Round up of today’s market news

North American News

US Stock Market Wraps with Modest Gains, Capping Off a Balanced Trading Day

• Russell 2000 falls as it does not react to lower rates

The three major US stock indices are closing modestly higher on the day:

• Dow Industrial Average average up 140.26 points or 0.36% at 38711.28
• S&P index up 7.94 points or 0.15% at 5291.35
• NASDAQ index of 28.38 points or 0.17% at 16857.05.

The small cap Russell 2000 index fell -25.73 points or -1.25% at 2033.94.

US factory orders for April

• US factory orders for April 2024

• Prior month 0.7%
• factory orders 0.7% versus 0.6% expected
• durable goods orders 0.6% revised from 0.7% preliminary
• Ex transportation 0.4% versus 0.4% preliminary
• nondefense capital goods ex- air 0.2% versus 0.3% preliminary
• factory orders ex transportation 0.7% versus 0.4% last month

JOLTs job openings for April

• JOLTs job openings for April 2024

• Job Openings 8.059M vs 8.355M estimate
• Prior month 8.488 million revised to 8.355M
• Quits rate 2.2% versus 2.2% revised
• Vacancy rate 4.8% versus 5.0% revised

Details from the Labor Department

Job Openings

• Number of job openings: 8.1 million (little change)
• Yearly decrease: 1.8 million
• Rate: 4.8% (little change)
• Decreases:
  • Health care and social assistance: -204,000
  • State and local government education: -59,000
• Increases:
  • Private educational services: +50,000

Hires

• Number of hires: 5.6 million (little change)
• Rate: 3.6% (unchanged)
• Increases:
  • Durable goods manufacturing: +52,000
• Decreases:
  • Arts, entertainment, and recreation: -45,000
  • Federal government: -8,000

Separations

• Total separations: 5.4 million (little change)
• Rate: 3.4% (unchanged)
• Increase:
  • Durable goods manufacturing: +49,000

Quits

• Number of quits: 3.5 million (little change)
• Rate: 2.2% (sixth month in a row)
• Decreases:
  • Professional and business services: -131,000
• Increases:
  • Other services: +67,000
  • Durable goods manufacturing: +39,000
  • State and local government education: +32,000

Layoffs and Discharges

• Number: 1.5 million (little change)
• Rate: 1.0% (unchanged)
• Decrease:
  • Arts, entertainment, and recreation: -37,000

Other Separations

• Number: 349,000 (little change)

Treasury Secretary Yellen: Treasury never tries to time market in debt management

• Treas. Sec. Yellen testimony to Senate Appropriation committee

• The treasury never tries to time market in debt management
• Issuance of treasury bills is in line with historical averages.
• We have seen an increase in exports to Russian from China, including dual use goods that can be used to aid Russia’s military
• US need to coordinate Russia sanctions efforts with allies.
• US is continuing to take sanctions against Iran. It is difficult for sanctions to curb shadown fleet of oil tankers.
• Market participants believe that short term rates will come down
• Short term bill issuance is in line with recommendations from Treasury Borrowing committee
• This is nothing about issuing short term debt, that creates a sugar high for the economy

Deputy Treasury Secretary Adeyemo: We expect inflation to continue to come down

• US Deputy Treasury Secretary Adeyemo speaking on CNBC says:

• US Manufacturers, distributors to step up compliance with Russia sanctions.
• US CEOs need to pay more attention to supply chain.
• US banks, CEOs are not complicit with Russia’s evasion of sanctions over Ukraine.
• Without China, Russia’s military supply chain would ground to a halt.
• While US economy is doing better, there are still challenges.
• Administration focused on bringing costs down.
• G7 has indicated that China will face higher tariffs from a collection of countries that want to level the trade playing field.
• We expect inflation to continue to come down.
• We have to build more housing in this country and expect those prices to come down too
• Hopes retailers cut prices like Walmart and Target have done

UBS says traders are too cautious on Fed rate cuts, base case is 50bp in 2024

• UBS says markets are underpricing Fed rate cuts this year

A snippet from UBS, analysts at the bank say they have a base case for 50bp of Federal Open Market Committee (FOMC) rate cuts in 2024, and that current pricing of around 35bp is too cautious.

Bank of Canada rate preview: A cut of 25 basis points is expected

• The move is the first change since July 2023 and the first cut in rates since March 2020

The Bank of Canada will announce its interest decision at 9:45 AM ET. The expectations are for a cut in rates of 25 basis points to 4.75% from 5.0%.A Reuters poll of 29 forecasts and 22 expecting a 25 basis point cut while seven see no change. The market has an 80% chance of a cut in June.

The last change in policy was a hike in July 2023 (a hike of 25 basis points).The last cut in rates was in March 2020 (a decline of 50 basis points to 0.25%).The Bank of Canada started its hike cycle 0.25 basis points on March 2022.

On May 22, Bank of America after the recent inflation report said that “falling core clears the way for a June cut”.

More specifically, they said:

• 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

However, they did say also that 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

Bank of Canada Macklem will conduct a press conference starting at 10:30 AM ET.

The risk is the Bank of Canada do not cut rates this week, but wait until July – preview

• The BoC meet on Wednesday, 5 June 2024. A rate cut is expected (but not unanimously)

The Bank of Canada decision is due at 1345 GMT on Wednesday, 5 June 2024, which is 0945 Eastern time.

The consensus is for the Bank to cut from 5 to 4.75%

Commonwealth Bank of Australia say a cut is expected, no cut is a risk:

• The risk is the BoC stands pat
• The market is only pricing about 57bp of cuts this year, including 20bp for this week’s meeting.
• While we expect a total of three cuts this year, a dovish repricing may be limited this week if the BoC sends a cautious message on future rate cuts.

Commodities

Gold pulls back on risk-off mood

• Gold drops 0.90% as commodities face widespread pressure.
• The US Greenback gains marginally, with the DXY up 0.04% to 104.08.
• US JOLTS data hit three-year low, showing economic slowdown alongside below-estimate Durable Goods Orders.

Gold prices retreat some 0.90% in the mid-North American session on Tuesday, amid a risk-off impulse. The latest tranche of US economic data shows the economy is slowing down, warranting lower interest rates. Despite that, the yellow metal trades with losses and exchanges hands at $2328.

Crude oil futures settle at $73.25

• Down $0.97 or -1.31%

The price of crude oil futures are settling at $73.25. That is down $0.97 or -1.31%. Below for the day reach $72.48 which was the lowest level going back to February 6 when the low reached $72.38.

The price is also on a five day streak of lower levels. The move to the downside took the price from a high of $80.62. The low price of today took the price down 10.10% from that high just five days ago. That’s a pretty big move in a short amount of time.

Oil private survey of inventory shows a large headline crude oil build vs draw expected

• This is from the privately surveyed oil stock data ahead of official government data tomorrow morning out of the US.

• crude +4.052 million (exp. -1.9 million)
• gasoline +4.026 million
• distillates +1.975 million
• Cushing +983,000
• SPR +0.9 million

Silver falls by over 3% in break under $30

• Commodities are struggling to start the week

It’s a sell everything mood in markets today as the flight to safety reverberates across asset classes. Precious metals were standout performers in the last few months but have been overdue a more significant pullback. This might be where that comes in, with silver feeling the pinch now in a fall back under $30.

The daily price action shows that silver had been struggling to hold a firm break above the $32 mark in May. And on the rejection there, price has been finding support closer to $30 and the 38.2 Fib retracement level at $30.03. That was also the case yesterday but we’re seeing sellers start to seize more control today instead.

Looking elsewhere, gold is also down 0.8% to $2,331. The pullback there isn’t as stark with the precious metal still hugging a consolidative range since last week. But outside of precious metals, we are seeing copper also take it on the chin in a drop to $4.55 per pound.

RBC on oil and OPEC+, ‘data dependent’

• The adding back of barrels later this year is not guaranteed

RBC is not so sure:

• “Some people read the OPEC statement, particularly the part about the adding barrels back from the voluntary cut, as bearish”
• “They were pretty clear that this is going to be data dependent”
• “As we get to the end of August, if the fundamental picture looks worse than what we have now, they would pause that addition”

HSBC hold their Brent oil price assumptions steady after OPEC+ meeting

HSBC :

• Brent crude oil price assumptions remain USD82/bbl for 2024
• including USD80/bbl in 2h 2024
• falling to USD76.5/bbl from 2025 onwards

EU News

European major indices in the day lower

• Declines across the board for the major European indices

The major European indices are all closing lower on the day. The declines are led by the German DAX down 1.02%.Italy’s FTSE MIB is also lower with a decline of -1.14%.

A snapshot of the final numbers shows:

• German DAX, -1.02%
• France CAC, -0.75%
• UK FTSE 100, -0.35%
• Spain’s Ibex -0.97%
• Italy’s FTSE MIB, -1.14%

In the European debt market, benchmark 10 year yields are lower

• German 10 year bonds, -3.0 basis points
• France’s 10 year bonds, -3.1 basis points
• UK 10-year bonds, -3.0 basis points
• Spains 10-year bonds, -2.4 basis points
• Italy’s tenure -1.8 basis points

Deutsche Bank have upgraded their outlook for Euro Area GDP for 2024 to 0.9% (from 0.4%)

• DB say the big uncertainty is the US election

Via Deutsche Bank’s extensive World Outlook, titled “Optimism with uncertainties ahead”.

This in brief from the humungous document.

• tone is optimistic across economies and asset markets
• we upgraded our US growth numbers considerably in January to the top end of Street forecasts for the next couple of years. Nearly 6 months on and our US forecasts remain similar
• we’ve upgraded Euro Area GDP for 2024 by half a percent to 0.9%
• the big uncertainty is the US election with plenty of risks to the growth, inflation, and Fed outlook from the results.
• China … upgraded 2024 growth to 5.2% in April which remains unchanged
• Japan growth should stay above trend for the next couple of years which helps us be more hawkish on the Bank of Japan than the market

Germany May unemployment change 25k vs 7k expected

• Latest data released by the Federal Employment Agency – 4 June 2024

• Prior 10k; revised to 11k
• Unemployment rate 5.9%
• Prior 5.9%

Switzerland May CPI +1.4% vs +1.4% y/y expected

• Latest data released by the Federal Statistics Office – 4 June 2024

• Prior +1.4%
• Core CPI +1.2% y/y
• Prior +1.2%

UK data – May BRC like for like sales +0.4% y/y (prior -4.4%)

• Also, Barclay’s Card spending data shows the smallest gain since February 2021

British Retail Consortium (BRC) data for May 2024:

• like for like sales +0.4% y/y (prior -4.4%)
• total sales +0.7% y/y (prior -4%)

BRC Chief Executive Helen Dickinson blamed weather:

• Despite a strong bank holiday weekend for retailers, minimal improvement to weather across most of May meant only a modest rebound in retail sales last month

Data also from Barclaycard:

spending on its customers’ debit and credit cards was only +1.0% y/y, weakest increase since February 2021

• prior +1.6% annual growth the month before and the weakest increase since February 2021.

Former head of ECB Trichet: Expects a 25 basis point cut from the ECB

• Speaking on CNBC

• Expects ECB to be very cautious and prudent
• I think it’s a reasonable to think of one additional rate cut between now and the end of year.
• That projection could change given the level inflation going forward
• The ECB should be data dependent
• I do not expect the Fed and the ECB to not be influenced by each other.
• In the US, there has been a lot of budget expansion
• Expect inflation to be around 2% in 2025
• Not surprised to see the services be responsible for better growth and inflation

Asia-Pacific-World News

PBOC sets USD/ CNY central rate at 7.1083 (vs. estimate at 7.2297)

• 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
• neutral on the day in Open Market Operations (OMOs)

Australian data Q1 Business Inventories +1.3% q/q (expected 0.7%)

• These are inputs to tomorrow’s GDP data release, expected to show very weak economic growth in Q1

Business Inventories Q1 +1.3%, a solid beat

• expected 0.7% q/q, prior -1.7%

Gross Company Profits Q1 -2.5%, a miss

• expected -0.6%, prior +7.4%

Current Account Balance SA Q1 -4.9% … shockingly bad compared to the surplus expected

• expected AUD5.1bn, prior AUD11.8bn

Net Exports Contribution Q1 -0.9%, a miss, and a big chunk subtracted from GDP

• expected -0.6%, prior +0.6%

Public sector demand will add 0.2% to Q1 GDP

Australian weekly consumer sentiment survey remains very weak

• ANZ-Roy Morgan Australia Consumer Confidence weekly survey

Up 0.3% on the week to 80.5, well under the 100 neutral level. Pessimists firmly outnumber optimists.

ANZ note:

• Overall confidence is very weak.
• The series has been below neutral for over 2yrs.
• Inflation expectations rose 0.1pts to 5.0%

Japan fin min Suzuki says intervention late April/early May a response to speculation

• Japan finance minister Suzuki

• Forex intervention had certain effects
• Forex intervention was intended to respond to speculative moves
• Says will continue to respond appropriately when asked about forex
• Concerned that automakers’ certification irregularities could have large implications

Japan’s government to warn of weak yen

• Government policy roadmap draft sighted by Reuters.

Japan’s government will warn of the pain a weak yen may inflict on households in this year’s long-term economic policy roadmap.

Reuters report citing a draft of the document it has sighted.

• “Japan’s economy continues to recover moderately, though some sectors, notably consumption, are stalling,” the draft of this year’s long-term roadmap said.
• “At present, the pace of wage rises hasn’t caught up with that of inflation,” it said.
• “Vigilance is required to the impact a weak yen could have on households’ purchasing power through rising import prices,” according to the draft, seen by Reuters by Tuesday.

Bank of Japan Governor Ueda says if inflation moves as expected, will adjust policy

• The Bank of Japan next meet on June 13 and 14.

Bank of Japan Governor Ueda comments crossing:

• If underlying inflation moves as we project, we will adjust degree of monetary support
• If our economic, price projections and assessment of risks change, that will also be reason to change interest rate levels
• Our policy goal is price stability, so won’t guide policy to fund fiscal spending
• Our basic stance is to allow the market to set long-term interest rates
• We have maintained the current pace of Japanese Government Bond buying to avoid big discontinuity in bind buying operations
• We are ready to conduct nimble market operations if there are sharp rises in long-term rates

Japan’s transport ministry ordered Toyota, Mazda, Yamaha to suspend some vehicle shipments

• The safety test scandal at Japanese automakers is widening

Japan’s transport ministry has said its found further irregularities in applications to certify certain models of vehicles, some automakers were found to have submitted incorrect or manipulated test data when they applied for certification of the vehicles.

Its impacting widely,

• Toyota
• Mazda
• Honda
• Suzuki
• Yamaha

Info comes via Reuters, more here.

South Korea May Consumer Price Index, core rate slowest rise since December 2021

South Korea May Consumer Price Index

• +2.7% y/y (expected +2.8%, prior 2.9%), slowest rise since July 2023
• +0.1% m/m (expected +0.2%, prior +0.0%)
• Core CPI +2.2% y/y (prior +2.3%), slowest rise since December 2021

Cryptocurrency News

ETH Leverage ETFs Debut as Ethereum Volatility Overtakes Bitcoin, A New Frontier Unveiled

• Volatility Shares leveraged Ethereum ETFs have officially launched for trading on the Cboe.
• Ethereum options implied volatility surpasses Bitcoin as investors anticipate launch of spot ETH ETFs.
• Ethereum could see a new all-time high of around $5,000 following the official launch of spot ETH ETFs.

Ethereum (ETH) sustained its sideways trend again on Tuesday following the launch of Volatility Shares leveraged ETH ETFs and an increase in implied volatility across ETH options.

Leveraged ETH ETFs increase Ethereum implied volatility

Ethereum surpassed Bitcoin in a key derivatives metric on Tuesday.

The 2x Ether ETF (ETHU) launched on Tuesday after the Security & Exchange Commission’s (SEC) approval as Fox Business’s Eleanor Terrett confirmed. The ETF, which is the first leveraged Ethereum ETF in the US, will track twice the price performance of futures ETH.

“Like our 2x Bitcoin ETF (BITX), ETHU may pave the way for 1x spot ETFs in the near future,” said company cofounder Stuart Barton in an interview with Eleanor Terrett.

Volatility Shares is one of the largest holders of Bitcoin futures contracts at the Chicago Mercantile Exchange (CME) after launching a Bitcoin 2x fund in June 2023. With ETHU’s launch, many have speculated that the SEC will likely approve spot ETH ETFs S-1 registration statements in the coming weeks.

Binance Braces for Record-Breaking Rally After Surging Momentum, All-Time High Looms Large

• Binance coin price is squeezed between the trendlines of an ascending triangle pattern.  
• On-chain data suggests BNB network and activity are growing.
• A daily candlestick close below $500 would invalidate the bullish thesis.

Binance coin (BNB)  aims for a fresh all-time high (ATH) above $692 as price action consolidates in a bullish ascending triangle pattern.On-chain data suggest increasing activity in BNB’s network.

Binance coin price ready for triangle breakout

Binance has produced four higher lows and four roughly equal highs since May 16. Connecting these swing points using a trend line reveals an ascending triangle formation in the daily chart. This technical pattern has a bullish bias, and the target is obtained by measuring the distance between the first swing high and the swing low to the breakout point.

Adding the 22% measurement to the potential breakout level of $645.7 reveals a target of $775, a new ATH. Investors should be cautious of this theoretical move as it could face a slowdown at BNB’s current ATH of $692.7. However, since the RSI and the AO indicators are firmly above their respective mean values of 50 and 0, the chances of the aforementioned slowdown are unlikely.

Gaming Tokens on the Rise as Roaring Kitty Sparks GameStop Surge, Rally Mode Activated

• GameStop stock rose after Roaring Kitty made a $175 million bet on the company.
• ALICE, TLM, and MOBOX are among the top gainers following GME’s rally.
• Solana-based meme token GME skyrocketed 300% following Roaring Kitty’s post.

Gaming tokens are gearing up for a rally after posting gains on Monday as Roaring Kitty revealed his hefty bets on GameStop. 

GameStop could propel a rise in Gaming tokens

GameStop’s stock price surged in the early hours of Monday following a recent disclosure by Keith Gill, popularly known online as Roaring Kitty, affirming that he placed a $175 million bet on the company. This revelation comes less than a month after returning from his self-imposed social media exile. The company’s stock price closed at $23.14 on Friday but started the new week at $40 before crashing to $29.

Following Roaring Kitty’s disclosure, Gaming tokens have been reacting positively, displaying signs of a potential rally.

Gaming tokens have underperformed several other categories in the market in the current bull market cycle. The last notable surge in most of their prices was in early March after investors booked profits from Bitcoin and migrated capital to the gaming category.

However, following a series of tweets from Roaring Kitty in mid-May, after three years in the shadows, Gaming tokens showed a glimpse of a price rally. And with his recent GME revelation, these tokens are gearing up for more growth.

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