Round up of today's market news *

North American News

US Stock Indices Reverse Gains, Ending in Disappointment

The US stock indices are snatching defeat from the jaws of victory

Despite Nvidia’s impressive earnings report, the Dow remained unresponsive from the outset. Meanwhile, the S&P 500 and NASDAQ indices initially reacted positively, climbing to new record highs early in the day. However, the upward momentum was short-lived as stronger-than-expected S&P Global PMI data fueled concerns over inflation and sent bond yields higher. This shift in market sentiment led to a gradual erosion of stock gains. By mid-afternoon, the S&P 500 had turned negative, and the NASDAQ soon followed. Ultimately, the markets experienced a dramatic reversal, with initial optimism giving way to widespread losses, effectively snatching defeat from the jaws of victory.

At the closing bell:

The Dow industrial average fell -608.79 points or -1.53% at 39065.25
S&P index fell -39.17 points or -0.74% at 5267.85
NASDAQ index fell -65.51 points or -0.39% at 16736.03.

The interest rate-sensitive Russell 2000 index fell -33.30 points or -1.60% at 2048.40.

Looking at the US yields, the 2-year note rose 5.7 basis points to 4.935%.
The 10-year yield rose 4.5 basis points to 4.478%.
The two-year yield is up 10.8 basis points this week.

Despite the declines, Nvidia still held onto and then closed up $8.49 or 9.32% at $1037.99.

Over some of the other major large-cap stocks did not fare as well:

Meta Platforms, -0.43%
Amazon -1.14%
Super Micro Computers -2.96%
Alphabet, -1.60%
Microsoft, -0.82%
Tesla -3.54%
Netflix -0.75%
AMD, -3.08%
Snowflake -5.36%

U.S. Treasury sells $16 billion of 10-year TIPS at a high yield of 2.184%

The U.S. Treasury sold $16 million of 10-year yield TIPS:

High yield of 2.184%
WI yield 2.16%
Tail: +2.4 basis points versus a six month average of -1 basis point
Bid to Cover: 2.33X vs six month average of 2.32X
Directs: 16.1% vs six month average 17%
Indirects: 69.8% versus six month average of 76%

US initial jobless claims 215K versus 220K estimate

US initial jobless claims and continuing claims for the current week

Prior week 222K revised to 223K
initial jobless claims 215K versus 220K estimate.
4-week moving average 219.7 5K versus 218.0K last week
continuing claims 1.794M vs 1.794M estimate. Last week 1.786 revised from 1.794K
4-week moving average of continuing claims 1.782M vs 1.777M last week

Nvidia shares now up around $94 or 9.90%

Largest gain since last earnings day in February

Shares of Nvidia are trading up around $94 or 9.90% at $1043.53.The last time the price has traded with such gains was back in February after the last earnings report when the shares moved up 16.4%. Another big move in Nvidia was a near 25% move after earnings back in May 2023

There has been upwards of 24 price adjustments.

Goldman Sachs: Raises PT to USD 1,200 (prev. 1,100) and keeps a ‘Buy’ rating.
JPMorgan: Raises PT to USD 1,150 (prev. 850) and keeps an ‘Overweight’ rating.
Mizuho: Raises PT to USD 1,180 (prev. 1,000) and keeps a ‘Buy’ rating.
Wolfe Research: Raises PT to USD 1,250 (prev. 1,200) and keeps an ‘Outperform’ rating.
Barclays: Raises PT to USD 1,200 (prev. 1,100) and keeps an ‘Overweight’ rating.
Wells Fargo: Raises PT to USD 1,250 (prev. 1,150) and keeps an ‘Overweight’ rating.
Melius Research: Raises PT to USD 1,250 (prev. 1,125) and keeps a ‘Buy’ rating.
Citi: Raises PT to USD 1,260 (prev. 1,030) and keeps a ‘Buy’ rating.
Cantor Fitzgerald: Raises PT to USD 1,400 (prev. 1,200) and keeps an ‘Overweight’ rating.
KeyBanc: Raises PT to USD 1,300 (prev. 1,200) and keeps an ‘Overweight’ rating.
UBS: Raises PT to USD 1,200 (prev. 1,150) and keeps a ‘Buy’ rating.
Evercore ISI: Raises PT to USD 1,310 (prev. 1,160) and keeps an ‘Outperform’ rating.
BofA: Raises PT to USD 1,320 (prev. 1,100) and keeps a ‘Buy’ rating.
Stifel: Raises PT to USD 1,140 (prev. 1,085) and keeps a ‘Buy’ rating.
Piper Sandler: Raises PT to USD 1,200 (prev. 1,050) and keeps an ‘Overweight’ rating.
Benchmark: Raises PT to USD 1,350 (prev. 1,000) and keeps a ‘Buy’ rating.
Susquehanna: Raises PT to USD 1,200 (prev. 1,100) and keeps a ‘Positive’ rating.
Needham: Raises PT to USD 1,200 (prev. 850) and keeps a ‘Buy’ rating.

S&P global manufacturing PMI for May 50.9 versus 50.0 estimate

S&P global manufacturing and service PMI data for May

Prior month manufacturing 50.0
Prior month services PMI 51.3
manufacturing PMI for May 50.9 versus 50.0 estimate
services PMI for May 54.8 versus 51.3 estimate. Best since May 2023
composite PMI for May 54.4 versus 51.1 estimate.

From the S&P Global:

US business activity growth accelerated sharply to itsfastest for just over two years in May, according to provisional PMI survey data from S&P Global, signalling an improved economic performance midway through the second quarter. The service sector led the upturn, reporting the largest output rise for a year, but manufacturing also showed stronger growth. Although companies continued to report lower employment, the rate of job losses moderated amid improved business confidence for the year ahead and higher order book intakes. Both input costs and output prices meanwhile rose at faster rates, with manufacturing having taken over as the main source of price growth over the past two months. However, the overall rate of selling price inflation remained below the average seen over the past year.

Commenting on the data, Chris Williamson, Chief BusinessEconomist at S&P Global Market Intelligence said:

“The US economic upturn has accelerated again after two months of slower growth, with the early PMI data signalling the fastest expansion for just over two years in May. The data put the US economy back on course for another solid GDP gain in the second quarter. Not only has output risen in response to renewed order book growth, but business confidence has lifted higher to signal brighter prospects for the year ahead. However, companies remain cautious with respect to the economic outlook amid uncertainty over the future path of inflationand interest rates, and continue to cite worries overgeopolitical instabilities and the presidential election.Selling price inflation has meanwhile ticked higher andcontinues to signal modestly above-target inflation. What’sinteresting is that the main inflationary impetus is nowcoming from manufacturing rather than services, meaning rates of inflation for costs and selling prices are now somewhat elevated by pre-pandemic standards in both sectors to suggest that the final mile down to the Fed’s 2% target still seems elusive.”

US new home sales for April 0.634M vs 0.679M estimate

US new home sales for April 2024

Prior month 0.665M revised from 0.693M
new-home sales 0.634M vs 0.679M estimate. Weakest since November 2023
new-home sales -4.7% versus +5.4% last month
Supply of new homes 9.1 months versus 8.3 months prior month
median sales price +3.9% to $433,500 down from $439,500
average sale price is up to $505,700 down from $527,400
The fixed rate mortgage is at 7.09% currently

Atlanta Fed Pres. Bostic: Last couple inflation numbers suggested going back to 2%

Fed Atlanta Fed Pres. Bostic is on the wires and says:

The post-pandemic economy may be less sensitive to rates
Last couple of inflation numbers suggested going back to 2%, but going slowly
Households, homeowners want in low rates, limit sensitivity of economy to policy rate hike’s
We are not going to talk about moving the Feds inflation goal until we get to 2%.
Expect to start new discussion on Fed framework in 2025
On rates, it is important to move in one direction only
We may have to be a little more patient about inflation’s path to 2% before moving policy rate
Job growth has been robust
Jobs give me comfort at staying at more restrictive level
We are not in danger of falling into a more contractionary environment.
There is still considerable upward pressure on prices, not past the worry point
Each central bank has to think about its own jurisdictions
Europe is quite different from us
It would NOT be a surprise to me if it took longer to get to 2% in the US than elsewhere
Climate change has important implications for how economy plays out in Atlanta district
Climate change has real economic implications. I have to keep my eye on it.

Federal Open Market Committee (FOMC) May meeting minutes – “a decidedly hawkish tone”

Bank of Montreal remarks on the minutes published on Wednesday:

The Minutes from the May 1st FOMC meeting struck a decidedly hawkish tone — one that was in-line with expectations given the fact that at the time of the meeting, the Fed didn’t have the April CPI report.
The trajectory of inflation is now considered less dire than what prevailed at the time of the meeting and, therefore, we’re not surprised to see the market dismissing the update as stale information.

Key observations include the hint at rate hikes:

the Minutes noted that “Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.” Powell (based on his comments at the press conference) most likely wasn’t among the ranks.
In keeping with the perceived stickiness of inflation at the time of the meeting, it wasn’t surprising to see that “A number of participants noted uncertainty regarding the degree of restrictiveness of current financial conditions and the associated risk that such conditions were insufficiently restrictive on aggregate demand and inflation.”

3 reasons the Bank of Canada will begin a cascade of rate cuts, first in June

… or maybe July

Bank of America on the Canadian inflation report and the implications for the BoC: falling core clears the way for a June cut.

We expect the BoC to cut in June given that:

core inflation continues to trend down
labor market is softening overall
the economy continues to grow below potential

There is a risk of June being postponed to July:

there are two inflation prints before the July meeting, which has a Monetary Policy Report
the BoC can cut even if the Fed takes longer to cut
baseline is 25bp consecutive cuts once the BoC gets going, so we expect the policy rate at 3.75% by end-2024 and 3.00% by end-2025
risk is for fewer cuts as the BoC could cut at a slower pace than in our forecasts while it waits for the Fed to cut

Commodities

Gold plunges to one-week low on strong US data

Gold price declines for third straight day, now at $2,332, down from high of $2,383.
Strong US economic data boosts Treasury yields and US Dollar, impacting Gold prices.
Fed minutes suggest more rate hikes possible if inflation continues, rate cut expectations reduced to 27 basis points by end of 2024.
Emerging market central banks have acquired 2,200 tons of gold since Q3 2022, influenced by sanctions on Russia.

Gold tanks for the third straight day on Thursday, refreshing one-week lows after economic data from the United States spurred a jump in US Treasury yields and boosted the American Dollar. That hurt the Fed’s rate cut hopes with investors expecting just 27 basis points of easing toward the end of 2024, based on the CBOT data.

At the time of writing, the yellow metal trades at $2,332, plunging 1.90% after reaching a high of $2,383.

The pullback in the commodities space is gathering some pace

It’s not just gold that is seeing a modest pullback in trading this week. Metals in general are seeing a similar mood, with copper in particular having seen its worst day since the pandemic.

In the case of gold, the near-term bias has turned more bearish on drops below its key hourly moving averages. Adding to that now is the pullback also breaching the 50.0 Fib retracement level of the swing higher this month at $2,363. There is some light support from the 13 May low around $2,332 to $2,336 next. But considering the nature of the pullback, we could see it extend back towards the early May lows close to $2,277 to $2,285.

From a structural perspective, the dips here will make for better buying opportunities in the longer run again. But patience and timing will be key in determining that. For now, it looks like the pullback still has some legs to run.

Crude oil futures settle at $76.87

Down $0.70 or -0.90%

Crude oil futures are settling at $76.87. That is down $-0.70 or -0.90%..

The low price reached $76.46. The high price reached $78.63.

Russian Energy Ministry says Russian oil production was slightly above agreed to target

The Russian Energy Ministry says Russian oil production was within OPEC+ guidelines in Q1

Russian Energy Minister says:

Russia exceeded OPEC+ quota in April due to technical reasons
Russia will submit a plan soon on compensation to the OPEC secretariat

EU News

European major indices close the session with mixed results

Focus on the US tech sector today

The major European stock indices are closing the session with mixed results:

German DAX, +0.06%
France CAC, +0.13%
UK FTSE 100 under, -0.37%
Spain’s Ibex, -0.16%
Italy’s FTSE MIB +0.02%.

Eurozone consumer confidence (flash) for May -14.3 versus -14.2 estimate

Euros on consumer confidence flash for May 2024

Prior month -14.7
Eurozone consumer confidence flash for May -14.3 versus -14.2 estimate
The confidence – although negative – is at the highest level since February 2022

Eurozone Q1 wages come in hotter than the previous quarter

The negotiated wages growth for Q1 2024 is seen at 4.7%, up from 4.5% in Q4 2023

The Q1 negotiated wages data now reflects a growth of 4.7% year-on-year, which is higher than that in Q4 last year of 4.5% year-on-year. This isn’t too helpful of a development for the ECB but policymakers will still go through with a June rate cut surely. However, this is likely to put them off from considering a July move at the very least.

Eurozone May flash services PMI 53.3 vs 53.5 expected

Latest data release by HCOB – 23 May 2024

Prior 53.3
Manufacturing PMI 47.4 vs 46.2 expected
Prior 45.7
Composite PMI 52.3 vs 52.0 expected
Prior 51.7

HCOB notes that:

“This looks as good as it could be. The PMI composite for May indicates growth for three months straight and that theeurozone’s economy is gathering further strength.Encouragingly, new orders are growing at a healthy rate while the companies’ confidence is reflected by a steady hiring pace. This time, there is also some good news for the EuropeanCentral Bank (ECB) as the rates of inflation for input and output prices in the services sector has softened compared to themonth before. This will be supportive for the apparent stance of the ECB to cut rates at the meeting on June 6. However, thebetter inflation outlook will be most probably not be enough for the central bank to announce that further rate cuts will followsuit.

“We are heading in the right direction.Considering the PMI numbers in our GDP nowcast, the Eurozone will probably growat a rate of 0.3% during the second quarter, putting aside the spectre of recession. Growth is mainly driven by the service sector whose expansion was extended to four months. Manufacturing acts less and less as a stumbling block for the economy and optimism about future output has increased further in this sector. With all this in place it seems plausible thatGDP growth of almost 1% could be reached this year, and there is even some upward risk.

“Looking for the fly in the ointment? Well, you will find plenty of them, especially in the manufacturing sector. While manufacturers have almost stopped reducing their production levels, inventories of purchased goods and final goods continue to shrink at even faster paces than during the last month. And while the indices for new orders, employment and backlogs of work have all increased, they are still well below the expansionary threshold. Thus, according to our Nowcast calculation, which considers the PMI indices, the recession in the manufacturing sector remains present in the current quarter.

“The German economy is outshining the French one, driven by a robustly growing services sector which is shrinking in France. The manufacturing sector’s development is less severe in France, but as in Germany the sector has not yet escaped recession. While people love to compare the performance of economies, finger pointing to the possible weaknesses and strengths, the good news here is that overall, both economies move in tandem. This means that there are good chances for France to catch up eventually in the services sector which would put eurozone growth on a sounder footing.”

Germany May flash services PMI 53.9 vs. 53.5 expected

Latest data released by HCOB – 23 May 2024

Services PMI 53.9 vs. 53.5 expected and 53.2 prior.
Manufacturing PMI 45.4 vs. 43.1 expected and 42.5 prior.
Composite PMI 52.2 vs. 51.0 expected and 50.6 prior.

Key Findings:

HCOB Flash Germany Composite PMI Output Index at 52.2 (Apr: 50.6).12-month high.
HCOB Flash Germany Services PMI Business Activity Index at 53.9 (Apr: 53.2).11-month high.
HCOB Flash Germany Manufacturing PMI Output Index at 48.9 (Apr: 45.4).13-month high.
HCOB Flash Germany Manufacturing PMI at 45.4 (Apr: 42.5).4-month high.

Comment:

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“These numbers offer hope. The manufacturing output index has reached its highest level in 13 months in May, while the recovery in the services sector has gained momentum. Consequently, the composite PMI now signals solid growth. OurGDP Nowcast estimates a 0.3% GDP increase in the second quarter compared to the first quarter.

“This could be the turnaround in the manufacturing sector, as the output index has made a significant move towards expansionary territory. It’s also encouraging that the index for new orders has made a substantial leap forward, driven by export orders. It seems likely that production will start growing again within two or three months.

“While the increase in the headline manufacturing PMI is positive, the accelerated downsizing of purchased and final goods stocks slightly dampens the outlook. However, this could indicate that companies were caught off guard by better-than- expected demand and had to rely more heavily on their existing inventory.

“Those predicting a prolonged weakness in the German economy might be proven wrong soon. The service sector, in particular, showed robust growth in May, expanding for three consecutive months. There’s more reason for optimism as it’s not just output that’s improving, but also new business and demand from abroad, which includes tourism. Additionally, companies are increasingly bullish about future activity, underlined by the much more solid hiring pace.”

France May flash services PMI 49.4 vs 51.7 expected

Latest data released by HCOB – 23 May 2024

Prior 51.3
Manufacturing PMI 46.7 vs 45.8 expected
Prior 45.3
Composite PMI 49.1 vs 51.0 expected
Prior 50.5

HCOB notes that:

“The French economy will grow in the second quarter thanks to strong domestic demand. Although the HCOB Composite Output PMI fell slightly below 50 in May, there is no reason for any major concern. Demand has grown for the first time inover a year and employment is still growing robustly.Our HCOB Nowcast expects 0.3% economic growth for the second quarter. While this is strong compared to the last few quarters, it is still slightly below the previous estimate due to the worsethan-expected HCOB PMI figures, down from 0.4%.

“The French services sector is showing signs of a sustainable upward trend. The sub-index of new business is confirming this, showcasing stronger overall demand. Although business activity declined, it did only slightly and at a considerably softer pace when compared to the past months. Moreover, although slowing, employment continues to grow at a solid pace.

“France’s manufacturing sector is slowly making a comeback. Although the HCOB Manufacturing PMI and the Output PMI are both still below 50, they recovered clearly since their low in December last year. The amelioration of French manufacturing comes also with higher price pressures. Output prices increased for the first time since May 2023.

“The global environment is heavily impacting the French economy. For now, input price increases stay elevated due to higher wages, but higher energy prices are also at play. They pose a serious risk, with the ongoing middle east crisis in mind. Moreover, although global trade seems to be recovering gradually, France does not seem to be profiting proportionally as foreign demand turned even weaker this month.”

UK May flash services PMI 52.9 vs 54.7 expected

Latest data release by S&P Global – 23 May 2024

Services PMI 52.9 vs. 54.7 expected and 55.0 prior.
Manufacturing PMI 51.3 vs. 49.5 expected and 49.1 prior.
Composite PMI 52.8 vs. 54.0 expected and 54.1 prior.

Key Findings:

Flash UK PMI Composite Output Index at 52.8 (Apr:54.1). 2-month low.
Flash UK Services PMI Business Activity Index at52.9 (Apr: 55.0). 6-month low.
Flash UK Manufacturing Output Index at 52.7 (Apr: 49.4). 25-month high.
Flash UK Manufacturing PMI at 51.3 (Apr: 49.1).22-month high.

Comment:

Commenting on the flash PMI data, Chris Williamson,Chief Business Economist at S&P Global MarketIntelligence said:

“The flash PMI survey data for May signalled a further expansion of UK business activity, suggesting the economy continues to recover from the mild recession seen late last year. The survey data are consistent with GDP rising by around 0.3% in the second quarter, with an encouraging revival of manufacturing accompanied bysustained, but slower, service sector growth.

“The survey also brings welcome news of a cooling inservice sector inflation, which is needed to open the doorfor the Bank of England to start cutting interest rates.A temporary surge in wage-related cost growth seen in April is showing signs of fading in May. Firms are also reporting that strong competition is limiting their scope to raise prices, especially in the face of weakened demand due to the elevated cost of living.

“With companies now reporting the slowest price growth in over three years, and headline inflation falling close to target, the PMI data support the view that the Bank ofEngland will start cutting interest rates in August providingthe data continue to move in the right direction over the summer.

“Such speculation of rate cuts has already fed through toimproved business confidence, with optimism for the yearahead lifting higher in May, adding to hopes that the battle against inflation can be won without the UK having suffered a serious recession.”

ECBs Villeroy: Latest wage data was a bit above expectations but due to Germany

ECBs Villeroy speaking:

Latest wage data was a bit above expectations but due to Germany, we should not over interpret the data.
We are dependent on euros on it data, we are not dependent on what the Fed does.

DIHK expects German economy to stagnate this year

The forecast is still better than at the start of the year though, when the DIHK were expecting a 0.5% contraction

The German chambers of commerce and industry (DIHK) is out with their latest comments on the economy and it still isn’t one that is too positive. While expecting private consumption grow by 1.0% and to support the economy, they note that “the current situation of companies is poor, and even bad in industry”. Adding that “expectations do not show a strong upward trend”.

The only positive development is that inflation pressures are likely to ease further this year. But the manufacturing sector is still one that is holding a negative outlook for the most part.

BOE cancels all public statements until after July 4 UK election

Does that mean the June meeting is postponed?

The Bank of England has canceled all public statements until after July 4 UK election. Does that include the June 20 interest-rate decision? The website still shows the next rate decision will be on June 20, but wonder if that is in error.

Hotter UK inflation chills BoE June rate cut prospects – base case cut August

A response to the UK CPI data on Wednesday
ING says that while the inflation data is “not a BoE gamechanger”, the prospect of a June rate cut is reduced.

the Bank of England will look at the numbers and see more noise than signal
But we think it does reduce the chances of a rate cut at June’s meeting, even though we’ll get another set of data before that decision. We certainly wouldn’t rule it out though.
The Bank is visibly divided and with very few media appearances by the internal committee members, it’s frankly impossible to know how the deciding votes are likely to be cast.
However, today’s data supports our long-held base case that the first rate cut will come in August, which offers the BoE an extra inflation print to be more confident about the underlying trend.For now, we’re sticking with that.

HSBC, Deutsche now expects BOE to only start cutting rates in August

Both firms had previously penciled in a June rate cut

Asia-Pacific-World News

Shenzhen Stock Exchange suspends trading of China’s ultra-long special treasury bonds

After a sharp price drop

PBOC sets USD/ CNY reference rate for today at 7.1098 (vs. estimate at 7.2451)

PBOC CNY reference rate setting for the trading session ahead. 7.1098 is the weakest (for CNY) since January)

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

2bn mature today
thus neutral in OMOs today

Chinese State Broadcaster says Chinese military drills are punishment for Taiwan

Chinese State Broadcaster:

Lai Ching-Te’s May 20 speech was ‘complete confession’ of Taiwan independence
Lai Ching-Te’s May 20 speech seriously ‘provoked’ one-China principle, undermined peace and stability across Taiwan strait
Lai Ching-Te’s may 20 speech ‘extremely harmful’
Mainland china’s countermeasures ‘legitimate, legal and necessary’
Lai used ‘country’ to refer to Taiwan throughout his speech, has no sincerity in promoting cross-strait exchanges
China’s drills around Taiwan are ‘punishment’ for Lai’s provocation
Taiwan’s DPP govt and external forces must stop seeking independence, or every provocation will be met with counter-attacks, and counter-attacks will become more ‘intense’

Australian data – Consumer Inflation Expectations for May 2024: 4.1% (prior 4.6%)

This drop will keep the Reserve Bank of Australia happy

Australian May preliminary manufacturing PMI 49.6 (prior 49.6)

Judo Bank / S&P Global Flash PMIs from Australia for May 2024

The manufacturing PMI held steady in contraction.

New Zealand retail sales Q1 +0.5% q/q (expected -0.3%)

A beat for retail in NZ

Imporvement for retail sales in Q1 2024 vs. Q4 2023.

RBNZ Governor Orr said the biggest risk we run is not getting inflation low and stable

Orr is on the speaking circuit in NZ after yesterday’s monetary policy statement.

RBNZ Governor Orr has been out and about explaining the Statement. Comments from earlier today:

The disappointing part is how stubborn domestic inflation remains.
we are now at the stubborn tail, which is not surprising
The biggest risk we run is not getting inflation low and stable”
Can start to ease before inflation hits 2%
Don’t want to risk inflation expectations blowout
Our patience on inflation hasn’t run out
No one piece of data that policy will hinge on

New Zealand Finance Minister Willis says the government is working to cut inflation

Finance Minister Nicola Willis in a radio interview this morning

NZ Finance Minister Nicola Willis spoke after the RBNZ ‘on hold’ decision yesterday.

”The reality is inflation is still not back to target.“
”We’re funding tax reduction through savings, reprioritisation.”
government had confidence it could reduce taxes and bring inflation back to target levels
says Treasury estimates a structural operating deficit of around 1.5% of GDP in the current financial year
adds NZ government deficit expected to be larger next year than it is this year
expect higher capital funding in the budget

BOJ Ueda: No change in view of Japan economic outlook despite Q1 GDP contraction

BOJ Ueda says Japan remains optimistic despite Q1 GDP decline. Auto output to rebound, easing inflation to boost consumption. Global risks monitored, focus on U.S. soft landing.

No change to view on Japan’s economic outlook despite Q1 GDP contraction
Japan’s Q1 GDP contraction was due largely to drop in auto output, impact on consumption and exports
Expect auto output to recover in Q2 onward. Cost-push inflation to keep easing and underpin consumption
Our view on global economy has not changed much since BOJ’s policy meeting in April
Biggest focus regarding overseas risks would be whether U.S. economy will achieve soft landing
Don’t see any fresh risks regarding overseas economic outlook

Japan preliminary May manufacturing PMI 50.5 (prior 49.6)

Jibun / S&P Global flash PMI for Japan in May 2024

The Composite is 52.4

prior 52.3

S&P comment:

“The expansion in business activity remained services-led, but the near-stabilisation of manufacturing output offers hope of growth broadening out later in the year,”

The Bank of Japan left its JGB buying amounts the same as the previous operation

Bank of Japan buys:

JPY375bln 1-3 Year
JPY425bn 3-5 Year
JPY425bn 5-10 Year

Reuters survey of Japanese firms: Almost half of firms see JPY above 155 as a negative

The latest Reuters Japan Corporate Survey, main points:

Almost half of firms see yen’s weakness beyond 155 yen per dollar negative for their business
Quarter of firms see yen’s slide below 155 yen per dollar as beneficial
37% of firms want the BOJ to raise rates to counter weaker yen
Nearly two-thirds of firms considering raising product prices to cope with yen’s weakness
34% of firms want Japan’s government to conduct forex intervention to counter softer yen

South Korea leaves base rate at 3.5% (as expected)

Bank of Korea updates forecasts, leaves inflation forecasts unchanged

Bank of Korea is South Korea’s central bank.

May 2024 policy decision is to leave the base rate at 3.5%, as expected

Forecast updates issued:

Sees 2024 inflation at 2.6% (unchanged from February forecast of 2.6%)
Sees 2025 inflation at 2.1% (unchanged from February forecast of 2.1%)
Sees 2024 GDP growth at 2.5% (vs, 2.1% previously forecast)
Sees 2025 GDP growth at 2.1%

Singapore central bank official says current policy settings remain appropriate

The Monetary Authority of Singapore is Singapore’s central bank

The Monetary Authority of Singapore is Singapore’s central bank. An official says:

current policy settings remain appropriate
the prevailing rate of the exchange policy band is needed to continue restraining imported inflation and domestic cost pressures

Earlier:

Singapore’s economy grew 2.7% year-on-year in Q1 2024

preliminary (out last month) was 2.7%
expected was 2.5%
quickest in 18 months

Cryptocurrency News

Ethereum bounces back from dip, Gensler refuses to comment on SEC’s decision on ETH ETFs

Ethereum ETFs will likely be approved as US lawmakers have urged SEC Chair to give the green light.
SEC Chair refused to comment when asked to give a preview on spot ETH ETF decision on Thursday.
Ethereum may rally more than Bitcoin did if SEC approves spot ETH ETF applications.

Ethereum (ETH) bounced back after a brief dip on Thursday as US lawmakers penned a letter to Securities & Exchange Commission (SEC) Chair Gary Gensler, urging him to approve spot ETH ETFs. Hong Kong regulators are also discussing whether issuers can offer ETH staking to investors.

Lawmakers pens letter to Gensler

Ethereum is the most trending digital asset, with only a few hours left before the SEC’s decision on spot ETH ETFs — specifically Van Eck’s application.

A bipartisan group of Congress members penned a letter to SEC Chair Gary Gensler, suggesting the regulator approve spot ETH ETF applications and, eventually, other digital assets. According to the lawmakers, the “transparency and reporting requirements” of exchange-traded products (ETPs) offer crypto access to investors in a regulated way. They also suggested that the SEC apply the same principles it used in approving spot Bitcoin ETFs to evaluate applications for spot ETH ETFs “as the legal considerations pertinent to Bitcoin also apply to Ether.”

When asked by some reporters to preview the SEC’s decision on Ethereum ETFs on Thursday, Gensler declined, stating, “I don’t have anything on this particular filing.”However, while on stage at an event in Washington, Gensler reaffirmed that most crypto assets are securities.”There’s 15,000 or 20,000 tokens in this field. They do not operate as currency,” said Gensler. “Not every crypto token is a security […] but I believe, again without prejudging, most are,” he added.

The SEC asked exchanges to submit updated 19b-4 forms of issuers on Monday. As of Wednesday, exchanges have submitted the forms of all applicants except Hashdex. The total number of issuers that have submitted amended 19b-4 filings includes BlackRock, Bitwise, Grayscale, Van Eck, Ark 21Shares, Fidelity, Franklin and Invesco.

Fidelity and Grayscale also updated their S-1 applications to remove any language related to staking since experts are of the opinion that the SEC may reject applications that include the feature.

The 19b-4 filings are what national exchanges like the NASDAQ or the New York Stock Exchange (NYSE) submit to the SEC to seek approval for listing new products on their trading platforms. In the context of ETFs, S-1s refer to the initial registration forms detailing how a fund would be managed and track the underlying asset’s price.

The SEC must approve both 19b-4s and S-1s before the ETFs can launch.

While information from experts and issuers’ engagement with the SEC suggests the agency will likely approve the 19b-4 filings, they’ve also warned that nothing is guaranteed until the actual order comes out.

Industry experts also believe that spot ETH ETF S-1 applications may take days or weeks to receive approval from the SEC.

Meanwhile, despite Ethereum’s popularity and price growth in the past few days, Hong Kong’s spot Ethereum ETFs haven’t risen in subscriptions or trading volume. On May 22, the single-day net subscription was 62.8 ETH, and the total single-day transaction volume was only $390,300, according to data.

XRP set for rally after Coinbase listing in New York

Coinbase’s Chief Legal Officer announced the listing of XRP for its New York clients.
XRP was initially removed from the exchange in January 2021 due to an SEC lawsuit on claims of the asset breaking securities regulation.
XRP could see a rally as the move should renew investors’ optimism and confidence in the digital asset.

XRP is among trending cryptocurrencies on Thursday after Coinbase (COIN) Chief Legal Officer Paul Grewal announced that the crypto exchange has relisted the digital token for its clients in New York.Coinbase removed the token across its US markets in January 2021 due to a lawsuit that the SEC filed against XRP’s parent company, Ripple.

Coinbase relists XRP for New York customers

In an X post on Thursday, Coinbase’s Chief Legal Officer, Paul Grewal, announced that the exchange has heard the voices of its users and has decided to bring back XRP trading to its New York clients. XRP was removed from Coinbase in January 2021 following a lawsuit from the SEC against Ripple Labs, the company behind the XRP token.The lawsuit claimed that the token operated as an unregistered security used to fund the company’s platform in 2013.The aftermath led to a long battle between Ripple and the SEC that has yet to be fully concluded.

With the lawsuit in place, Coinbase and other crypto exchanges were forced to delist XRP from their US markets, which caused a sharp decline in the token’s price.

Coinbase’s relisting of XRP follows the House of Representatives’ passing of the FIT21 bill on Wednesday. The bill, which received strong bipartisan support, will provide clear rules to guide the operation of the crypto industry in America.

Coinbase was also subject to a lawsuit from the SEC in June.The regulator claimed that the crypto exchange broke securities laws by allowing unregistered sales of securities to the general public.

XRP is down 0.09% on Thursday, trading at $0.53.

Polygon could surge 30% following month-long consolidation

Polygon price is likely to rally following a month-long consolidation period.
MATIC investors could gain by 30% If the daily candlestick flips the 50-day exponential moving average to support.
A daily candlestick closing below $0.653 will invalidate this bullish thesis.

Polygon has consolidated for the last 40 days, given the bright outlook on the cryptocurrency market for spot Ethereum ETF approval by the US SEC. A daily candlestick close that flips the 50-day exponential moving average to support might result in 30% gains.

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Round up of today’s market news

ByBilals Tech