Round up of today’s market news

North American News

Stocks Retreat on Quarter-End Despite Positive Economic Data and Russell Rebalancing Boost

The final day of the second quarter began with a strong start but ended in a decline. Major indices, which saw early gains with the S&P 500 and Nasdaq Composite hitting record highs, retreated to close in the red, except for the Russell 2000, which gained 0.5% due to late-session activity tied to the reconstitution of the Russell indices, resulting in higher than average trading volume.

A positive Personal Income and Spending Report for May, showing increases in real disposable income and real personal spending alongside moderated inflation pressures, initially boosted market sentiment, sending Treasury yields lower and equity futures higher.

Despite this, disappointing FY25 sales outlook from Dow component Nike (-20.0%) and political uncertainty regarding President Biden’s position on the Democratic ticket dampened market enthusiasm. Early gains led by mega-cap stocks and semiconductor issues were ultimately reversed by rising Treasury yields and quarter-end trading activity.

Yields on the 2-year and 10-year Treasury notes initially fell post-report but closed at 4.72% and 4.34%, respectively, reflecting a reversal in the bond market.

Sector performance was mixed, with real estate (+0.6%), financials (+0.4%), and energy (+0.4%) sectors closing higher, while communication services (-1.6%), consumer discretionary (-1.4%), and utilities (-1.1%) sectors saw losses. The information technology sector, up 1.6% at its peak, ended down 0.4%, but remained the best performer for the quarter with a 13.6% gain.

The Vanguard Mega-Cap Growth ETF (MGK) fell 0.9% but posted a 9.6% gain for the quarter. Mega-cap leadership contributed to the S&P 500’s 3.9% quarterly gain, whereas the equal-weighted S&P 500 declined 3.0%.

Closing numbers:

• Dow -45.20 at 39118.86, 
• Nasdaq -126.08 at 17732.60, 
• S&P -22.39 at 5460.48

Year-to-date performance:

• Nasdaq Composite: +18.1%
• S&P 500: +14.5%
• S&P Midcap 400: +5.3%
• Dow Jones Industrial Average: +3.8%
• Russell 2000: +1.0%

Economic Data Highlights:

• Personal income rose 0.5% MoM in May; personal spending increased 0.2% MoM.
• PCE Price Index was unchanged in May, up 2.6% YoY.
• Core-PCE Price Index increased 0.1% MoM, up 2.6% YoY.
• Final June Index of Consumer Sentiment was 68.2, with year-ahead inflation expectations at 3.0%.
• June Chicago PMI improved to 47.4, indicating a slower contraction in manufacturing activity.

Overall, the data supported a soft landing and moderating inflation, keeping hopes for a Fed rate cut alive. However, mixed market reactions highlight ongoing uncertainty and volatility as the second quarter closes.

UMich June final consumer sentiment 68.2 vs 65.6 prelim

• UMich details:

• Prelim was 65.6
• Prior was 67.4
• Current conditions 65.9 vs 62.5 prelim (68.8 prior)
• Expectations 69.6 vs 67.6 prelim (66.5 prior)
• 1-year inflation 3.0% vs 3.3% prelim
• 5-year inflation 3.0% vs 3.0% prelim

US May core PCE 

• The US PCE data for the month of May 2024

• Prior was +0.2%
• Prior core m/m +0.2% (revised to +0.3%)
• Core y/y +2.6% vs +2.6% expected
• Headline PCE 0.0% m/m vs 0.0% expected
• Headline PCE +2.6% y/y vs +2.6% expected
• Personal income +0.5% vs +0.4% expected
• Personal spending +0.2% vs +0.3% expected
• Prior personal spending +0.2% (revised to +0.1%)
• PCE services excluding energy +0.1% vs +0.3% prior

Cleveland Fed median PCE inflation +0.2% m/m vs +0.3% prior

• The median PCE report from the Cleveland Fed
• Median inflation +3.3% y/y vs +3.3% prior

According to the Cleveland Fed:

By omitting outliers (small and large price changes) and focusing on the interior of the distribution of price changes, the median PCE inflation rate can provide a better signal of the underlying inflation trend than either the all-items PCE price index or the PCE price index excluding food and energy (also known as the core PCE price index).

Dallas Fed May PCE price index +1.4% m/m annualized vs +2.7% prior

• Data from the Dallas Fed

• One month annualized trimmed mean 1.4% vs 2.7% prior (lowest this year)
• Six month annualized 3.0% vs 3.1% prior
• 12-month 2.8% vs 2.9% prior

Digging through the numbers, some drivers of inflation:

• Prescription drugs
• Tobacco
• Spectator sports
• Hospitals
• Used trucks

Some drivers of disinflation:

• Computer software and accessories
• Gasoline
• Air transport
• Financial services fees
• Women’s and girls clothing

Fed’s Daly: The PCE data is ‘good news’ but the Fed is not done yet

• Comments from the SF Fed President

• It’s taking longer for policy to work, but it’s working
• I’m looking at scenarios, we will react. It’s too early to tell what we will do
• Inflation data shows it’s cooling, policy is working as expected
• Anticipate generative AI will boost productivity, but it’s too early to speculate on
• “I think we’ll continue to see inflation printing above 2%, potentially, through 2025”

Fed’s Barkin: Policy tightening will eventually slow the economy further

• Remarks by Richmond Fed president, Thomas Barkin

• There are still lags to policy transmission that are playing out
• Open to the idea that rate hikes are not constraining the economy as much as the Fed thinks
• That is given the ‘remarkable’ strength in the economy that they are seeing
• Services, shelter price-setters still have room to push prices higher
• Will proceed ‘deliberately’ on policy
• I don’t think forward guidance is particularly helpful right now
• Real time consumer demand indicators still seem solid, not frothy
• I’m still hearing good solid demand growth in conversations with contacts
• Companies have cut back on their hiring but they have also cut back on firing

Canada April GDP M/M 0.3% vs. 0.3% expected

• Canada April monthly GDP data

• April GDP 0.3% vs. 0.3% expected and 0.0% prior.
• May Advance GDP 0.1% vs. 0.3% prior.
• Services producing industries +0.3%.
• Goods producing industries +0.3%.
• 15 of 20 sectors increasing in the month.

Commodities

Silver Rebounds from Support, Eyes Convergence of Moving Averages

• Silver has bounced off key support and risen up towards the cluster of the 50 and 100-period SMA. 
• The overall short-term trend remains bearish, however, with a risk the precious metal could roll over at any time. 
• Silver is in a falling channel, but the upper boundary has been briefly breached increasing the risk it could break again. 

Silver has rebounded from key support at the June 13 low and is currently moving towards the 50 and 100-period Simple Moving Averages. Despite this bounce, the precious metal remains in a falling channel, indicating that the short-term trend is still bearish. This suggests that bearish bets are favored, with a potential continuation lower once the recovery loses momentum. A drop below $28.57, the June 26 low, would reconfirm the downside bias, targeting the lower channel line around $27.50.

However, if Silver breaks above the 50 and 100 SMAs at $29.49 and $29.56, respectively, it could signal a continuation higher towards the upper channel line at around $29.90. This level is also significant as it represents the top of a four-year consolidation zone. A decisive break above this level, marked by a strong uptrend or multiple green candles, would suggest a reversal in the short-term trend.

It’s notable that Silver temporarily breached the upper channel line on June 20, weakening its integrity and adding a slightly bullish tone to the charts. This breach, though short-lived, indicates that the upper channel line might be more susceptible to being broken again, suggesting potential for a bullish move if Silver maintains its recovery.

US oil production rose 72K bpd in April

• The latest monthly production data from the EIA

The EIA is out with its month report today, which is much more accurate than the weekly data.This is for April and it showed a 72,000 barrel per day increase to 13.248 million barrels per day, which is the highest since December.

Baker Hughes US oil rig count falls to the lowest since December 2021

• Weekly oil and gas drilling rigs

• Oil -6 to 478
• Gas -1 to 97
• Total 581

Copper is under selling pressure – TDS

Price action in the base metal complex is staving off Commodity Trading Advisor (CTA) selling pressure in Copper, however the higher selling trigger, now at $9,350/t, is becoming more of an entrenched risk for the red metal, TDS commodity strategists note.  

Demand for base metals in China is weakening

“Indeed, with our gauge of global commodity demand continuing to weaken, while depressed premiums and surging inventories in the Middle Kingdom argue against fundamental tightness, there are plenty of potential catalysts that could see prices ease further from here, particularly given still bloated money manager positioning.”

“While the fundamental situation certainly looks promising in the years to come, the lack of evidence supporting current physical tightness can continue to see these money manager positions unwind.”

“Elsewhere, CTAs are modest buyers of Aluminum and Zinc but prices are close to levels that would see the buying quickly halted or reversed as current momentum signals are on the weaker side.”

ABN AMRO predicting a year-end price of USD 2,000 per ounce of Gold

• Cautious outlook for gold prices

• Although gold prices set a new high earlier in the year, the momentum of the rally has diminished.
• Traditional relationships between gold prices and other factors such as US real yields and the US dollar have broken down.Historically, higher US real yields and a stronger US dollar would suppress gold prices, but this year, both gold prices and these factors have risen.
• The technical indicators suggest a loss of momentum, with prices already below the 50-day moving average.
• Decreased expectations of US monetary policy easing have not resulted in higher gold prices as might be expected.
• During the COVID crisis, physical gold experienced shortages, leading to high demand and premiums. This year, speculative positions have increased, but premiums on popular gold coins like the Eagle and Maple Leaf are below long-term averages, indicating no significant shortage.
• Despite the reduction in ETF positions, speculative positions in the futures market have increased, offsetting the potential negative impact on gold prices from the ETF liquidation.

EU News

European equity close: French stocks slump

• Closing changes

• Stoxx 600 -0.2%
• German DAX +0.1%
• UK FTSE 100 flat
• French CAC -0.8%
• Italy MIB -0.2%
• Spain IBEX -0.2%

Germany May import price index 0.0% vs vs +0.2% m/m expected

• Latest data released by Destatis – 28 June 2024
• Prior +0.7%

On an annual basis, import prices were seen down 0.4% compared to May last year. If you strip out energy prices, import prices were up 0.1% on the month compared to April.

Germany June unemployment change 19k vs 15k expected

• Latest data released by the Federal Employment Agency – 28 June 2024

• Prior 25k
• Unemployment rate 6.0% vs 5.9% expected
• Prior 5.9%

German unemployment rose more than expected in June, with the jobless rate also ticking a little higher back to 6.0%. On the latter, that is the highest reading since May 2021.

France June preliminary CPI +2.1% vs +2.3% prior

• Latest data released by INSEE – 28 June 2024

• Prior +2.3%
• HICP +2.5% vs +2.5% y/y expected
• Prior +2.6%

Italy June preliminary CPI +0.8% vs +1.0% y/y expected

• Latest data released by Istat – 28 June 2024

• Prior +0.8%
• HICP +0.9% vs +0.9% y/y expected
• Prior +0.8%

Spain June preliminary CPI +3.4% vs +3.3% y/y expected

• Latest data released by INE – 28 June 2024

• Prior +3.6%
• HICP +3.5% vs +3.4% y/y expected
• Prior +3.8%

UK Q1 final GDP +0.7% vs +0.6% q/q prelim

• Latest data released by ONS – 28 June 2024

• Prior -0.3%
• GDP +0.3% vs +0.2% y/y prelim
• Prior -0.2%

Looking at the breakdown, household consumption contributed 0.25% to Q1 GDP with the bigger contributor being from net trade (0.56%). That is offset a little by gross capital formation (-0.11%)

Switzerland June KOF leading indicator index 102.7 vs 101.0 expected

• Latest data released by KOF – 28 June 2024
• Prior 100.3; revised to 102.2

ECB’s Villeroy: Disinflation process is on track

• Villeroy lauds the fall in French inflation numbers, saying it is ‘encouraging news’

• We are gaining more confidence in the forecast
• And there is more scope to disregard the smaller bumps in the disinflation process
• Being “data-driven” currently does not mean being “flash-driven”
• Data is inherently noisy and there is a risk of overreacting to volatile news
• Should refrain from changing 2% inflation target

EU has agreed to give Ursula von der Leyen a second term

• News from the EU

• EU leaders agree on top EU jobs, giving Ursula von der Leyen a second term as head of the European Commission – diplomats.
• EU leaders agree on Portugal’s Antonio Costa as the new chairman of EU summits – diplomats.
• EU leaders agree on Estonia’s Kaja Kallas for the job of EU top diplomat – diplomats.

Asia-Pacific-World News

PBoC injects 50 billion Yuan via 7-day reverse repos at a rate of 1.8%

• Sets 7-day reverse repo rate at 1.8% vs 1.8% prior
• PBoC injects 50 billion Yuan via 7-day reverse repos
• Sets 7-day reverse repo rate at 1.8% vs 1.8% prior

PBOC sets USD/ CNY reference rate for today at 7.1268 (vs. estimate at 7.2727)

US Campbell regarding China’s destabilizing actions in South Sea

• Geopolitics

U.S. Deputy Secretary of State Campbell raised serious concerns regarding China’s destabilizing actions in the South Sea in a call with China Executive Vice Foreign Minister Ma Zhaoxu – State Department.

RBA Hauser comments a possible headwind for AUD longs

• Deputy didn’t sound rattled by this week’s CPI data

Below we can see the sharp climb in the expected rate path for the RBA at the time (versus a week and a month ago).

An extract for his comments from yesterday.

Here we can see how money market pricing shifted slightly more dovish after his comments

Australia private sector credit 0.4% vs 0.5% prior

• Data for May 2024

• Australia private sector credit 0.4% vs 0.5% prior
• Housing credit 0.4% vs 0.4% prior

Japan Tokyo Core CPI YY 2.1% vs 2.0% expected

• Data for June 2024

• Japan Tokyo Core CPI YY: 2.1 vs 2.0% expected
• Jobs/Applications ratio: 1.24 vs 1.26 expected
• Unemployment Rate: 2.6% vs 2.6% expected

Japan Industrial Production 2.8% vs 2.0 expected

• Data for May 2024

• Japan Industrial Production: 2.8% vs 2.0 expected
• Production forecast 1 month ahead: -4.8% vs prior 6.9%
• Production forecast 2 month ahead: 3.6% vs -5.6%

Japan chief Cabinet secretary says closely watching FX moves

• Remarks on the yen by Japan chief Cabinet secretary, Yoshimasa Hayashi

• Rapid FX moves are undesirable
• Important for currency to move in a stable manner, reflecting fundamentals
• Will take appropriate actions on excessive FX moves

Japan’s Suzuki says rapid FX moves are undesirable

• Japan Finance Minister Suzuki:

• Won’t comment on forex levels.
• Important for currencies to move in stable manner reflecting fundamentals.
• Rapid FX moves undesirable.
• Deeply concerned about excessive, one-sided moves on forex.
• Closely watching FX moves with a high sense of urgency.
• No comment on whether current levels are excessive or not.
• Believe trust in Japanese currency maintained.

Japan’s MoF replaces currency diplomat Kanda with Atsushi Mimura

• Japan’s Ministry of Finance appoints Atsushi Mimura as top currency diplomat, replacing Masato Kanda – Nikkei.
• Japan’s Ministry of Finance appoints Hirotsugu Shinkawa as Vice-Minister of Finance, replacing Eiji Chatani – Nikkei.

Cryptocurrency News

Ethereum Long-Term Holders and Key Options Data Indicate a New Price Target for ETH

• Ethereum long-term holders now own 78% of ETH’s total supply.
• Spot Ethereum ETF issuers have begun marketing their products with a potential “tech play” move in the cards.
• Ethereum options data shows reduced volatility as ETH looks set to reach a new yearly high.

Ethereum Price Outlook: LTH Accumulation and ETF Marketing Efforts Signal Potential Surge to $4,000

Ethereum (ETH) dropped 2% on Friday amidst increased holdings by long-term holders (LTHs) and intensified marketing campaigns by ETH ETF issuers. Despite the dip, options data points to a possible climb to $4,000 in the near future.

Market Movers: The Role of Long-Term Holders

LTHs, who hold their ETH for over a year, now control 78% of the total supply, according to recent data. Historically, significant selling pressure from LTHs often marks the peak of a bull cycle. The growing holdings among these investors suggest potential for substantial price growth.

Anticipation of Spot Ethereum ETFs

LTHs appear to be betting on higher prices, likely driven by the upcoming launch of spot Ethereum ETFs. This behavior contrasts with Bitcoin LTHs, who have been offloading their holdings since the start of the year.

Strategic Marketing by ETH ETF Issuers

ETH ETF issuers are ramping up their marketing efforts. VanEck is promoting Ethereum’s decentralized application capabilities, likening it to an “open-source app store.” Similarly, Bitwise has been highlighting Ethereum’s appeal to Wall Street investors by comparing it to tech investments rather than traditional assets like gold.

These dynamics collectively hint at a bullish trend for ETH, with the potential to reach the $4,000 mark in the coming weeks.

Web3 gaming is the worst-performing category in Q2: MYTH, PRIME, YGG face double-digit losses

• Web3 gaming is the worst-performing narrative of Q2 2024 among top crypto categories this cycle. 
• Mythos, Echelon Prime, Yield Guild Games noted double-digit declines in the past week, per CoinGecko data. 
• Relative strength of most top crypto narratives is negative compared to meme coins, per DYOR data. 

A crypto analyst ranked different categories of cryptocurrencies by their performance in the second quarter of 2024. Meme coins ranked first, while Gaming Finance (GameFi) ranked last in terms of Relative Strength, among other metrics. 

Mythos (MYTH), Echelon Prime (PRIME), and Yield Guild Games (YGG) are three of the worst-performing GameFi tokens that rank in the top 300. 

Fetch.ai set to extend decline after testing major resistance level

• Fetch.ai faces resistance at $1.65, the 61.8% Fibonacci retracement level in the weekly chart, and trades below $1.46 on Friday.
• On-chain data shows FET’s investors are booking profits, and supply on exchanges is increasing, signaling a bearish momentum.
• A weekly candlestick close above $1.65 would invalidate the bearish thesis.

Fetch.ai (FET) price is encountering resistance at $1.65 this week, with current trading below $1.46 as of Friday. On-chain data reveals that FET’s investors are taking profits, leading to an uptick in supply on exchanges. This indicates a bearish momentum that could potentially drive down FET’s price in the coming days.

Fetch.ai price set for a downward move

Fetch.ai price faces resistance at $1.65, the 61.8% Fibonacci retracement level from the weekly swing low of $0.51 on February 5 to the weekly swing high of $3.48 on March 25. At the time of writing, FET trades at $1.46 on Friday.

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