Round up of today's market news *

North American News

US Stock Market Sees Mixed Results as S&P 500 Maintains Dead Heat, Ending the Day Unchanged

Nasdaq down marginally

In today’s US stock market session, the S&P 500 index epitomized a ‘dead heat,’ closing the day virtually unchanged, with a minuscule dip of just -0.05 points. In contrast, the Dow Jones Industrial Average charted a positive trajectory, registering gains, while the Nasdaq Composite Index trended in the opposite direction, experiencing a downturn. This mixed performance underscores the nuanced landscape of contemporary market movements, reflecting diverse influences on different sectors and investor sentiments.

The final numbers are showing:

Dow Industrial Average average rose 172.13 points or 0.44% at 39086.40
S&P was unchanged at 5187.66
NASDAQ index was down 29.80 points or -0.18% at 16302.76

The small-cap Russell 2000 felt -9.51 points or -0.46% at 2055.13.

Some of the losers today included:

Shopify tumbled -18.48% after earnings and guidance disappointed
Uber fell -5.68% after it announced its earnings
Roblox fell -3.75%
Paypal fell -3.20%
Snap fell -2.28%
Intel fell -2.22%

Some winners today included:

Emerson +4.91%
Trump Media, +3.34%
Boeing, +2.05%
JPMorgan +2.02%
Pfizer, +1.82%
Taiwan Semiconductor, +1.77%

US treasury auctions off 10-year yields at high yield at 4.483

WI level at the time of the auction 4 473%

High Yield: vs six-auction average 4.276%
WI level at the time of the Auction 4.473%
Tail: 1.0 bps vs six-auction average 0.9 basis points
Bid-to-Cover Ratio: 2.49X vs six-auction average 2.49x
Dealers: 15.73% vs six-auction average 16.9%
Directs (a measure of domestic buyers):18.74% vs. six-auction average 17.0%
Indirects (a measure of international buyers): 65.52%vs. six-auction average 66.1%

Atlanta Fed GDPNow jumps to 4.2% versus 3.3% last

Big jump in Q2 growth from the Atlanta GDP model

In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 4.2 percent on May 8, up from 3.3 percent on May 2. After recent releases from the US Bureau of Economic Analysis, the US Census Bureau, the Institute for Supply Management, and the US Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and second-quarter real gross private domestic investment growth increased from 3.2 percent and 4.1 percent, respectively, to 3.9 percent and 6.8 percent, while the nowcast of the contribution of the change in real net exports to second-quarter real GDP growth decreased from -0.05 percentage points to -0.10 percentage points.

US March wholesale inventories (revised) -0.4% versus -0.4% preliminary

US wholesale inventories for March 2024

Prior month +0.4%
wholesale human toys for March comes in at -0.4%, unchanged from the preliminary release. Last month the inventories rose +0.4%.
Wholesale sales -1.3% after a 2.0 percent gain last month (revised from 2.3%). Weakest since January when it was down -1.8%
Sales came in at $662.8B
Wholesale sales were up 1.4% compared to March 2023
The March inventories/sales ratio for merchant wholesalers, except manufacturers’ sales branches and offices, based on seasonally adjusted data, was 1.35. The March 2023 ratio was 1.40.

US MBA mortgage applications w.e. 3 May +2.6% vs -2.3% prior

Latest data from the Mortgage Bankers Association for the week ending 3 May 2024

Prior -2.3%
Market index 197.1 vs 192.1 prior
Purchase index 144.2 vs 141.7 prior
Refinance index 477.5 vs 456.9 prior
30-year mortgage rate 7.18% vs 7.29% prior

US Justice Dept is examining if Tesla permitted wire and securities fraud in self driving

This is according to Reuters

The US Justice Department is examining if Tesla permitted wire and securities fraud in their self driving claims.

Shares of Tesla currently trade down $6.67 or -3.76% at $171.12.

Morgan Stanley pushes back Fed rate cut forecast to September

The firm previously saw the Fed cutting in July

On the change, Morgan Stanley notes that “a reversal in key components points to disinflation ahead, but given the lack of progress in recent months it will take a bit longer for the FOMC to gain confidence to take the first step”. This fits with what traders are looking at as well, with the odds of a September rate cut seen at ~82% currently. The total rate cuts priced in for the year is at ~44 bps, not much changed from after the US jobs report last week.

Feds Collins: Expects demand will need to slow to get inflation to 2%

Boston Fed President Collins speaking
Expects demand will need to slow to get inflation to 2%.
Fed policy well-positioned for current Outlook.
Monetary policy is moderately restrictive.
There are risks to cutting rates too soon.
Doesn’t expect productivity jumped to be persistent.
Firms well-positioned to absorb faster wage growth.
Recent inflation setbacks are not a surprise.
Optimistic Fed can get 2% inflation in reasonable timeframe.
Economy is robust job market coming into better balance.
Very strong job market has bolstered consumer spending
Expect some factors underpinning economic resilience will wane
Current monetary policy should slow economy.
It is to soon to tell just how restrictive monetary policy is.

Fed’s Cook: Households remain resilient but watching rising delinquency rates

Comments from the Fed’s Lisa Cook
Firms have ample earnings to cover debt payments
Financial firms well positioned to absorb shocks
Overall risk from commercial real estate considered sizable but manageable
Growth of private credit likely has not hurt the financial system’s resilience

Commodities

Gold edges lower amid a strong dollar

Gold trades steadily above $2,300, minor shift despite rising US Treasury yields and strong USD.
Focus on upcoming US data: unemployment claims, University of Michigan Consumer Sentiment, Fed speeches.
China’s central bank boosts Gold reserves for 18th consecutive month, reflecting continued demand amid global economic uncertainty.

Gold price hovers around familiar levels on Wednesday during the North American session amid rising US Treasury yields and a strong US dollar. The economic docket in the United States remains scarce, with traders awaiting unemployment claims on Thursday, followed by the University of Michigan (UoM) Consumer Sentiment survey on Friday.

The yellow metal trades at $2,312, down a minimal 0.02% and virtually unchanged. During the week, market players remained laser-focused on speeches by Fed officials amid growing speculation that the US central bank would lower interest rates. Lower interest rates usually benefit the golden metal, which remains trading above the $2,300 threshold.

Gold price tumbles below $2,320 as US yields climb

Gold prices fell amid lower US Treasury yields and a strong US Dollar. The US 10-year Treasury note is yielding 4.49%, up seven basis points (bps) from its opening level. The US Dollar Index (DXY), which tracks the Greenback’s performance against six other currencies, is up 0.16% to 105.55.
Last Friday, April’s US NFP missed estimates and trailed March’s figures. The Institute for Supply Management (ISM) PMIs in the manufacturing and services sectors entering contractionary territory might undermine the US Dollar, a tailwind for the golden metal.
Nevertheless, recent hawkish comments by Minneapolis Fed President Neel Kashkari, who said that the Fed might stay put on interest rates and opened the door to raising the fed funds rate if inflation doesn’t resume its downtrend, bolstered the Greenback.
Gold has advanced more than 12% so far in 2024, courtesy of expectations that major central banks will begin to reduce rates. Renewed fears that the Middle East conflict could resume between Israel and Hamas can sponsor a leg up in XAU/USD prices.
According to Reuters, the People’s Bank of China (PBoC) continued to accumulate Gold for the 18th straight month, adding 60,000 troy ounces to its reserves amid higher prices.
Following the US NFP data release, the CME FedWatch Tool shows that odds for a quarter-percentage-point cut in September increased from 55% before the report to 85%.
After the data release, Fed rate cut probabilities increased with traders expecting 36 basis points of rate cuts toward the end of the year.

Crude oil settles at $78.99

Up $0.61 or 0.78%

The price of crude oil is settling the day at $78.99. THa tis up $0.61 or 0.78%. The price is settling near the high for the day at $79.11 the low for the day came in at $76.92.

For the 4th day in a row, the price toyed with the 100-day MA and closed above the MA again. That 100-day MA is at $78.22. The 200-day MA is ta $80.06 and would be the next key target to get and stay above if the buyers are to wrestle back more control from a technical perspective from the sellers.

Weekly Crude oil inventory show a -1.362M drawdown vs -1.066M estimate

EIA weekly inventory data

Crude oil showed a large and expected drawdown of 1.362M vs expectations of -1.066M
Gasoline showed a unexpected build of 0.915M vs expected -1.255M drawdown
Distilates showed a build up 0.560M vs an expected drawdown of -1.098M
Cushing showed a build of 1.880M vs last week’s build of 1.089M

Oil price dip & the US is back on the bid to buy oil for Strategic Petroleum Reserve (SPR)

“Sell high, buy low” seems to be the DoE’s motto.

The U.S. Department of Energy’s (DOE) Office of Petroleum Reserves has announced:

a solicitation for up to 3.3 million barrels of oil for delivery to the Strategic Petroleum Reserve (SPR) in October

The DoE says:

purchasing oil … (at) a price around $79 dollars per barrel or below (is) far less than the average of about $95 per barrel DOE received for 2022 emergency SPR sales
DOE has already purchased a total of 32.3 million barrels of oil for an average price of $76.98

EU News

European major stock indices end the day mostly higher. German Dax &UK FTSE at records

Italy’s FTSE MIB declines on the day

Major European stock indices are closing mostly higher. The exception is Italy’s FTSE MIB which declined by -0.27%:

German DAX +0.37%
France CAC +0.69%
UK FTSE 100 +0.49%
Spain’s Ibex +0.65%
Italy’s FTSE MIB -0.27%

Germany March industrial production -0.4% vs -0.6% m/m expected

Latest data released by Destatis – 8 May 2024

Prior +2.1%; revised to +1.7%

Factory output in Germany slumped in March amid a fall in the production of consumer goods (-1.4%) and intermediate goods (-0.6%). That is offset slightly by the production of capital goods (+0.1%) while construction production increased by 1.0% compared to February.

Goldman Sachs have downshifted their GBP forecasts

GBP/USD and EUR/GBP forecasts

Goldman Sachs has cut its forecasts for GBP/USD to:

1.24 in 3 months, from 1.30 previously
1.24 in 6 months, from 1.33
1.28 in 12 months from 1.35

For EUR/GBP on the same time horizons:

0.85 from 0.81
0.85 from 0.79
0.84 from 0.80

Goldman Sachs cite the less dovish US backdrop:

“With hawkish policy repricing driving markets recently, the pro-cyclical backdrop for GBP is less supportive than it was earlier in the year”

ECBs Wunsch: I see a path for initiating rate cuts this year

ECBs Wunsch is on the wires saying:

I see a path for initiating rate cut this year.
Cost of remaining time for too long is seen to outweigh the cost of premature easing.
There is room to cut 50 basis points but when will depend on data.
The need for critical evaluation of ECBs modeling framework, role of models in policymaking.

ECBs Holzmann: Does not see a reason to lower rate to much too quickly

ECBs Holzmann is now speaking

Asia-Pacific-World News

US reportedly looks to curb China’s access to AI software

Reuters report, citing sources familiar with the matter

The report says that the Biden administration is eyeing a move to safeguard US AI from China, with initial plans to protect the most advanced AI models first and foremost. That will include core software of AI systems such as ChatGPT, according to the sources.

It is said that there will also be a regulatory push in order to restrict the export of proprietary or closed source AI models. This is largely believed to be an effort to try and slow down China’s development of cutting edge technology for military purposes.

Chinese state media is reporting the PBOC is likely to cut its RRR in Q2 2024

Reserve Requirement Ratio (RRR)

PBOC sets USD/ CNY mid-point today at 7.1016 (vs. estimate at 7.2202)

PBOC CNY reference rate setting for the trading session ahead
PBOC injects 2bn via 7-day RR, sets rate at an unchanged 1.8%

The RBA May meeting left the cash rate on hold: What’ll make the bank raise rates further

Reserve Bank of Australia response

In summary from Westpac’s response, … on what’ll prompt a further rate rise:

RBA Board … strengthened its rhetoric around upside inflation risks.
The statement highlighted that inflation is declining, but more slowly than expected. Services inflation is moderating only gradually, driven by a labour market that the RBA now assesses to be tighter than previously thought.
Monetary policy is assessed as restrictive, and the current level of the cash rate is seen as supporting continued progress on getting inflation back into the 2–3% target.
In the media conference, the Governor confirmed that both a rate hike and holding rates unchanged were discussed at the meeting, with the Board ultimately deciding to hold.
The forward-looking parts of the statement continue to emphasise that the Board is not ruling anything in or out in terms of future policy.

RBA response from Commonwealth Bank of Australia – Interest rate cut coming in November

Reserve Bank of Australia forecast

Via CBA, the main points from their response to the decision:

The Board did not reinstate its hiking bias and maintained the neutral stance it shifted to at the March Board meeting, as we anticipated .
The Board retains full optionality over the future path of the cash rate and has once again stated, “the path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out” .
The RBA has upwardly revised its end – 2024 inflation forecast from 3.2% to 3.8 % largely due to the stronger than anticipated Q1 24 outcome as well as higher petrol prices and some higher-than-expected services price inflation.
The RBA has retained its forecast for inflation to get back to the target range in H2 2025 and to be around the midpoint by mid-26.
The RBA’s forecast for GDP growth has been downwardly revised over 2024, but has been left unchanged over the rest of the forecast horizon.
The forecast profile for the unemployment rate has been lowered a touch and the peak in the unemployment rate over the forecast horizon is now 4.3% (from 4.4% previously).

Bank of Japan Governor Ueda says monetary policy does not seek to control forex rates

Bank of Japan Governor Ueda speaking in the Japanese parliament

Says monetary policy is aimed at impacting inflation, not the yen rate
will examine the impact of movement of the yen on the economy
FX moves could have a big impact on the economy and prices, and so the impact of FX volatility could be bigger than in the past
BOJ does not seek to directly control FX rates with monetary policy
FX moves are among various factors that affect the economy and prices
weak yen pushes up import costs, has an impact on the the economy in other ways, such as via demand
the Bank of Japan may need to respond via monetary policy if such impact for yen moves affects trend inflation
we expect trend inflation to gradually head towards 2%
We will adjust monetary policy as appropriate if trend inflation heads toward 2% as we project, or if we see risk of inflation overshooting our forecast
don’t see yen moves as having a big impact on trend inflation so far but there is risk impact could become significant in the future
BOJ won’t necessarily wait until inflation achieves our forecasts in 1.5 to 2 years to raise interest rates
If trend inflation moves as we project, we will adjust degree of monetary support accordingly
Inflationary pressure driven by positive wage-price cycle is strengthening

Japan finance minister Suzuki says he is watching FX movement with a sense of urgency

Same old from Suzuki

A bit of a verbal intervention effort from Suzuki, saying what he usually does:

watching FX movement with a sense of urgency
won’t comment on FX levels
rapid FX moves are undesirable
important for currencies to move in a stable manner reflecting fundamentals
will take a thorough response on FX
deeply concerned over the negative impact of weak yen
will closely watch market moves
will take action when needed
do not see an absolute line FX level we must defend, we are focused on fluctuations

Cryptocurrency News

Base attracts Lion’s share of Ethereum deposits among Layer 2 chains, beats Optimism in TVL

Base attracts the most capital among Ethereum Layer 2 chains, surpasses deposits to Arbitrum and Optimism.
Base has recorded an inflow of over 6,500 Ether, worth nearly $20 million this week.
The volume of daily contracts deployed on Base climbed to 9,000 on Tuesday.

Base, Coinbase’s Ethereum Layer 2 chain, has noted a spike in inflows to its blockchain this week. Nearly $20 million in Ether flowed into Base since Monday, nearly two times that of Arbitrum and five times as much as Optimism, its competitors in the scaling ecosystem.

Base chain has recorded an increase in the volume of daily contracts deployed; this implies the blockchain is gaining relevance and popularity among users.

Injective to launch Layer 3 chain on Arbitrum, INJ falls 4%

Injective is launching a Layer 3 network powered by Arbitrum’s Layer 2 scaling solution technology.
The DeFi protocol’s plan could attract capital from investors and improve the state of the INJ token in 2024.
INJ market capitalization shrunk to half of its $4.5 billion peak in 2023.

Injective (INJ) had a market capitalization of close to $4.5 billion at its peak in March 2023. At nearly half its market cap, the DeFi protocol has proposed a solution, likely to reinstate INJ to its former glory through higher relevance and fresh capital injection.

Injective plans to launch a Layer 3 chain on Arbitrum, using its Orbit toolkit that allows developers to build customizable chains.

Injective to launch Layer 3 chain powered by Arbitrum

Injective’s inEVM is compatible with the Ethereum Virtual Machine and connects Ethereum, Solana and Cosmos networks. The solution planned by Injective will use Arbitrum’s Orbit toolkit to customize a Layer 3 chain. The move could likely boost Injective’s importance among market participants, likely driving demand and fresh capital injection to the project.

Australian Tax Office targeting unreported crypto profits: 1.2m accounts investigation

ATO seeking data from exchanges

The Australian Taxation Office (ATO) is seeking personal data and transaction details from crypto exchanges to crack down on potential tax evaders.

Oversight of Crypto Tax Compliance ATO’s notice aims to identify individuals who may have failed to report their crypto transactions. It focuses on instances where crypto assets were exchanged or utilized for payments without proper tax declarations.

Standard Chartered US$200K BTC forecast – says Bitcoin will surge if Trump wins election

Stan Chart have a prediction for BTC as high as USD200,000

ICYMI on crypto, the latest from Standard Chartered this week. Analysts at the bank point to two reasons a Trump win would be positive for Bitcoin.

1. Trump would ease back on regulating crypto: “While officials in the Biden administration have taken a relatively tough stance on digital assets, Trump said in a March interview that if elected, he would not crack down on Bitcoin or other digital assets”

2. Trump’s lack of economic understanding would undermine the US and the USD:

Trump’s plan to hike tariffs and spend even more than the current administration will lead to higher inflation, causing investors to fell from US Treasuries and the USD, and seek shelter in alternatives, BTC being one.

Stan Chart maintain a $150K forecast for BTC by the end of 2024 and $200K by the end of 2025.

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Round up of today’s market news

ByBilals Tech