- Involuntary part time rate 18.9% vs 17.2% a year earlier
Employment grew 40K in the month but was outpaced by 103K in population growth. That’s an important dynamic as Canada goes full-tilt on immigration. It’s now seven straight months that population growth has outpaced job growth.
Yesterday: BOC’s Macklem: We are concerned that progress in bringing down inflation has slowed
- Comments from Macklem
- We are prepared to raise rates again but don’t want to raise rates than we have to
- The longer we wait, the harder it is likely to be to reduce inflation
- Mon pol might not be restrictive enough to restore price stability
- Bank is concerned that larger-than-normal price increases for goods and services remain broad based
- We are not trying to kill economic growth
- The biggest contribution to the slowing in inflation since the peak lastyear has been from energy, which accounts for two-thirds of the slowdown
- Today, about 60% of CPI components are rising above 3% and about 45% are rising above 5%
- Looking ahead, we want to see less-generalized price increases as well as a decline in the average price increase.
- The weakness in second-quarter GDP largely reflected a broad-based slowing in consumer spending and a decline in housing activity.
Yesterday: Macklem Q&A: Maybe we don’t need to do more, maybe we do’ on interest rates
- Macklem takes audience questions
- We will take decisions meeting by meeting
- Expecting growth of ‘a little less than 1%’ over the next few quarters
- You can expect headline inflation is going to go up in the near term, before it eases
Commodities
Gold price rebounds as investors digest global slowdown risks
- Gold price discovers support as Fed policymakers see no interest-rate increase in September.
- The USD Index hovers near 105.00, preparing for a fresh upside amid the risk-off mood.
- Fed’s Goolsbee said the central bank is aiming to push the economy on a “golden path”.
Gold extends recovery as the Fed policymakers suggested that the central bank will not raise interest rates further in the September monetary policy meeting. The precious metal capitalized on remarks from Fed policymakers, which seem to be backed by cooling inflation and slowing employment growth.
Brent crude finishes the week above $90 for the first time since November
- Brent settles up 73-cents to $90.65
It’s been a strong run for brent crude after slowly forming a bottom from March through June. A 73-cent gain today caps off the 10th rally in 11 days and the best levels since November. It’s also the first close above $90 on a weekly basis in 10 months.
There’s already chatter about a US crude oil inventory build next week due to a drop in US exports and increase in imports so there will be a good test for the crude bulls next week.
Baker Hughes US oil rig count 513 vs 512 prior
- Slight uptick for US drilling rigs
- Gas rigs +1
China’s Gold-Buying Streak Continues: Adds to Reserves for the 10th Consecutive Month
August data showed that China’s foreign exchange reserve dropped 1.38% from a month earlier to $3.16 trillion, the lowest level since the beginning of the year, according to China’s State Administration of Foreign Exchange.
- At the same time China extended its streak of expanding gold reserves to a 10th consecutive month.The People’s Bank of China bought about 930,000 ounces of gold into its reserves last month. This boosts its holdings to 69.62 million ounces (2,165 tons).
- Since November, China has added a total of 5.95 million ounces to its stockpile.
China has been expanding gold purchases as part of efforts to reduce reliance on the U.S. dollar.
EU News
European equity close: Friday’s gains trim the weekly decline
- Closing changes for the main European bourses
Closing changes for the day:
- Stoxx 600 +0.2%
- German DAX +0.1%
- UK FTSE 100 +0.5%
- French CAC +0.6%
- Italy MIB +0.3%
- Spain IBEX +0.6%
For the Week:
- Stoxx 600 -0.8%
- German DAX -0.7%
- UK FTSE 100 +0.2%
- French CAC -0.8%
- Italy MIB -1.4%
- Spain IBEX -0.9%
German economy to contract by 0.4% in 2023 – DIW
- Germany’s DIW economic research institute cuts its 2023 GDP growth forecast
The institute previously saw the German economy contracting by 0.2% but have revised the projection lower to 0.4% now, owing to a surprisingly weak second quarter. DIW notes that:
“Households’ spending mood should benefit from significantly lower inflation, but the export-oriented German economy is slow to pick up speed despite an improving global economy.”
Germany August final CPI +6.1% vs +6.1% y/y prelim
- Latest data released by Destatis – 8 September 2023
- HICP +6.4% vs +6.4% y/y prelim
The core inflation rate is seen at +5.5% y/y and that is unchanged from July.
ECB rate hike odds rise to 38% as talk of a hawkish push continues
- There’s a pushback from the hawks
Will the ECB get to 4.00%?
The Sept 14 meeting is the highlight of next week’s economic calendar and all week we’ve been getting a pushback from the hawks. Pricing for a cut hasn’t changed much today, with it rising to 38% from 36% earlier.
ECB faces a dilemma ahead of policy decision next week
- To hike or not to hike? That is the question..
The odds of a 25 bps rate hike are seen at ~36% as of today, with traders not entirely convinced of there being no rate hike. But also not enough to think that the likelihood of a rate hike being rather considerable. As much as I want to decipher the numbers, I would argue that the decision right now looks to be rather 50-50 at worst/best depending on how you want to view it.
The rates pricing hasn’t changed all too much in the past week, which indicates that traders are also just as much confused about what the ECB is going to do next week:
The main conundrum for the ECB is that policymakers fear they may still need to do more in the fight against inflation but another rate hike could also mean overdoing it, if they are not careful.
Other News
Another report highlighting China’s ban on iPhones to local governments, state-owned firms
- Nikkei reports on the matter this time
The report here highlights that an employee at a state-owned company in Beijing said she received a confidential notice in early September on restricting the use of iPhones at work. Adding that the ban will apply to departments involved in trade secrets from 1 October and to all employees from 1 March next year.
The latest notice also appears to cover restricting the use of Apple Watch and AirPod wireless earphones, preventing employees from bringing those to the workplace.
This is a big blow to Apple as China is one of its major market segments and just adds to the dour mood in stocks at the moment. Let’s see if the iPhone 15 announcement next week can turn their fortunes around.
China vice premier Zhang Guoqing to visit Russia next week
- Zhang will be visiting Vladivostok on 10-12 September
This as confirmed by the Chinese foreign ministry and continues to highlight the close ties between the two countries. The visit will be in conjunction with the 8th Eastern Economic Forum in Russia.
Morning trade in Hong Kong has been cancelled due to severe weather – Black Rainstorm
HKEX will not trade this morning.
Hong Kong Exchange and Clearing is the operator of the city’s stock exchange.
Its cancelled morning trade in the securities and derivatives market after the city issued a “Black Rainstorm” warning in the face of torrential rainfall and severe flooding.Trading will be suspended as long as the warning remains in effect. Trading could be halted for the remainder of the day, HKEX said.
Hong Kong was hit with its heaviest rainfall since 1884, which in turn caused severe flooding in large swathes of the city.The Hong Kong government suspended schools and most public services.
The “Black” level warning was issued by the Hong Kong Observatory on Thursday night and is the highest-level warning of extreme weather conditions in the city.
Japan Q2 GDP revised down to 4.8% from 6%
- Q2 GDP has been revised to +1.2% q/q and +4.8% y/y
- from +1.5% and +6.0% respectively
The data confirms weak domestic demand with private consumption coming in at -0.6% q/q (the preliminary for this was -0.5%). Business investment is soft too, capex coming in at -1.0% q/q (the prelim on this was -0.7%).
External demand a positive contribution at +1.8% q/q.
The deflator, an inflation indicator, comes in at 3.5% y/y
Japan July real wages fall 2.5% y/y, and household spending falls 5% y/y
Data from Japan for July 2023 shows real (that is, inflation-adjusted) wages and household spending both fell.
July total cash earning +1.3% y/y (prior +2.3%)
- real wages -2.5% y/y
- overtime pay +0.5% y/y
Overall household spending -5% y/y (prior -4.2%)
Japan PM Kishida reportedly will reshuffle Cabinet on 13 September
- NHK reports on the matter
The move here is largely to try and bolster support before next year’s voting, in which Kishida looks likely to face strong opposition to his position as prime minister. This is also seen as a move to try and ensure public confidence amid doubts creeping in about the government’s handling of the economy, so let’s see what he has planned.
Japanese Fin Min Suzuki says rapid FX moves are undesirable, won’t rule out any options
Verbal intervention efforts from Japanese Finance Minister Suzuki:
- Rapid FX moves are undesirable
- Won’t rule out any options vs excessive FX moves
- Its important that FX move stably reflecting fundamentals
Australian LNG facility plant strikes will begin today, Friday afternoon local time
The Chevron’s Wheatstone and Gorgon LNG facilities.
The union representing workers says:
- Chevron Australia LNG workers to begin planned strikes from 1 pm local time on Friday
- When industrial action commences, plant will be shut down if there are not competent personnel to undertake handovers during work stoppages
- Chevron are demanding they be given special concessions in bargaining, which the union has rejected
Cryptocurrency News
Vitalik Buterin states Ethereum faces same issues it did in 2017 as network continues to struggle
- Ethereum as a network has been facing bearishness on all fronts, including DeFi and Layer 2.
- Founder Vitalik Buterin stated the network is struggling with privacy, consensus, smart contract security, and scalability even today.
- Institutional interest this past year has been the worst for Ethereum, with the asset noting outflows amounting to $102 million.
Ethereum is considered to be the home of decentralized finance as it brought smart contracts to the limelight when it first launched.While the blockchain pioneered the sector, it was met with a host of issues that – according to the founder Vitalik Buterin – still plague the network.
Vitalik Buterin details Ethereum’s issues
During a recent speech at the Nanyang Technological University in Singapore, Ethereum founder Vitalik Buterin shared his thoughts on the technological progress and challenges faced by the network at the moment. Buterin was of the opinion that Ethereum’s technological progress has not changed much since its launch six years ago.
According to the founder, the network’s main issues still persist, which notably are privacy, consensus, smart contract security, and scalability. He added,
“Back in 2017, the challenge was simply to bring the technology to Ethereum and make zk-SNARKs work…By 2023, the current state of technology is very advanced…We have a long list of very interesting technologies like StarK, ZK Rollup, Cairo, and many more.”
Vitalik Buterin further said that of the four smart contract security issues, solving them is a slow process. He noted,
“When you switch from proof-of-work to proof-of-stake, there’s a major event “merger” that happens. And when it comes to security, there are no major incidents, because the whole point is that there are no incidents. But sometimes it’s important to remember that the event didn’t happen, and that’s good news. So I think there have been real improvements in this area, but there are still many persistent problems.”
FBI links North Korean hacker group Lazarus to Stake.com’s $41 million heist
- Stake.com was robbed of more than $41 million earlier this week following a private key leak.
- The hacker group, according to the FBI, has stolen more than $200 million in 2023.
- Back in January, the FBI intercepted a portion of funds from the $100 million Harmony Bridge attack, also tied to Lazarus.
One of the biggest cybercriminal groups, Lazarus, run by members of the Democratic People’s Republic of Korea (DPRK), has been confirmed to be active again. The North Korean hacker group has been the leader in cyber crimes this year and has also been held responsible for the recent Stake.com attack.
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