Round up of today’s market news

North American News

Market Retreats: Major Indices Dip Following Record Highs, Breaking Streak

• Nasdaq down -0.26% leads the way

Tuesday witnessed a notable feat in the US stock market as the NASDAQ index closed at a record level, heralding a positive start to the week. Subsequently, Wednesday saw a remarkable continuation of this upward trend, with both the S&P and Dow Jones Industrial Average also surpassing their previous record closing levels, culminating in a historic moment for all three major indices.

However, today’s trading session saw a shift in sentiment as the market struggled to maintain the upward momentum observed earlier. Despite initial gains, the major indices faltered as the day progressed, eventually closing lower. This retreat from the record highs achieved just the day before highlights the volatility and unpredictability inherent in today’s market landscape, leaving investors to navigate an environment marked by fluctuating fortunes and shifting dynamics.

The final numbers are showing:

• Dow industrial average -38.64 points or -0.10% at 39869.37.
• S&P index -11.05 points or -0.21% at 5297.09
• NASDAQ index -44.07 points or -0.26% at 16698.32.

The small-cap Russell 2000 fell -13.21 points or -0.63% at 2096.24.

US yields were higher today with the short end up the most:

• 2-year yield 4.795%, +6.0 basis points
• 5-year yield 4.404%, +4.9 basis points
• 10 year yield 4.380%, +2.5 basis points
• 30-year yield 4.518%, unchanged

US initial jobless claims 222K vs 220K estimate

• The weekly initial and continuing claims data for the current week

• Prior week 231K revised to 232K
• Initial jobless claims vs 220K estimate
• 4-week moving average of initial jobless claims 217.75K vs 215.250K last week
• Continuing claims 1.794M vs 1.785M estimate
• 4-week moving average of continuing claims 1.779M vs 1.780M last week

Atlanta Fed Atlanta Fed GDPNow Q2 growth estimate falls to 3.6% from 3.8% yesterday

• Atlanta Fed GDPNow growth estimate for second quarter 2024

In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 3.6 percent on May 16, down from 3.8 percent on May 15.After this morning’s releases from the US Census Bureau, the US Bureau of Labor Statistics, and the Federal Reserve Board of Governors, a decrease in the nowcast of second-quarter real gross private domestic investment growth from 7.3 percent to 5.6 percent was slightly offset by an increase in the nowcast of second-quarter real personal consumption expenditures growth from 3.2 percent to 3.4 percent, while the nowcast of the contribution of the change in real net exports to second-quarter real GDP growth increased from -0.09 percentage points to -0.06 percentage points.

US April housing starts 1.360m vs 1.420m expected

• US April 2024 housing starts data
• Prior was 1.321m (revised to 1.287m)
• Building permits 1.440m vs 1.485m expected
• Starts +5.7%
• Permits -3.0%

US import prices for April 0.9% vs 0.3% estimate

• US import and export prices for the month of April 2024
• Prior month import prices 0.4% MoM revised to 0.6%.
• Prior month export prices 0.3% MoM revised to 0.1%
• Import prices for April 0.9% vs 0.3% estimate
• Export prices for April 0.5% vs 0.4% estimate
• Import prices for April 1.1% vs 0.4% last month. Highest since December of 2022
• Export price YoY -1.0% vs -1.1% estimate.

US April industrial production 0.0% vs +0.1% expected

• US April industrial production

• Prior was +0.4% (revised to +0.1%)
• Manufacturing output -0.3% vs +0.1% exp (prior revised to +0.2% vs +0.5%)
• Capacity utilization 78.4% vs 78.4% exp
• Prior capacity utilization 78.4% (revised to 78.5%)

May Philly Fed +4.5 vs +8.0 expected

• May 2024 Philadelphia-area manufacturing survey

Philly Fed business index:

• Two-year high
• Prior was +15.5 (was a two-year high)
• Six-month index +32.0 vs +34.3 prior
• Employment: -7.9 vs -10.7 prior
• New orders: -7.9 vs +12.2 prior
• Prices paid: +18.7 vs +23.0 prior
• Prices received: +34.4 vs +5.5 prior
• Shipments: -1.2 vs +19.1 prior
• Unfilled orders: -11.5 vs +0.8 prior
• Delivery times: -0.8 vs -9.4 prior
• Inventories: -10.1 vs -8.9 prior
• Avg employee workweek: -8.3 vs -18.7 prior

BofA: April CPI provides some relief; we still see first Fed rate cut in December

• Bank of American wants to see continued improvements in inflation

Bank of America maintains its prediction for the first rate cut by the Federal Reserve in December 2024, despite a slight softening in the April Consumer Price Index (CPI).The April CPI showed improvements but not enough to significantly shift the Fed’s cautious stance on inflation.

Key Points:

• April CPI Details: The headline CPI rose by 0.3% month-over-month, slightly below expectations, with the year-over-year rate decreasing to 3.4%.Core CPI increased by 0.3% month-over-month, resulting in a year-over-year rate of 3.6%.
• Core Goods and Services: Core goods prices fell, led by declines in new and used car prices, while core services, particularly rents, remained high but showed signs of slight moderation.
• Long-term Inflation Outlook: Despite the positive report, inflation levels remain above the Fed’s 2% target.The expected core PCE inflation rate is projected at 0.23% month-over-month for April, indicating a gradual decline but still elevated.

Fed’s Barkin: Companies are still saying there is ‘no crime’ in raising prices

• Barkin on CNBC

• Services in particular still feel they can raise prices
• Latest retail sales point to ‘good but not great’ consumer spending
• CPI still not where the Fed is trying to get
• CPI ‘is not terrible’
• The overall labor market to me is normalizing
• Jobless claims are historically low but edging up
• The except in the labor market is skilled trades, which are quite tight
• There is a lot of catch up in services now, cities insurance
• I still there is a lot of movement on the services side but it will take time
• I think we’re on the right path but it’s going to take a bit more time
• The question now is how long rates need to be held where they are to get the required impact on inflation
• Labor force participation for women under-50 is at the highs, perhaps because of remote work
• Labor force participation for women over-65 is dropping, perhaps as they take care of grandchildren

Fed’s Mester: It will take longer to gain confidence inflation moving towards 2%

• Comments from the Cleveland Fed President

• Monetary policy is well positioned as the Fed reviews more data
• Risks to inflation side of the mandate have increased
• Downside risks to growth and hiring have fallen
• Expects gradual progress on lowering inflation
• Labor market conditions are strong
• Current policy will lower inflation
• Welcomes the latest CPI data as a sign of cooling inflation
• No decision made on fed digital currency.
• Fed won’t do digital currency without Congress involvement.
• US fiscal path not sustainable, it must be brought under control.
• US fiscal issues are not an immediate issue.
• Politics are not part of fed policy debates.

White House Economic advisor Brainard speaking on China

• Comments come after new tariffs imposed by the Biden administration

White House economic advisor Lael Brainard is on the wires saying:

• China’s industrial capacity, and exports in some sectors are so large they can undermine the viability of investments in the US
• a new cycle of Chinese policy driven overcapacity in exports urges could have adverse consequences for US workers

Fed’s Williams: Doesn’t see need for a rate cut in the near-term

• Remarks by NY Fed president, John Williams

• Also doesn’t see any current need to raise interest rates
• April CPI was a ‘positive development’ for inflation dynamics
• Overall trend for slowing inflation looks good
• But still lacks confidence that inflation is moving sustainably to 2%
• Monetary policy is restrictive, ‘in a good place’
• Jobs market is still tight but excesses are waning

Kansas City Federal Reserve announce August 22 – 24 for the Jackson Hole symposium dates

• Annual event attended by many heads of global central banks

The Kansas City Federal Reserve branch host the annual symposium at Jackson Hole.

• KC Fed have announced the dates as August 22 to 24
• The topic of the event is “Reassessing the effectiveness and transmission of Monetary Policy”

Fed Goolsbee says if housing inflation decrease seen in April CPI continues, that’s great!

Federal Reserve Bank of Chicago President Austan Goolsbee in a radio interview

• If decrease in housing inflation seen in april cpi data continues, that’s great — marketplace radio interview
• I’m still optimistic, and my read of the evidence is that house price inflation comes down substantially

BlackRock on inflation and the Fed

BlackRock is the world’s largest asset manager.The firm’s chief investment and portfolio strategist, Americas, Gargi Chaudhuri is taking a circumspect view of the better CPI report:

• CPI came in (@0.3% m/m and 3.4% y/y) better than expected (0.4 and 3.4 respectively)
• but higher-for-longer interest rates from the Federal Reserve are likely to be still necessary
• “This print reiterates that while inflation is moving in the right direction, a more restrictive policy stance with interest rates remaining on pause is the appropriate monetary policy for this macroeconomic environment”

Commodities

Gold dips

• Gold slips 0.24%, influenced by rising US Treasury yields, firm US Dollar.
• Mixed US economic data includes higher jobless claims and mixed housing data.
• Fed officials highlight ongoing inflation challenges and steady monetary policy stance.

Gold prices fell in the mid-North American session on Thursday, below $2,390.Wednesday’s inflation report in the United States sponsored the golden metal rally, but Thursday’s data was a mixed bag, which could likely trigger some profit-taking ahead of the weekend.

Silver rally pauses as ‘doji’ emerges

• Silver trades at $29.60, posting slight losses of 0.04% amid mixed US economic data.
• Technical outlook shows a ‘doji’ pattern, signaling indecision among traders.
• Silver must stay above $29.00 to challenge the YTD high of $29.79 and further resistance levels at $32.15 and $35.40.

Silver’s advancement paused on Thursday, as the grey metal posted minuscule losses of 0.04%, exchanging hands virtually unchanged. Jobs data, along with mixed housing data and the lack of strength in the manufacturing and industrial sectors. Therefore, the grey metal dropped and traded at $29.60 at the time of writing.

Crude oil futures for July settle at $78.74. June contract settled at $79.,23

Crude oil futures are settling the day at $78.74 for the July contract, up $0.58 or 0.74%.

The June contract settled at $79.23. Once again the price traded above and below its 100-day moving average at $78.51. The price also traded below its 200-day moving average currently at $79.98 for the 12th consecutive day.

Natural Gas keeps stretching higher in fierce rally

• Natural Gas prices are up over 2.5% on the day.
• China’s biggest LNG buyers placed orders to further expand its LNG tanker fleet.
• The US Dollar Index sinks after US CPI shows the economy is back on track in its disinflationary path. 

NatGas is unchained and prints again near 2.6% gains on Thursday, reaching the highest level in four months and breaking another important technical level on more headlines that China is cornering the Gas markets. China National Offshore Oil Corporation has placed an order for 12 ships worth 16 billion for Liquified Natural Gas LNG tankers. This adds to news that several trading hubs such as London have confirmed that more Chinese participants are buying up contracts at local European and US Gas markets. 

Ahead The EIA

• While US Gas prices are going through the roof, European Gas markets are rather trading steadily in a tight range with sluggish demand in play with Europe still carrying robust stocks into its refueling season.
• For nearly four months, no LNG carrier has passed through the Red Sea ever since the Houthi rebel attacks started to take place, Bloomberg reports.
• Since the pandemic, China is back on top of the leaderboard in importing LNG, measuring around 71.3 million tons last year. 
• Continuing disruptions in the Red Sea are forcing LNG vessels to reroute around Africa to transport fuel between the Atlantic and Pacific ports. As a consequence, Asian buyers only have a limited pool of suppliers available to buy LNG from unless they’re willing to pay for higher shipping costs.
• Around 14:30 GMT, the weekly storage change from the Enery Information Administration will be released for Natural Gas. Previous number was at 79 billion cubic feet, with a draw down expected to 76 billion cubic feet for this week.

ANZ sees a scenario where oil prices could return to $100 per barrel

• The firm says that an extension to OPEC+ production cuts could produce “eye-watering deficits”

And that in turn would lead oil prices to push higher to $100/BBL. On the flip side though, ANZ is arguing that should OPEC+ choose to remove production cuts, their fair value model would suggest that prices could fall to as low as $75/BBL. For now though, they are seeing the oil market move into a deficit stage next. That is the basis for their forecast of $90/BBL for the second half of this year.

EU News

Major European indices close the session mostly lower

• European traders look for the exits

The major European indices are closing the day most lower. A snapshot of the closing levels shows:

• German DAX, -0.76%
• France CAC, -0.61%
• UK FTSE 100, -0.20%
• Spain’s Ibex, -0.61%
• Italy’s FTSE MIB +0.04%

The benchmark 10 year yields are higher on the day:

• Germany 2.45%, +3.2 basis points
• France 2.949%, +3.2 basis points
• UK 4.063%, +0.5 basis points
• Spain 3.210%, +2.7 basis points
• Italy 3.752%, +4.1 these points

Italy April final CPI +0.8% vs +0.9% y/y prelim

• Latest data released by Istat – 16 May 2024

• Prior +1.2%
• HICP +0.9% vs +1.0% y/y prelim
• Prior +1.2%

ECB’s Kazāks: The conditions for a June rate cut are there

• ECB policymaker, Mārtiņš Kazāks, comments

• It would take a massive economic surprise for the ECB not to move in June
• Relatively comfortable with market pricing of rate cuts, no need to disturb that
• Rate cuts should be gradual and easiest to move at quarterly meetings when projections are released

ECB’s Centeno: We have the expectation to start rate cuts in June

• Remarks by ECB policymaker, Mario Centeno

• Prefers a gradual rate cut path
• Inflation is falling and it is a sustained fall
• Decisions are taken meeting by meeting

BOE poll: A rate cut in June versus August is a close call

• Slight majority see the BOE waiting until August

Economists are split on whether the Bank of England will hike next month or wait until August, according to a Reuters poll.

They surveyed 71 BOE economists rate cut expectations are:

• 38 for August
• 31 for June
• 2 for September

Quarterly GDP is seen rising 0.3% each quarter through 2025.

BOE’s Greene: The burden of proof lies in inflation persistence continuing to wane

• Remark by BOE policymaker, Megan Greene

• Data released ahead of our next meeting will give clearer indication of how far along the “last mile” we have come

Asia-Pacific-World News

The news out of China is supporting the Australian dollar, and there’s more on Friday

• Will Friday’s news be as supportive?

Via Nomura:

• It’s been our view that Beijing will eventually have to address concerns about homes being delivered
• Beijing should reach into its own pockets, even with printed money from the People’s Bank of China, to support the completion of new homes that were pre-sold by developers
• expects that eventually Beijing will set up a special agency and set aside a special fund for such a rescue

Comments via CBA on what we have so far:

• reports have not been confirmed so it is unclear if the purchases will go ahead

And, coming up on Friday, China activity data:

• We expect the Chinese activity data to show a continued recovery led by industrial production and public investment, supporting CNH

PBOC sets USD/ CNY reference rate for today at 7.1020 (vs. estimate at 7.2017)

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

• 2bn mature today
• thus neutral in OMOs today

China will always be a good friend and partner of mutual trust with Russia, says Xi

• Remarks by China president Xi Jinping, as he meets with Russian president Vladimir Putin
• China-Russia relations today have not come easily and should be cherished
• Ready to work together to achieve development of respective countries

Putin says partnership with China is an example of how relations should work

• Remarks by Russian president, Vladimir Putin, in his visit to China

• Talks showed the importance of the relationship
• Thanks Xi for warm reception
• Says he is in constant contact with Xi, and that they discuss all issues
• Priorities of talks were trade and investment, also talked on energy
• We have concrete plans to deepen energy cooperation

RBA’s Hunter comments on housing market, not directly on the economy or monetary policy

• Sarah Hunter is Chief Economist and Assistant Governor (Economic) at the Reserve Bank of Australia

Sarah Hunter is Chief Economist and Assistant Governor (Economic) at the Reserve Bank of Australia

Her speech discussed several potential avenues through which the imbalance between housing supply and demand growth may be resolved. This is a big issue in Australia, with surging prices, rents, and homelessness.

Australian April unemployment rate 4.1% (vs. 3.9% expected)

• Employment report from Australia for April 2024
• m/m change in hours worked flat
• underemployment 6.6% (prior 6.5%)
• Underutilization 10.7% (prior 10.3%) … this combines the unemployment and underemployment rates

Japan’s annualised Q1 GDP -2.0% q/q (vs -1.5% expected)

• Huge contraction for Japan’s economy

Japan January – March quarter preliminary economic growth data.

GDP Annualised SA -2.0% q/q

• expected -1.2%, prior 0.0%

GDP -0.5% q/q

• expected -0.3%, prior 0.0%

The GDP Deflator is a measure of inflation, comes in at 3.6%

• expected 3.3%, prior 3.9%

More details:

• Capex -0.8% q/q (poll: -0.7%) … capex down for first time in two quarters
• External demandcontribution to GDP -0.3% (poll: -0.3%)
• Exports -5.0% q/q … exports down for first time in four quarters, and the biggest decrease since Q2 2020
• Domestic demandcontribution to GDP -0.2% … private consumption down for fourth straight quarter

Japan’s Economy Minister says the economy is expected to continue a moderate recovery

• His response to questions on the GDP data

• Economy is expected to continue moderate recovery
• Need to pay close attention to risks related to forex fluctuations that would push up domestic prices
• Need to pay closeattention to global economy downturn risk such as outlook on Chineseeconomy, crude oil prices due to unstable situations in the Middle East
• Govt will continue comprehensive efforts to ensure solid wage hikes will spread to mid- and small-sized firms

Cryptocurrency News

Bitcoin Price Resilient Above $65.5K as Major Futures Exchange Paves Way for BTC Trading Debut

• Bitcoin price breached $65,500 on Wednesday with a god candle after US April CPI data.
• Bullish momentum continues to grow with higher lows on daily RSI chart.
• Futures exchange CME plans to launch Bitcoin trading, platform could boost mainstream adoption.

Wednesday saw a surprising surge in Bitcoin’s price, driven by the release of April’s CPI data in the US. Speculation and market sentiment fueled the rally, with traders and investors interpreting the softened inflation as a potential signal for central banks to continue their loose monetary policies. This perception, in turn, bolstered optimism for riskier assets such as Bitcoin.

World’s largest futures exchange plans to launch Bitcoin trading

According to reports from the Financial Times, the world’s largest futures exchange, CME Group, is gearing up to introduce Bitcoin trading on its platform. This move comes amid a growing demand for BTC among Wall Street institutions. As money managers increasingly seek exposure to the cryptocurrency sector, particularly through recently approved exchange-traded funds (ETFs), CME Group aims to capitalize on this trend.

The Chicago-based financial services company has been engaged in discussions with traders interested in participating in regulated Bitcoin trading. While the plans are still underway, if realized, they could have bullish implications for the cryptocurrency market, potentially driving mainstream adoption. Additionally, the introduction of Bitcoin trading on a regulated marketplace would facilitate basis trades, allowing investors to profit from price differentials between cryptocurrencies and their corresponding futures contracts.

It’s worth noting that CME Group already offers trading in Bitcoin futures, and basis trading involves leveraging money to sell futures contracts while simultaneously buying the underlying asset, thereby exploiting price differentials for profit.

The allure of BTC comes courtesy of ETFs with some of the world’s largest financial institutions already turning from Bitcoin skeptics into advocates. Among them:

• Wells Fargo now holds Grayscale’s spot Bitcoin ETF, joining the trend of institutional adoption.
• Susquehanna International Group holds $1.8 billion in Bitcoin ETFs.
• State of Wisconsin Investment Board (SWIB) invested $162 million in Bitcoin ETFs, making it the first state institution to go public with spot BTC ETF holdings.
• JPMorgan, the largest bank in the US, has disclosed holdings in spot Bitcoin ETFs, per SEC filing.
• Millennium Management discloses $2 billion spot Bitcoin ETF portfolio.

AI tokens see explosive gains as Vitalik Buterin says GPT 4 passed the Turing test

• Vitalik Buterin commented on whether OpenAI’s GPT 4 passed the Turing test, in an update on Farcaster. 
• Buterin believes GPT 4 has passed the test, meaning it exhibits intelligent behaviour equivalent to or indistinguishable from humans. 
• AI tokens see massive gains, FET, GRT, TAO, AKT, AGIX among other assets posted double-digit gains in the last 24 hours. 

Open AI’s Large Language Model (LLM) GPT 4 has allegedly passed the Turing test per a Senior Oxford researcher, Toby Ord. The test is considered as a means to identify whether the AI exhibits the same level of intelligence or is indistinguishable from humans. 

Ethereum co-founder Vitalik Buterin took into account the research shared by a Senior Oxford Researcher Toby Ord, and said he believes GPT 4 passed the test. AI tokens continue to post double-digit gains, extending their rally in the past 24 hours.

Senate votes to overturn SEC rule preventing highly regulated financial firms from custodying digital assets

• US Senate has voted to overturn SEC ruling preventing highly regulated financial firms from holding crypto.
• 12 Democrats joined 48 Republicans in voting to overturn SAB-121.
• Senator Lummis says the Senate’s overturning of SAB-121 is a win for financial innovation and a clear rebuke against crypto persecutors.

In a decision that received bipartisan support, the Senate aligned with the House of Representatives in voting to overturn controversial SAB-121 rule on Thursday.

Senate votes to repeal SAB-121

The SEC issued Staff Accounting Bulletin 121 (SAB-121) in 2022, requiring a firm that custodies crypto assets for clients to record them as liabilities on its own balance sheet.The rule was met with backlash from several crypto industry leaders, who considered it would have several implications for banks working with crypto clients.

Several lawmakers also criticized the SEC for issuing the bulletin, which the Government Accountability Office believed met the definition of a rule and, as such, is subject to the Congressional Review Act  which allows Congress to review federal rules.

As a result, in an effort largely spearheaded by Republicans and a few Democrats, Congress swung into action to repeal SAB-121 based on the CRA.

A report from the Congressional Research Service on Wednesday stated, “If the SEC were to reissue the bulletin, provided that it met the CRA’s definition of rule, Congress could again use the CRA to overturn the bulletin on the basis that it was too similar to the disapproved SAB-121 or for any other reason. Congress could also use its legislative powers in other ways, not just through the CRA, to respond to any subsequent SEC bulletin or other action.”

XRP Holds Firm Above $0.51 Amidst Whale Accumulation, Setting Stage for Potential Upside

• Ripple whales, holding between 1 million and 10 million XRP, continued accumulating in May. 
• XRP holders digested the developments in the SEC vs. Ripple lawsuit and await court rulings.
• XRP is likely to extend gains to $0.60, testing resistance at $0.51 on Thursday. 

Large wallet investors are quietly accumulating Ripple (XRP) tokens, a strategic move that underscores confidence in the cryptocurrency’s resilience amidst the ongoing legal battle with the Securities and Exchange Commission (SEC). As XRP holders eagerly anticipate a crucial court ruling in the SEC lawsuit against Ripple, the accumulation trend by whales signals optimism for the native token of the XRPLedger.

Despite the legal uncertainty looming over Ripple, XRP’s price has maintained stability above the $0.51 mark, bolstering hopes for further gains. Market sentiment remains buoyant, with investors eyeing the psychologically significant resistance level of $0.60 as the next potential target for XRP’s upward trajectory. The ongoing accumulation by large investors underscores a positive outlook for Ripple’s future performance, even in the face of regulatory challenges.

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