Round up of today’s market news

North American News

Nvidia Surge Propels NASDAQ to Record High

• Nvidia shares up by 7.13%

It was a mixed close for US major stock indices.

• Dow Industrial Average average fell -216.73 points or -0.55% at 38852.87
• S&P index rose 1.32 points or 0.02% at 5306.03.That is short of its all-time high close reached last week at 5321.42
• NASDAQ index rose 99.09 points or 0.59% at 17019.88. It was the first close above the 17,000 level.

These small-cap Russell 2000 index fell -2.816 points or -0.14% at 2066.85.Higher rates weighed on that index today.

Nvidia’s shares soared by $75.90, or 7.13%, reaching $1140.59, driving the NASDAQ to a new record high. Since announcing its earnings on May 22, Nvidia’s stock has surged 20.13%. This impressive growth has propelled Nvidia’s market capitalization to $2.806 trillion, closing in on Apple’s $2.913 trillion market cap.

Other large-cap stocks did not perform as well today:

• Meta Platforms+0.36%
• Amazon+0.77%
• Alphabet, +0.81%
• Microsoft, +0.04%
• Apple, positive 0.01%
• Tesla, -1.39%
• Netflix, +0.35%

Some of the bigger gainers

• Arm holdings, was 8.98%
• AMD +3.16%
• Dell, +3.68%
• Micron, +2.46%

U.S. Treasury auctions off $70 billion of five-year notes at a high yield of 4.553%

• WI level at the time of the auction 4.540%

• High-yield 4.553%
• WI level at the time of the option 4.540%
• Tail: +1.3 basis points versus six average of. -0.1 BPs
• Bid-to-cover: 2.3X versus a six month average of 2.41x
• Dealers: 19.52% versus a six month average of 16.0%
• Directs: 15.44% versus the six-month average of 17.9%
• Indirects: 65.04% versus a six month average of 66.1%

US sells 2-year notes at 4.917% vs 4.907% WI

• Results of the $69 billion sale of 2-year notes
• Prior was 4.898%
• Bid to cover at 2.41 vs 2.66 prior

Dallas Fed manufacturing index -19.4 vs -14.5 prior

• Dallas Fed data for May

• Prior was -14.5

Details:

• General business activity -19.4 vs -14.5 prior
• Output -2.8 vs +4.8 prior
• Prices paid +20.4 vs +11.2 prior
• New orders -2.2 vs -5.3 prior
• Shipments -3.0 vs +5.0 prior
• Employment -5.3 vs -0.1 prior

Food manufacturing

• Recent developments in the overall economy suggest consumers are resilient and still spending money. Though the Federal Reserve isunlikely to lower interest rates any time soon, the market seems to haveadjusted to the delay. Inflation will continue to decline, slowly.
• Volume of new orders has picked up. Demand feels more robust right now than at the beginning of the year. We are still battling cost inflation on raw materials.
• We are still trying to find competent people who want to work. The biggest problem is turnover of new hires. Long-term employees are stable. Young people do not want to work.

Paper manufacturing

• Orders are down approximately 10 percent.

Printing and related support activities

• We have been very busy and having “hooray” billing months with very nice profits, but that is about to change as things seem to be slowing down, and we can tell that this may be a lean summer. We are fortunate to have some nice projects to carry us through the summer and help cover overhead, but we need additional work to make it be profitable. Our competitors have been really slow, so this does not bode well for our next few months.

Primary metal manufacturing

• Our building and construction business remains off. Higher mortgage rates and higher home costs are the main factors. Fewer folks are buying first-time homes. More younger couples are moving into apartments.

Fabricated metal product manufacturing

• Things seem to be slowing down in our manufacturing sector.
• We have orders, but jobs are not being released due to financing holds and uncertainty.

Machinery manufacturing

• Business is flat at a relatively low level.
• It isn’t much fun to be in business right now, at least in our industry. Our sales team is putting forth a full-court press effort, and we’ve attempted to add services and product offerings to complementwhat we do, but it’s just tough sledding and has been all year.

Computer and electronic product manufacturing

• We are reaching a cyclical bottom for most end markets after the post-COVID inventory build. We are expecting shipments to more closely follow end-market demand in the second half of 2024.
• Customer volumes are decreasing due to the economy. They are still bullish, but indicators based on outbound shipments show there will be fewer shipments in the future. Technology changes with AI[artificial intelligence] have increased technology deployment and arepossibly going to increase production, but it’s too early to be a contribution to growth in the next six to 12 months.
• Wage inflation continues to be our biggest issue. We are caught between a rock and a hard place; we have to increase wages to keep our best employees, but we also have to invest capital to improve productivity so we can eventually do more with fewer people. Thecombined result is substantially less free cash flow for this year andnext.The tax increases that President Biden has announced as part ofhis reelection campaign will have a very significant negative impact on our ability to grow.We will be forced to slow down capital investmentand reduce head count if he is reelected.

US May consumer confidence 102.0 vs 95.9 expected

• US consumer confidence data from The Conference Board for May 2024
• Prior was 104.7 (revised to 103.1)

Details:

• Present situation index 143.1 vs 142.9 prior
• Expectations index 74.6 vs 66.4 prior
• Jobs hard-to-get vs 14.9 prior

US March Case-Shiller home price index +0.3% m/m vs +0.3% expected

• Case-Shiller home price index and the FHFA house price index

• Prior was +0.6%
• Prices +7.4% y/y vs +7.3% expected

FHFA data:

• +0.1% m/m vs +1.2%
• Prices +6.7% y/y vs +7.1% prior

SF Fed Pres.Mary Daly: New technologies often re-allocate labor

• SF Fed Pres.Mary Daly speaking

• new technologies often reallocate labor, with a painful gap for some workers.
• No one knows the impact of generative AI and labor and the economy

Fed’s Kashkari: I don’t think anyone has taken rate increases off the table

• Comments from Kashkari

• US labor market has softened but remains tight
• I don’t think anyone has taken rate increases off the table
• The short-run neutral rate may have gone up temporarily
• Policy is restrictive by most measures, but not all
• If surprised by the data, the fed will do what we need to do

Earlier:

Fed’s Kashkari: No hurry to cut interest rates

• Remarks by Minneapolis Fed president, Neel Kashkari, to CNBC

• Inflation has moved sideways recently
• Need to wait and see to feel more confident on price outlook
• Fed is in a good position as labour market remains robust
• Should not rule out anything on policy path

Fed would have benefited from earlier decision to taper, end QE in 2021 – Bowman

• Fed governor, Michelle Bowman, speaks alongside Cleveland Fed president, Loretta Mester, in Tokyo

• That would have allowed for earlier rate hikes
• Would have supported either waiting to slow QT pace or a more tapered slowing in balance sheet run-off
• In the future, Fed should signal that QE is temporary and unwound when market conditions normalise
• Prefer for FOMC statements to use more words to describe current economic assessment (Mester)
• Also to describe how it influences the outlook and the risks to that outlook (Mester)
• Expects the Fed will consider communications as part of its next policy framework review (Mester)

Canada April producer price index +1.5% vs +0.8% prior

• Canadian April producer price index data

• Prior was +0.8% (revised to +0.9%)
• Prices +1.4% y/y vs -0.5% prior
• Raw materials price index +5.5% m/m vs +4.3% prior
• Raw materials +3.1% y/y vs +0.4% prior

Commodities

Gold price edges higher

• Gold gains more than 0.30%.
• Hawkish remarks from Fed officials, including Governor Michelle Bowman, temper Gold’s rise.
• Gold traders are eyeing the release of US core PCE inflation data.

Gold was modestly up late in the North American session, registering gains of around 0.15% amid high US Treasury bond yields that make it less appealing to hold the non-yielding metal. Consequently, the Greenback erased its previous losses, capping Gold’s rally. The yellow metal trades at $2,357, above its opening price by 0.28%.

Gold price waxes, wanes around $2,350

• Gold prices stay in the green yet trade off three-day highs reached at $2,364 amid elevated US Treasury yields.
• The US Dollar Index, which tracks the buck’s performance against a basket of peers, trades at 104.61, up 0.03%.
• Fed Governor Michelle Bowman said she would have supported either waiting to slow the quantitative tightening pace or a more tapered slowing in balance sheet run-off.
• Lastly, Minneapolis Fed President Neel Kashkari stated that he doesn’t believe anyone has ruled out further rate increases and added that he anticipates no more than two rate cuts in 2024.
• The US Conference Board Consumer Confidence improved in May after three months of declines, rising to 102.0 from 97.0, exceeding estimates of 95.9.
• Despite improving, Dana Peterson, Chief Economist at The Conference Board, wrote, “a possible resurgence in recession concerns.”
• Americans’ perceptions of the likelihood of US recession over the next 12 months rose again in May.

Crude oil futures settle at $79.83

• Up $2.11 or 2.71%

The price of crude oil futures settled at $79.83. That was right at its 200 day moving average.

The price has subsequently moved above the moving average level and currently trades at $80.11.

Natural Gas steadies at lower levels

• Natural Gas prices slide near 2%.
• The US Dollar Index retreats further, testing the last lines of defense.
• Bloomberg’s Power and Gas research calculated that, despite the current hiccups in supply, the European bloc is still set to hit a 100% full Gas storage inventory ahead of the winter season.

NatGas is testing this week’s low on Tuesday after prices fell on Monday due to extensive profit-taking.Natural Gas is trading at $2.78 per MMBtu. 

Crude oil pushes toward 200 day MA. Third test of the 200 day MA in May

• 200-day MA in crude oil is at $79.83. The $80 is another natural resistance level

Crude oil futures are moving higher with the index now up $2.00 or 2.57% at $79.73.The high price reached $79.77 so far.That high is just short of its 200-day moving average is $79.83.

The $80 level and the 50% midpoint of the range since the September 2023 high comes in at $81.36. Just ahead of that swing lows from April come in at $80.82. Those are the next target on a break of the 200-day moving average.

UBS expects OPEC+ to extend current output cuts for at least another three months

• OPEC+ will be convening via a virtual meeting this coming weekend

The call from UBS is pretty much one that everyone is expecting. But the key thing to watch out for will be any dissent or signs that they may taper those cuts subsequently. As for the oil market outlook, UBS notes that “oil remains a valid geopolitical hedge, in our view, and we see Brent crude trading at around $87 per barrel by the end of the year”.

“Memorial Day Jet Fuel Demand Outshines Gasoline”

• Highest number of air travellers in 20 years

Bloomberg reported on Monday that:

• The number of travelers expected to fly this Memorial Day weekend may be the highest in nearly 20 years, according to the American Automobile Association.
• a 4.8% jump from last year and a 9% from 2019.
• Broader oil demand also is expected to pick up in the coming weeks as the Memorial Day weekend kicks off the peak US driving season.

EU News

European equity close: Declines in the -0.2% to -0.9% range

• Closing changes

• Stoxx 600 -0.6%
• German DAX -0.5%
• UK FTSE 100 -0.7%
• French CAC -0.9%
• Italy MIB -0.2%
• Spain IBEX -0.5%

Eurozone inflation expectations lowest since September 2021 – ECB survey

• Consumers in the euro area are seeing lower inflation over the next 12 months

Inflation expectations for the year ahead eased to 2.9%, down from 3.0% a month earlier.And that is the lowest level since September 2021.Meanwhile, inflation expectations for the three years ahead is seen at 2.4%.That is still above the ECB’s target of 2% but at least lower than the 2.5% reading from the prior month.

Germany April wholesale price index +0.4% vs +0.2% m/m prior

• Latest data released by Destatis – 28 May 2024

• Prior +0.2%
• Wholesale price index -1.8% y/y
• Prior -3.0%; revised to -2.6%

On the annual change, just take note that this is the first reporting month that the base year has been updated to 2021 (previously 2015). According to the rebasing, the March reading is now revised to -2.6% year-on-year instead. As an aside, Destatis says that the base year is changed every five years as a general rule.

UK May CBI retailing reported sales 8 vs -44 prior

• Latest data released by CBI – 28 May 2024
• Prior -44

UK shop price inflation ‘back to normal’ BRC says

• British Retail Consortium (BRC) Shop Price Index for May 2024 0.6% y/y (expected 1.0%, prior 0.8%)

British Retail Consortium (BRC) Shop Price Index for May 2024 dropped back to 0.6% y/y

• expected 1.0%, prior 0.8%

BRC chief executive Helen Dickinson:

• “Shop price inflation has returned to normal levels.Ambient food inflation remained stickier, especially for sugary products which continued to feel the effects of high global sugar prices.
• “In non-food, retailers cut furniture prices in an attempt to revive subdued consumer demand for big-ticket items, and football fans have been able to grab some bargains on TVs and other audio-visual equipment ahead of this summer’s Euros.”

The BRC survey is run in conjunction with data analysis firm NielsenIQ. NIQ comment:

• had seen “some improvement” in consumer sentiment

Wells Fargo expect 25bp rate cut from the European Central Bank in June, then in September

• Wells Fargo tipping four 25bp rate cuts from the ECB this year

• expect a 25 bp cut in June
• “We expect the ECB to hold rates steady in July, before delivering another 25 bps rate cut in September.”
• base case is of rate cuts of 100 bps this year

The caveat, says the analysts:

• “If wage or price inflation fails to slow as much as we expect, the risk is tilted to a lesser 75 bps of cumulative easing to 3.25% over the rest of this year”

ECB’s Holzman says he would support a rate cut next week but next moves not automatic

• Comments from Holzman

• What I see at the moment is that the disinflation process is indeed underway
• There will be no automaticity on further moves after June
• Each cut that follows will need its own justification
• In Sept and in Dec we will have new information and we will have to make a new decision

ECB’s Centeno: Interest rate reduction process is about to begin

• Remark by ECB policymaker, Mario Centeno

• Inflation is under control

BoE deputy gov Broadbent says critics of the Bank’s inflation record are talking rubbish

• Rejects claims that the monetary policy committee acted too slowly because of groupthink

Bank of England deputy governor Ben Broadbent speaking in an interview with UK media, The Times.

• said claims that its rate setting monetary policy committee had failed to foresee surging inflation over the past three years because its members shared similar backgrounds were “absolute tripe”

His comments are seemingly in response to criticism of the Monetary Policy Committee from a former governor, Merv King, who said

• the rate setters had prioritised gender and ethnic diversity over“diversity of thinking” and were guilty of “groupthink”

Asia-Pacific-World News

China president Xi urges promoting high-quality and sufficient employment conditions

• Xi comment after a group study session involving the Politburo on the matter

• More efforts should be made to enhance the sense of fulfilment, happiness and security among workers

At the same time, the Politburo is out saying that it will be necessary to deepen reform of the employment system. Adding that they will prioritise the goal for high-quality and sufficient employment in their economic measures.

PBOC sets USD/ CNY reference rate for today at 7.1101 (vs. estimate at 7.2403)

• 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 mature today
• thus neutral in OMOs today

China’s Shanghai has announced property sector support measures

Shanghai

• cuts down payment requirement,
• lowers minimum mortgage rates
• restrictions on home purchases will be eased
• required years of social security or income tax payments for non-Shanghai residents will be reduced from five to three years

China’s Foreign Ministry says the US should stop supporting Taiwan’s independence forces

• China’s Foreign Ministry keeping tensions with the US simmering

China’s Foreign Ministry said on Tuesday that China and the United States held consultations on May 24 on maritime affairs.

• China and US agreed to maintain dialogue, refrain from intervening in maritime disputes between China and its neighbours,
• Says US should refrain from ganging up to ‘use the sea to control China’
• Says US should immediately stop supporting and condoning ‘Taiwan independence’ forces

Australian Retail Sales for April 2024 +0.1% m/m (expected +0.2%)

• A miss but improved from March

Australian Retail Sales for April 2024 +0.1% m/m

• expected +0.2%, prior -0.4%

RBNZ implement new limits on lending – restricts high debt to income loans

• Eases back LVRs too

Reserve Bank of New Zealand announcement:

• new DTI restrictions (debt to income)
• will create limits on the amount of high-DTI lending that banks can make (i.e. where the borrower has taken on a high amount of debt relative to their gross, or pre-tax, income)
• LVR restrictions limit the amount of low-deposit lending that Banks can make.
• “LVRs target the impact of defaults by reducing the amount of potential losses in the event of a housing down-turn. While DTIs reduce the probability of default by targeting the ability of borrowers to continue to repay debt. Both act as guardrails reducing the build-up of high-risk lending in the system,”
• “Having both the DTI and LVR restrictions in place means we can better focus them on the risks that they are designed for while achieving the same or better overall level of resilience in the financial system. Therefore, activating DTIs means that we can ease LVR settings too.”

Japan PPI Services for April 2024: 2.8% y/y (expected 2.3%)

• Well above estimates!

Japan PPI Services is also known as its Corporate Services Price Index (CSPI).

Rose 2.8% y/y in April 2024

• expected +2.3%
• prior +2.3%

Bank of Japan says services PPI has hit its fastest rate on increase since March 2015

• If this prompts consumer price inflation the Bank will be happy
• Bank of Japan says the Corporate Services Price Index (CSPI) has hits its fastest y/y increase since March of 2015

Cryptocurrency News

Ethereum may continue it’s uptrend, community favors ‘programmable money’ slogan

• Ethereum community members favor term ‘programmable money’ as its new slogan before the approval of ETF S-1 applications.
• Santiment analyst expects Ethereum to continue outperforming Bitcoin following sustained whale accumulation.
• Ethereum bulls seem to be stepping on the brakes as they await more clarity on S-1 applications.

Ethereum (ETH) followed a sideways trend on Tuesday as the crypto community seems to favor the term ‘programmable money’ as ETH’s one-liner. Meanwhile, whales have continued accumulating ETH despite profiting from the recent price spike.

FLOKI whales add 30 billion tokens to their holdings in May, meme coin rises 11% on the day

• FLOKI rallied 11% on Tuesday, extending its seven-day gains over 40% on Binance. 
• The meme coin has noted accumulation from large wallet holders; 30 billion FLOKI were added to whale wallets in May. 
• FLOKI’s on-chain metrics, social dominance and active addresses support recent gains in the meme coin. 

Floki Inu (FLOKI) has noted a spike in on-chain metrics in May.The meme coin rallied alongside large market capitalization meme tokens like Dogecoin (DOGE), Shiba Inu (SHIB), Dogwifhat (WIF) and PEPE (PEPE) this cycle. 

On-chain metrics support FLOKI’s gains and the meme coin is likely to extend its rally. 

FLOKI extends gains, rallies in double-digits

FLOKI hit an all-time high of $0.000314 on Binance early on Tuesday. The meme token is likely to extend gains by nearly 18% if FLOKI sees a daily candlestick close above May 27 high of $0.000290. 

JP Morgan is skeptical that US authorities will approve ETFs other than for BTC and ETH

• JPM doubts Solana or others will be approved as ETF’s

Crypto press report on comments from Nikolaos Panigirtzoglou, managing director and global market strategist at JPMorgan, expressing scepticism that the U.S. Securities and Exchange Commission (SEC) will approve Solana and other crypto exchange-traded funds:

• “We doubt. The decision by the SEC to approve ETH ETFs is already stretched given the ambiguity about whether Ethereum should be classified as security or not. We don’t think the SEC would go even further by approving Solana or other token ETFs given the SEC has stronger (relative to Ethereum) opinion that tokens outside bitcoin and Ethereum should be classified as securities”

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