Round up of today’s market news

North American News

Market Optimism Fuels a Strong Start to the Trading Week: Positive Trends Abound

• Major indices move higher on the day

The US stock market saw a minor setback during today’s trading session following the release of refunding estimates for the 2nd quarter, which surpassed initial expectations. This unexpected news briefly pushed the broader S&P and Nasdaq indices into negative territory, prompting a cautious response from investors. However, market sentiment quickly shifted as the decline stabilized, leading to a notable rebound in the prices of these indices later in the day. The resilience displayed by the market underscores investor confidence and highlights the ongoing dynamic nature of market movements in response to economic data.

At the end of the day:

• Dow Industrial Average average rose 146.43 points or 0.38% at 38386.10
• S&P index rose 16.21 point or 0.32% at 5116.16
• NASDAQ index rose 55.18 points or 0.35% at 15983.08

The small-cap Russell 2000 rose 14.02.2 or 0.70% at 2016.02

Looking at some of the large-cap stocks :

• Shares of Meta Platforms continued their decline with the fall of -10.67 points or -2.41% to $432.62. It’s time reached $531.41back on April 5 . The earnings and forecasts were disappointing to investors last week.
• Amazon will announce its earnings after the close tomorrow. Its shares rose 0.75% today.
• Super Micro Computers rose $32.91 or 3.84% to $890.35. SMCI will announce their earnings after close tomorrow
• Microsoft shares fell $-4.07 or -1.0% to $402.28.
• Apple rose $4.20 or 2.48% at $173.50 on a analyst upgrade
• Tesla rose $25.76 or 15.31% to $194.05 after a surprise trip by Elon Musk to China over the weekend.

Dallas Fed manufacturing business index -14.5 vs -14.4 prior

• Small dip in Texas manufacturing survey

• General business activity -14.5 vs -14.4 prior
• Output +4.8 vs -4.1 prior
• Prices paid +11.2 vs +21.1 prior
• New orders -5.3 vs -11.8 prior
• Shipments +5.0 vs -15.4 prior
• Employment -0.1 vs +1.5

Comments in the report:

Food manufacturing

• We continue to see a slight strengthening in demand for our products. This demand, combined with the cost-saving initiatives that we implemented when demand softened in 2022–23 alongside inflation pressures on our core customers, has improved our outlook for the remainder of 2024 and 2025.
• We’re coming out of a seasonal low, and there seems to be a slight uptick in demand, despite prices for raw materials (and finished goods) increasing.
• The geopolitical environment is volatile. The economy remains stronger than anticipated, causing the Federal Reserve to delay interest rate cuts.
• Political instability and politicization have hampered growth. We are entering stagflation.

Textile product mills

• We have had a very strong quarter, particularly with our direct-to-consumer business. Wholesale business (and overall sentiment/mood from other wholesale vendors/partners/friends) is less encouraging, and many are noting slow sales (our wholesale/business-to-business is flat to slightly up). We feel great about our short-term outlook but are still not sure about our long-term outlook. Input prices are flat, and there is little change throughout the business as it relates to costs, delivery times, etc.

Paper manufacturing

• There has been a decrease in new orders for three weeks now. Currently, we think this will come around, but we get more concerned as time goes on.

Printing and related support activities

• We continue to be very busy with incoming orders up hugely for the first six months of our fiscal year compared with last year. We can’t really explain it, and while many in our industry are slow or just so, so busy, we are fortunate to have an abundance of work. We do hear about some serious general slowness in the market and because of that are very cautious about six months from now. We did just place an order for a very large capital expenditure machine that upgrades our existing line that was bought new in 1998. It will be installed in October 2024, probably when we are slow.

Nonmetallic mineral product manufacturing

• Inflationary pressures on raw materials and construction costs are driving up the cost of public projects. This is causing states to delay or scramble for funding for projects that have long lead times.

Primary metal manufacturing

• A large portion of our business is related to building and construction. Several of our customers build windows and doors for new houses, and this market remains off. Remodeling remains off as well, with both [areas of slowdown] tied to interest rates and the cost of new homes. Another negative factor is the significant increase in imports from 15 countries that are dumping product into the U.S. Countervailing duties and tariffs are pending, but if they are not high enough to stop imports, our industry will continue to lose jobs, and plants will be shut down.
• Legacy business has declined over the past year, and we do not see it returning anytime soon. Our company has taken a strategy to diversify our processes to allow new markets and products. This is possible through increased capital expenditure.
• Fewer governmental regulations would lower our cost of doing business. An example is the 332 report, which we must fill out for the U.S. government; it has no value for us, just expense.

Fabricated metal product manufacturing

• Annual merit-based pay increases for production employees take effect in April each year, which explains the wages increase. Demand is down versus the prior year but is holding steady. Several large capital projects are expected to be completed and invoices received in fourth quarter 2024.

Machinery manufacturing

• Business is in a state of flux. The elections I believe are affecting business decisions, and we expect this to continue for the foreseeable future.
• Business is extremely slow, and we see no signs of improvement. We think it will stay slow until after the presidential election, after which, we will either have four more years of slow business or an improving economy.
• I keep thinking we’ll hit bottom and either level out or turn up, but we keep pushing those hopes out a month, and another month, and another. Forecasting and predicting have become rather challenging. We’ve got a few small jobs here and there, but nothing significant and nothing sustainable. It could wind up being a long, hot, slow summer for our operation.

Computer and electronic product manufacturing

• We are close to an inflection point of a cyclical bottom. Customers have been reducing inventory over the last several quarters, which looks to be coming to an end in most markets.
• Business has not been this slow since COVID, and I’m worried. A lot of competitors have been purchased by venture capitalists, and it is changing the way bids come out. We cannot compete in this changed industry. Being women-owned and a DBE [Disadvantaged Business Enterprise] is not helping.
• Industrial manufacturing is showing signs of positivity due to the possibility of an interest rate decrease. Please do it. Manufacturing is really hurting.
• Customer orders have dropped. The indication is the economy is hurting spending in our area specifically. Customer uncertainty is worsening.
• Business is generally good, but we’re starting to see more customer resistance to prices. Our costs have increased dramatically over the last two years, and we have customers asking to hold prices to last year’s level, which we just can’t do. We continue to make capital investments to improve productivity and reduce unit labor cost.

Transportation equipment manufacturing

• The business and political environment is terrible.

Furniture and related product manufacturing

• Consumer confidence for consumer goods has noticeably worsened.

US Treasury refunding: $243 billion vs $202 billion prior

• The updated estimate for Treasury borrowing

• Initial Treasury estimates for the April-June quarter were $202 billion
• The previous estimate was $202 billion from late January
• Expects to borrow $847 billion in July-Sept quarter, assumes end-Sept cash balance of $850 billion
• In Jan-March quarter borrowed $748 billion, ended with cash balance of $775 billion

The announcement says:

The borrowing estimate is $41 billion higher than announced in January 2024, largely due to lower cash receipts, partially offset by a higher beginning of quarter cash balance.

The release highlights that the cash balance at the end of Q1 was $25b higher than anticipated. This suggests more spending in Q2, lower revenues or a pull-forward in spending from Q3/4. 

ANZ sees downside risks for Friday’s non-farm payrolls report

• ANZ also sees modest support from the FOMC

Key Points:

• Weakening Employment Indicators: ANZ points out discrepancies in U.S. employment data, with the household survey suggesting weaker conditions than the headline nonfarm payrolls figures. The April Flash PMIs employment composite index dipped below 50, marking the lowest point since June 2020 and indicating significant softening in employment, which could foreshadow broader economic slowdowns.
• PMIs and Payroll Trajectory: While PMIs have not consistently predicted monthly payroll outcomes, ANZ notes that they generally track the broader trends in employment changes. The recent sharp decline in the employment index is particularly concerning as it might signal a forthcoming downturn in payroll numbers.
• Upcoming Employment Data: Further insights will be required to confirm these trends, with additional data points such as the Conference Board’s job differential gauge anticipated this week. These metrics will be crucial in solidifying expectations for the labor market ahead of the official payroll report.
• FOMC Meeting Outlook: The FOMC’s stance appears modestly supportive for the USD, driven by a shift toward more hawkish commentary from Fed officials during the pre-meeting blackout period. However, ANZ suggests that market pricing likely already reflects expectations for any hawkish statements from Chair Powell.
• USD Strategy: Given the potential for weaker payroll data and the anticipated impact of the FOMC meeting, ANZ leans towards a softer USD outlook heading into next week’s labor market update.

Conclusion:

With key employment data on the horizon and the FOMC meeting set to take place, ANZ advises caution regarding the USD’s position. Investors should prepare for potential volatility in the currency markets, particularly if employment indicators continue to show weakening and if the FOMC’s support does not exceed market expectations.

US Treasury set to update borrowing estimates

• Look for $202 billion

Treasury yields are 3-6 basis points lower today. That’s a good sign ahead of today’s refunding update.

BMO suggests small a chance the numbers could be lower:

We have no strong bias in this regard other than to observe that the solid Q1 underlying growth figures – as evidenced by final sales to domestic purchasers – bodes well for tax receipts which would lessen the need to meaningfully grow issuance in the near term.

Citi sees first Fed rate cut in July

• The firm had previously forecast the Fed to begin cutting rates in June

As for the entirety of the year, Citi sees the Fed delivering 100 bps worth of rate cuts in total. For some context, Fed funds futures are showing the odds of a July rate cut to be at ~34% currently. And only ~36 bps worth of rate cuts priced in for 2024.

Barclays says expect a hawkish Fed and Powell at this week’s FOMC meeting

• September or December a coin toss for the first rate cut

Barclays expect a pivot back to hawkish:

• “Inflation data have turnedd back up this year. And that will force Powell to become a little more hawkish again,”

While the potential for a June rate cut is well and truly off the table, Barclays say it could be as late as December:

• “We see September as being the earliest opportunity for the Fed to cut rates” and add that its almost as likely that the first cut comes in December

Barclays see only one cut this year:

• “We think that the level of rates still above 5% would be justified by year end”

JP Morgan, meanwhile:

• Fed intends “to keep policy in its current restrictive stance for as long as it takes to gain that confidence” (that inflation is coming down to target)

Commodities

Gold price edges lower

• Gold price edges lower on the back of persistent inflation concerns as data shows stubborn inflation in both Europe and America. 
• The precious metal has weakened amid expectations interest rates will remain higher for longer in the US. 
• The US Federal Reserve meeting in May could color the outlook for interest rates, impacting Gold price.  

Gold edged lower on Mondays trading in the $2,330s an ounce, on the back of inflation concerns caused by recent data from the US and Europe which showed stubbornly high inflation persisting. 

In Europe, HICP data, which is the European Central Bank’s prefered inflation gauge, showed inflation in both Germany and Spain failed to come down in April. This follows data out of the US last week that indicated inflation remaining high in the first quarter. 

Silver may be forming a Bear Flag price pattern

• Silver price is still probably forming a Bear Flag pattern on the 4-hour chart. 
• The pattern indicates a probable continuation of the bearish trend to targets substantially lower. 
• Support from a long-term support and resistance level at $25.80 is likely to provide a floor for any sell-off. 

Silver may have formed a Bear Flag pattern on the 4-hour chart with negative implications for the precious metal’s price going forward. 

After a steep decline between April 19-23 Silver price bounced off support at $26.70 and has since consolidated into a rectangle pattern. Taken together with the prior sell-off the whole formation resembles a Bear Flag pattern.  

According to technical law, the expected move down from a Bear Flag equals the length of the preceding “pole” or a Fibonacci ratio of the pole extrapolated from the flag pattern down. In this case the pole is the decline between April 19-23. 

The Fibonacci 0.618 ratio of the pole gives a conservative target at roughly $26.30. If Silver price falls the whole length of the pole (Fib. 1.000), however, it will reach a more optimistic target of around $25.50. 

Tough support from a long-term upper range boundary line at about $25.80, however, is likely to offer support before Silver price reaches the lower target for the Bear Flag. 

A break below the $26.69 low of April 23 would be required to confirm a breakdown of the Bear Flag towards its targets.  

Natural Gas jumps to session’s high after US Opening Bell

• Natural Gas price rallies on Monday despite bearish headlines.
• US Gas storages are near full with California already ahead of next heating season.
• The US Dollar Index fully recovers from early decline after Yen intervention. 

NatGas prices was ticking up above $2 on Monday, showing a distorted picture of fundamentals against correlations. Fundamentally, Gas prices are expected to retreat a little with news that points to higher supply and lower demand, a textbook combination for lower prices. On the demand side,  Europe is about to face a warm weather front, slashing the demand for Gas in the continent. Adding to this, more supply is likely coming online as the US Freeport Liquified Natural Gas (LNG) plant overcomes some of its technical problems, which have weighed on production for the last few months.  

Natural Gas is trading at $2.06 per MMBtu at the time of writing.  

Oil prices fall on hopes for a political solution in Gaza

• Ceasefire in the works?

CNN reports that Hamas is considering a new framework proposed by Egypt that calls for the group to release as many as 33 hostages kidnapped from Israel in exchange for a pause in hostilities in Gaza. A slow release over several weeks and the release of Palestinian prisoners could lead to a durable calm in the area.

The news has prompted some selling in oil today with WTI down $1.26 to $82.59, which is the lowest since Thursday.

Gold holds consolidative mood above $2,300, eyes on the Fed later this week

• How is price action shaping up in gold at the moment?

After coming off the boil in trading last week, gold is in a bit more of a consolidative mood now. Buyers are able to hold price above $2,300 and in search of a third straight day of gains. Still, this is only a bit part recovery from the drop from above $2,400 on 19 April. 

We are seeing traders duke it out in the near-term. Break below the 100-hour moving average and sellers will regain control. However, they will need to firstly look for a stronger push under the $2,300 mark. A daily close below that will be much needed to reaffirm any further downside, at least in the short-term.

As for buyers, break above the 200-hour moving average and the near-term bias will shift to being more bullish again. And that could invite a retest of the $2,400 mark once more.

EU News

European equity close: Minimal moves

• Small changes for European bourses to start the week

Closing changes:

• Stoxx 600 +0.1%
• German DAX -0.1%
• UK FTSE 100 +0.1%
• French CAC -0.2%
• Italy MIB +0.1%
• Spain IBEX -0.4%

Eurozone April final consumer confidence -14.7 vs -14.7 prelim

• Latest data released by the European Commission – 29 April 2024

• Economic confidence 95.6 vs 96.7 expected
• Prior 96.3
• Industrial confidence -10.5 vs -8.5 expected
• Prior -8.8
• Services confidence 6.0 vs 6.5 expected
• Prior 6.3

Germany April preliminary CPI +2.2% vs +2.3% y/y expected

• Latest data released by Destatis – 29 April 2024

• Prior +2.2%
• CPI +0.5% vs +0.6% m/m expected
• Prior +0.4%
• HICP +2.4% vs +2.3% y/y expected
• Prior +2.3%
• HICP +0.6% vs +0.6% m/m expected
• Prior +0.6%

Bavaria April CPI +2.5% vs + 2.3% y/y prior

• The latest German state inflation readings for the month of April 2024

• Hesse CPI +1.9% vs +1.6% y/y prior
• North Rhine Westphalia CPI +2.3% vs +2.3% y/y prior
• Saxony CPI +2.7% vs +2.5% y/y prior
• Brandenburg CPI +3.0% vs +2.8% y/y prior
• Baden-Wuerttemberg CPI +2.1% vs +2.3% y/y prior

Spain April preliminary CPI +3.3% vs +3.3% y/y expected

• Latest data released by INE – 29 April 2024

• Prior +3.2%
• HICP +3.4% vs +3.4% y/y expected
• Prior 3.3%

ECB’s De Guindos: We are heading in the right direction on inflation

• Comments from De Guindos

• Wage growth shows signs of easing
• 2% price goal to be hit in 2025 but substantial risks

ECB’s Wunsch: July rate cut is not a done deal

• Remarks by ECB policymaker, Pierre Wunsch

• We are going with at least two rate cuts this year, barring any bad news
• We still want policy to remain a little restrictive
• Cutting rates again in July could be interpreted to mean we are going to cut at every meeting
• And that would lead to repricing that might go too far
• July decision should be about managing expectations
• I’m very comfortable with rate cut in June
• But if we only do two or three rate cuts, then should not communicate that at every meeting
• Would be very surprised if ECB does more than 25 bps rate cut in June

Asia-Pacific-World News

Data released over the weekend showed China’s industrial profits fell y/y in March

• Profits fell 3.5% year-on-year in March 2024

China’s industrial profits March 2024 fell 3.5% y/y, this slowed the gains made for the quarter compared to the first two months.

• In January – February industrial profits rose 10.2% y/y.
• But for Q1 as a whole, profits of China’s industrial firms rose 4.3% to 1.5 trillion yuan.

Chinese brokerage CICC cutting investment banking base pay by 25%

• Economic woes in China hitting onshore executives at China International Capital Corp

China International Capital Corporation (CICC) is a Chinese multinational investment management and financial services company. Its owned in part by state interests.

Base pay investment bank salaries are to be cut, by up to a quarter. Will impact around 2,000 staff.

Factors cited include:

• cost reduction
• slow economy
• reduction in IPOs
• Beijing’s austerity drive

Info via Reuters report.

Elon Musk met Premier Li Qiang in an unannounced trip to China

• Musk wants data from China sent to the US

China is Tesla’s second-biggest market, so Musk visiting should not come as much surprise.

Media reports have it that the main purpose of Musk’s visit was to discuss enabling autonomous driving mode on Tesla cars in China:

Musk wants to enable Full Self Driving (FSD) in China and transfer data collected in the country abroad to train its algorithms

FSD is available in countries including the US but not, so far, in China.

Musk met with Chinese Premier Li Qiang. Musk said Tesla was willing to engage in deep cooperation with China to “achieve more win-win results”.

Li told Musk the Chinese market would “always be open to foreign-funded firms.”

Chengdu (major city in southwest China) has removed home-buying curbs

• Effort to boost demand and prop up the property sector

A bit ofweekend news from China, where Chengdu, a major city in the southwest China, has removed home-buying restrictions.

Similar moves have been made already across many cities in China in efforts to bolster demand for real estate and, in turn, stimulate economic growth. Chengdu is the capital city of Sichuan province, it will no longer review home buyers’ qualification for real estate purchase starting from April 29

PBOC sets USD/ CNY reference rate for today at 7.1066 (vs. estimate at 7.2579)

• PBOC CNY reference rate setting for the trading session ahead.

PBOC injects 2bn via 7-day RR, sets rate at an unchanged 1.8%

• 2bn yuan of RRs mature today
• thus net neutral on the day in OMOs

Markets in China will be closed on Wednesday, Thursday and Friday this week

• China celebrates Labour Day holidays from May 1 to 5, inclusive

During Labour Day holidays, travel volume is high. China’s prime tourist destinations are frequently visited.

Markets in China are closed for the holiday. 

FT on rising sovereign yields in China:

The FT (gated) says

• Chinese regulators warn against Silicon Valley Bank-style meltdown
• Regional banks have been piling into long-dated sovereign bonds since January

CE analysts forecast an RBA 25bp interest rate hike at its next meeting, May 7

• Overshooting inflation citied

Capital Economics are forecasting a Reserve Bank of Australia rate hike on May 7. In brief:

• The case for the RBA to tighten policy is growing increasingly compelling. Underlying inflation is all but certain to overshoot its current forecast.
• Services inflation, which has long been a concern for the Bank, is also proving to be quite persistent.
• Meanwhile, the labour market has largely stopped loosening and green shoots are starting to emerge in the economy.
• As a result, we now expect the RBA to hike rates by another 25bp when it meets

Japan top currency diplomat says will take appropriate action against excessive FX moves

• Kanda continues to offer no comment about any intervention today though

• Speculative, rapid and abnormal FX moves have had bad impact on the economy
• Such moves are unacceptable
• No specific level in mind on an appropriate level for exchange rate
• Will only disclose if there was FX intervention at the end of May

Japan PM Kishida’s party lose 3 key by-election seats

• Kishida’s LDP didn’t even run in 2 of these

The main opposition Constitutional Democratic Party of Japan won big on Sunday elections, scoring victories in three key by-elections, including a closely watched race in a district that was long a ruling Liberal Democratic Party stronghold.

This does not auger well for Prime Minister Fumio Kishida. Kishda concurrently serves as LDP president and this is not seen as a vote of confidence in him. Kishida’s term as prez of the party expires in September and this will argue against him being reappointed , according to pundits.

The CDP won in

• Shimane No. 1 district
• Nagasaki No. 3 district
• Tokyo No. 15 district

The LDP chose not to field candidates in the Nagasaki and Tokyo by-elections. But it lost Shimane, a long time bastion of LDP support.

Reminder, Japanese markets are closed today, Monday, 29 April 2024

• There are plenty of market holidays in Japan in the days ahead, keep your eye on the yen.

Japan will be on holidays, with market closures, on :

• Monday 29 April 2024
• Friday, May 3
• Monday, May 6

Cryptocurrency News

Bitcoin dips to a 10-day low as the halving bulls wait

• The post-halving bump fails to materialize

Bitcoin is under pressure today, though it’s off the lows. It’s down 2% to $62,750 after trading as much as $1000 lower and to the worst levels since April 19. That was the day before the halving, which hasn’t been the catalyst that bulls hoped. However bitcoin might not be as weak as it appears. Tech stocks have struggled lately and the correlation with bitcoin is high.

Maker loses 9% in past 24 hours as whales sell MKR for profits

• Maker’s large wallet investors sold $10.2 million worth of MKR for profits, early on Monday. 
• A hedge fund recently announced its position in Maker, as the chain captures nearly 40% DeFi profits on Ethereum.
• MKR price wiped out over 9% of its value in the past 24 hours. 

Maker (MKR) wiped out 9% of its value in the past 24 hours. Data from crypto intelligence tracker Santiment shows that large wallet investors are taking profit on their MKR holdings, likely driving down the asset’s price. 

Trust Wallet with over 100 million users back on Google Play Store after temporary removal

• Trust Wallet informed users of its removal from Google Play Store on Monday, this development affected Android users. 
• The decentralized wallet says that it submitted an appeal to Google, the removal was temporary and the app was restored. 
• Trust Wallet has over 100 million users, allowing traders to buy, sell and store their digital assets. 

Trust Wallet is a non-custodial software wallet that allows traders to send, receive, exchange and hold digital assets. Users can hold cryptocurrencies and NFTs in their Trust Wallets. The wallet disclosed its removal from Google’s application store, Play Store, early on Monday. 

Google temporarily removes Trust Wallet from its Play Store 

Trust Wallet announced that Google had temporarily removed the Trust Wallet application from the Play Store, limiting access to Android users. The tech giant had previously notified Trust Wallet of the potential action, after which the dApp submitted an appeal weeks ago. 

ICYMI Swiss National Bank Chairman Jordan says wary about buying Bitcoin

• Jordan responding to calls to sink some SNB reserves into crypto

Swiss National Bank Chairman Thomas Jordan spoke on Friday, saying the SNB remains wary about buying bitcoins.

His remarks come in response to this:

Jordan:

• “We have not yet decided that we want to invest in bitcoin. Actually for good reasons”
• “Currency reserves are international payments. They have to be liquid. They have to be sustainable. And we have to be able to sell and buy them.”

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