Round up of today’s market news

North American News

NASDAQ Index starts off the week with Robust Gains

• NASDAQ index rises by 0.83%

The NASDAQ index kicked off the second half of 2024 with a strong gain, rising 0.84% to close at a new record level of 17,879.30, following an 18.13% increase in the first half of the year. The Dow Jones Industrial Average also saw a modest rise of 0.13% to 39,169.51, while the S&P 500 gained 0.27% to finish at 5,475.09. However, the small-cap Russell 2000 index fell by 0.86% to 2,030.06 due to concerns over higher interest rates.

Tesla shares jumped 6.05% to $209.86 ahead of its Q2 delivery estimates release, which are expected to range between 433,000 and 436,000. Despite this surge, Tesla shares are down 20.36% for the first half of the year.

Other notable performers included:

• Nio ADR (NIO): +6.61%
• Snowflake (SNOW): +5.67%
• Grayscale Bitcoin (GBTC): +5.36%
• Deutsche Bank AG (DB): +4.23%
• Bitcoin Futures (BMC): +3.98%
• Rivian Automotive (RIVN): +3.65%
• Merck & Co (MRK): +3.30%
• Apple (AAPL): +2.90%
• Boeing (BA): +2.70%
• Goldman Sachs (GS): +2.49%
• CrowdStrike Holdings (CRWD): +2.34%
• Broadcom (AVGO): +2.20%
• Microsoft (MSFT): +2.19%
• Palantir (PLTR): +2.15%
• Amazon.com (AMZN): +2.04%

These gains occurred despite rising yields, with the 2-year yield up 4.0 basis points to 4.759%, the 5-year yield up 9.9 basis points to 4.429%, the 10-year yield up 13.0 basis points to 4.473%, and the 30-year yield up 13.4 basis points to 4.636%.

Atlanta Fed GDPNow growth estimate for Q2 1.7% versus 2.2% previously

• Atlanta Fed GDPNow growth estimate for Q2 2024

The Atlanta Fed GDPNow growth estimate for Q2 falls to 1.7% from 2.2% previously.In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 1.7 percent on July 1, down from 2.2 percent on June 28.After this morning’s releases from the US Census Bureau and the Institute for Supply Management, the nowcasts of second-quarter real personal consumption expenditures growth and second-quarter real gross private domestic growth decreased from 1.8 percent and 8.7 percent, respectively, to 1.5 percent and 6.9 percent.

US May ISM manufacturing index 48.5 vs 49.1 expected

• US ISM manufacturing for June 2024

• Prior month 48.7
• Prices paid 52.1 versus 57.0 prior
• Employment 49.3 versus 51.1 last month
• New orders 49.3 versus 45.4 last month
• Production 48.5 versus 50.2 last month.
• Supplier deliveries 49.8 versus 48.9 last month
• Inventories 45.4 versus 47.9 last month.
• Backlog of orders 41.7 versus 42.4 last month
• New export orders 48.8 versus 50.6 last month
• Imports 48.5 versus 51.1 last month

The S&P PMI ticked slightly lower in June and this survey was more disappointing as it slipped to the lowest since February.

Comments in the report:

• “High volume of customer orders.” [Chemical Products]
• “Customers continue to cut orders with short notice, causing a ripple effect throughout lower-tier suppliers.”[Transportation Equipment]
• “Consumer demand and inventories are no longer stable at retail and food service establishments.” [Food, Beverage & Tobacco Products]
• “While orders are still steady, inventory from the previous month is enough to satisfy current- and near-term commitments.” [Computer & Electronic Products]
• “Customers ordering more to create buffer stocks (in case of) future shortages.” [Electrical Equipment, Appliances & Components]
• “Order levels in two of our main divisions are indicating weak demand, and now we must work to reduce inventory levels.” [Fabricated Metal Products]
• “Sales backlog is decreasing. We have furloughed a portion of our workforce as a result.” [Machinery]
• “The level of production is lower due to decreased demand for products.” [Miscellaneous Manufacturing]
• “Elevated financing costs have dampened demand for residential investment. We have reduced inventories of production components.” [Wood Products]
• “Orders have increased slightly due to seasonal restocking.” [Plastics & Rubber Products]

US June S&P Global manufacturing PMI 51.6 vs 51.7 prelim

• The manufacturing survey from S&P Global

• Prelim was 51.7
• Prior was 51.3

Chris Williamson, Chief Business Economist at S&PGlobal Market Intelligence, said:

“The S&P Global PMI survey shows US manufacturers struggling to achieve strong production growth in June, hamstrung by weak demand from domestic and export markets alike. Although the PMI has now been in positive territory in five of the first six months of 2024, up from just one positive month in 2023, growth momentum remains frustratingly weak.

“Factories have been hit over the past two years by demand switching post-pandemic from goods to services, while at the same time household and business spending power has been diminished by higher prices and concerns over higher-for-longer interest rates.These headwinds persisted into June, accompanied by heightened uncertainty about the economic outlook as the presidential election draws closer. Business confidence has consequently fallen to the lowest for 19 months, suggesting the manufacturing sector is bracing itself for further tough times in the coming months.”

US construction spending for May -0.1% versus 0.2% expected

• US construction spending for May 2024

• Prior month +0.3% versus -0.1% previously reported
• Construction spending -0.1% versus 0.2% expected

Total Construction:

• May 2024 construction spending was $2,139.8 billion, -0.1% below April’s revised $2,142.1 billion.
• 6.4% higher than May 2023’s $2,011.8 billion.
• First five months of 2024: $836.3 billion, +8.8% above the same period in 2023 ($768.6 billion).

Private Construction:

• Spending was $1,652.1 billion, -0.3% below April’s revised $1,656.7 billion.
• Residential construction: $918.2 billion, -0.2% below April’s $920.3 billion.
• Nonresidential construction: $733.9 billion, -0.3% below April’s $736.5 billion.

Public Construction:

• Spending was $487.6 billion, +0.5% above April’s revised $485.4 billion.
• Educational construction: $102.1 billion, +0.6% above April’s $101.5 billion.
• Highway construction: $147.6 billion, -0.5% below April’s $148.3 billion.

Former Fed Gov. Clarida: Sees one Fed rate cut in December

• Former Fed Gov. Clarida speaking on CNBC

• Feds stance is dovish despite perceived hawkishness
• Earliest practical time for rate cut is September.
• PIMCO’s base case is for one cut this year in December
• Characterizes the May inflation data as welcome news for the Fed
• Says that Fed officials need a string of good inflation news to cut rates

Federal Reserve Bank of New York President John Williams

Comment from Fed’s Williams:

“I’m confident that we at the Fed are on a path to achieving our 2% inflation goal on a sustained basis,” Williams said, in a video for a Bank for International Settlements conference made public on Monday.

HSBC is wary of progress on US inflation stalling in the months ahead

• Analysts expect the pace of improvement in inflation from here to be only gradual and uneven

HSBS, though, in their most recent ‘global outlook’ note are more circumspect:

• We still expect the pace of improvement in inflation from here to be only gradual and uneven given the ongoing stickiness in service sector inflation and the fact the ‘easier’ supply-driven improvements from energy prices and global supply chains that were so critical to collapsing goods price inflation have now run their course
• There are some signs of discounting now in the US but inflation is set to rise in places in the coming months given not just base effects but the recent strength in an array of commodity prices, from metals to foods, and ongoing shipping disruptions and the impact on freight costs”

Canada on holiday

Happy Canada Day.

Canadian markets are closed today as we kick off the second half of the year.

Commodities

Crude oil futures settle at $83.38

• Up $1.84 or 2.26% on the day

Crude oil futures are settling at $83.38.That is up $1.84 or 2.26% on the day.

The gain is the largest one day gain since June 10 when the index rose 2.93% and driven by expectations of higher summer demand and concerns over potential supply shortages due to OPEC+ production cuts.

Oil prices increased by 6% in June, supported by OPEC+ extending output cuts until 2025. Analysts foresee supply deficits in the third quarter as summer travel and increased air-conditioning usage reduce fuel reserves.

Investors are awaiting comments from Federal Reserve Chair Jerome Powell, the central bank’s policy meeting minutes on Wednesday, and U.S. nonfarm payroll data on Friday to gauge the direction for ageless rates and the economy. Additionally, traders are monitoring the impact of hurricanes on oil and gas production, with Hurricane Beryl threatening the Caribbean’s Windward Islands.

After surpassing the 50% retracement level of the April 2024 decline at $80.06 on June 18, the price entered a consolidation phase between the 50% midpoint at $80.06 and the 61.8% level at $81.84. It broke higher on Friday but pulled back to the 61.8% level by the close. Today, the upward trend continued, reaching the highest levels since April 29. The next target is the April 26 high of $84.46, with immediate support at the 61.8% retracement level of $81.84.

Gold price steady as market awaits busy US weekly schedule

• Gold remains steady unaffected by rising US Dollar.
• Mixed US manufacturing data: S&P PMI expands, ISM PMI contracts for third consecutive month.

Gold prices remain virtually unchanged on Monday even though the Greenback registers minuscule gains propelled by elevated US Treasury bond yields, following a release of softer-than-expected US economic data. That, along with a shortened week in observance of Independence Day in the US and an eventful week, keeps the yellow metal trading within familiar levels at around $2,327 flat.

Natural Gas faces crucial moment as pivotal support gives way

• Natural Gas extends its decline and sinks to $2.55 on Monday. 
• China’s demand is less majestic as initially thought. 
• The US Dollar index retraces after the Euro outpaced the Greenback on Monday, offering support to XNG/USD. 

NatGas extending losses and is at risk of freefalling after substantial support snapped at the start of the US trading session.The move comes on the back of China cutting its Liquified Natural Gas (LNG) imports after prices rose above $3.0 in June.It seems that the demand and hunger for LNG in China is not that big once prices are heating up, while European Gas prices are moving higher after a local temperature surge and the energy demand rose again. 

Natural Gas is trading at $2.52 per MMBtu.  

NatGas news: Dipping further

• Europe’s gas prices are sinking as well with current supply numbers being large and broad enough to whistand current demand as heat waves are roaming through Europe and are sparking demand for energy to fuel airconditionings.  
• Bloomberg reports that China’s LNG imports fell for the first time in more than a year, by 6.2% compared to the same month last year. 
• Germany is topping over 80% of its Ggas storage capacity by hitting 81%.The overall EU gas storage capacity is at 77%, according to the GIE.

EU News

European indices closed the day with gains

• To start the new week, month, quarter and the 2nd half of the year, the major European indices are closed higher

A snapshot of closing levels:

• German DAX, +0.30%
• France CAC +1.09%
• UK FTSE 100 +0.03%
• Spain’s Ibex, +1.04%
• Italy’s FTSE MIB +1.70%

The gains today come after gains for most of the major indices in the first six months of the year (France’s CAC was the exception):

• German DAX, +8.86%
• France CAC, -0.86%
• UK FTSE 100, +5.57%
• Spain’s Ibex, +8.33%
• Italy’s FTSE MIB, +9.23%

Eurozone June final manufacturing PMI

• Latest data released by HCOB – 1 July 2024
• Manufacturing PMI (final) 45.8 vs. 45.6 prelim and 47.3 prior.

Key findings:

• HCOB Eurozone Manufacturing PMI at 45.8 (May: 47.3). 2-month low.
• HCOB Eurozone Manufacturing PMI Output Index at 46.1 (May: 49.3). 6-month low.
• Sharper decline in new orders and costs increase, but outlook remains upbeat.

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said: “Is this another bull trap for the manufacturing sector, similar to the false start at the beginning of 2023 when output briefly improved only to fall back again for a longer period? Indeed, the PMI indices for all Eurozone countries, except Italy, deteriorated in June. However, we are inclined to see this more as a temporary blip rather than a sign of a prolonged downturn. Manufacturing growth was seen in other parts of the world in June, such as the United States, UK, and India, according to their respective Flash PMI. This global recovery provides a supportive backdrop for Eurozone manufacturers. Additionally, optimism about future production remains as high as it was in May, indicating that businesses are still confident about the coming year.”

“It’s rather depressing that forward-looking new orders are falling at an accelerated pace. This decline comes after a record stretch of 25 consecutive months of falling demand, but a vague hope that things were improving in May when the respective index showed some increase. This means that any significant recovery will likely be postponed until at least the end of the summer or the beginning of fall.”

“It may be a good sign that an increasing number of companies were able to pass on some of the increase in input costs to their clients. This suggests that there is some pricing power in the market, which typically re-emerges when conditions are starting to improve.”

“Germany has failed to shake off its position as the worst performer among the eurozone countries tracked by the PMI survey. Austria is doing nearly as poorly, and manufacturers in France and Italy remain in recessionary territory as well. In contrast, the Netherlands, Spain, and Greece are seeing growth in their manufacturing sectors. We attribute Germany’s weak performance to its above-average exposure to the car industry, which is suffering on a global scale.”

Germany June CPI +2.2% vs +2.3% y/y expected

• Latest data released by Destatis – 1 July 2024

• Prior +2.4%
• CPI +0.1% vs +0.2% m/m expected
• Prior +0.1%
• HICP +2.5% vs +2.6% y/y expected
• Prior +2.8%
• HICP +0.2% vs +0.2% m/m expected
• Prior +0.2%

Germany June final manufacturing PMI 43.5 vs 43.4 prelim

• Latest data released by HCOB – 1 July 2024

• Prior 45.4

The reading is more or less the same as the initial estimate, reaffirming a slight setback for Germany’s manufacturing sector at the end of Q2. Weak demand conditions is still the main culprit in all this but at least that is helping to pin down price pressures slightly. HCOB notes that:

“Will this downturn in manufacturing never end? It will, but apparently it is going to take longer than expected. After having seen the decline in output ease in every month since March, this trend was interrupted in June. The accelerated fall in new orders and especially export orders indicates that we will have to wait some more months until a recovery in the manufacturing sector can be seen. However, companies are far from throwing in the towel, as they are more optimistic about the future than they were in May.

“The weakening demand conditions are hitting all surveyed sectors, from consumer to intermediate and investment goods. While this is just a monthly setback and shouldn’t be overdramatized, it’s worrying that the investment goods sector, a cornerstone of Germany’s industry, is drifting further from growth territory instead of moving closer to it.

“In the past, economic turning points have often coincided with shifts in the inventory cycle. Typically, companies that have stockpiled supplies initially rely on these inventories during a downturn. However, they eventually need to replenish their stock to continue production, marking the beginning of an upturn. What’s unusual now is that destocking, which started early in 2023, is still ongoing, even though the pace of inventory depletion has already been very high in recent months compared to previous cycles. The silver lining here is that when the rebound does come, it could be even stronger.

“The weak export orders for German companies, even as the global manufacturing sector shows a moderate recovery, is concerning.One likely explanation is the increasing competition from China, which is ramping up its exports worldwide due to sluggish domestic demand. This situation creates a double whammy for German exporters: fewer exports to China, evidenced by a 14% decrease in May, and heightened competition from Chinese products, especially in emerging markets. We’re now operating in a structurally different world compared to the 2010s. Companies must adapt to these new realities rather than hoping for a return to the “good old days”.”

Bavaria June CPI +2.7% vs +2.7% y/y prior

• Latest data released by Destatis – 1 July 2024

The other state readings released around the same time:

• Brandenburg CPI +2.6% vs +2.9% y/y prior
• Hesse CPI +1.8% vs +1.9% y/y prior
• Saxony CPI +2.8% vs +3.1% y/y prior
• North Rhine Westphalia CPI +2.2% vs +2.5% y/y prior
• Baden Wuerttemberg CPI +1.9% vs +2.1% y/y prior

France June final manufacturing PMI

• Latest data released by HCOB – 1 July 2024
• Manufacturing PMI (final) 45.4 vs. 45.3 prelim and 46.4 prior

Key findings:

• New orders decrease at quicker pace, weighing on production.
• Accelerated declines seen for purchasing activity and employment.
• Price pressures intensify, with output charge inflation at 15-month high.

Comment:

Commenting on the PMI data, Norman Liebke, Economist at Hamburg Commercial Bank, said:”Not only did France’s manufacturing sector plunge deeper into decline, but its contraction was also widespread in June as activity in the consumer goods sub-sector dropped for the first time since January. For the other two segments – intermediate and capital goods – factory output remained depressed, particularly at the latter. Indeed, reports from the survey panel noted weaker sales to clients in the automotive industry specifically.”

“Lower demand for French consumer goods was likewise a major factor behind the steeper reduction in total new orders, while purchasing activity fell at the strongest rate since December 2023. Additionally, the level of confidence in the outlook dropped below its historic average, reinforcing the pessimistic view portrayed by the forward-looking input purchasing and new orders indicators.”

“Of concern will be the re-acceleration of inflation in the manufacturing sector. Costs and output prices rose in all three major sub-sectors, although particularly steep input price inflation at intermediate goods makers suggests strengthening pipeline price pressures for the manufacturing sector as a whole.”

Italy June manufacturing PMI 45.7 vs 44.4 expected

• Latest data released by HCOB – 1 July 2024

• Prior 45.6

The downturn continues in Italy’s manufacturing sector, with it staying in contraction territory for a third straight month. Weaker demand conditions continue to be the bane for most of the euro area at the moment. This led to a decline in production volumes, with the pace of the drop being the quickest in seven months. HCOB notes that:

“The Italian industry remains in solid decline. The HCOB PMI for the manufacturing sector in Italy hasn’t dropped further from the previous month but still shows no signs of recovery at an index value of 45.7. Given the bleak present, it is surprising how optimistic Italian manufacturers are about the future.

“The brief uptick seen in the spring has quickly fizzled out. Output has significantly dropped compared to the previous month. Additionally, stocks of purchases and inventories of finished goods declined, further highlighting weak momentum.

“The Italian industry continues to grapple with sharply rising prices. Input costs have increased even further compared to the previous month, despite facing declining demand, which is challenging for industrial firms. These higher costs reflect elevated raw material prices and transportation costs, as anecdotal evidence suggests.Compounding the issue, manufacturers were not able to pass on the additional costs to end customers with output prices shrinking further in June.

“Employment is the sole silver lining. Although employment in the Italian industry is still slightly shrinking, the prospect of hiring is not too far off. However, to justify this, there would need to be a significant recovery in orders both domestically and internationally, which is currently not evident in the data. The long-awaited recovery of the industry, therefore, continues to elude us.”

Spain June manufacturing PMI

• Latest data released by HCOB – 1 July 2024
• Manufacturing PMI 52.3 vs. 53.0 expected and 54.0 prior.

Key findings:

• Production and new orders rise again, but at slower rates.
• Weaker growth in employment as confidence softens.
• Input cost inflation accelerates to highest since November 2022.

Comment:

Commenting on the PMI data, Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, said: “Uncertainty following European elections is putting pressure on Spanish manufacturers. In June, the index value fell significantly from 54.0 to 52.3. A crucial difference compared to the whole of Europe, however, is that the index in Spain is still in the weak growth area, while it has recently signaled accelerated contraction in the Eurozone according to the Flash PMIs. Production and demand grew in June, but much more slowly than in May. Correspondingly, business expectations have fallen to their lowest level in 2024 and below the historical average.”

“Spanish manufacturers are struggling with reaccelerating input prices. Panelists report that shipping costs and a range of raw materials especially were responsible for the reacceleration in input prices. While output prices have risen for the second consecutive month, the dynamic is significantly weaker compared to input prices. Due to market competition, companies only partially passed the higher prices on to consumers.”

“The weaker but robust growth in manufacturing is still broad-based. Slower demand growth led to a softer pace in Intermediate Goods and Investment Goods activity growth. In the Consumer Goods sector, however, demand conditions improved, resulting in accelerated growth. Additionally, new employees were hired in all sectors. The intensification of cost pressures was particularly noticeable in the Intermediate and Investment Goods sectors.”

UK June final manufacturing PMI 50.9 vs 51.4 prelim

• Latest data released by S&P Global – 1 July 2024

• Prior 51.2

It’s a slight revision lower to the initial reading but still reaffirms a marginal growth in UK’s manufacturing sector. Both output and new orders continued to expand for a second successive month. However, price pressures remain stubborn with input cost inflation rising to a 17-month high. That’s a troubling sign for the BOE. S&P Global notes that:

“The UK manufacturing sector is enjoying its strongest spell of growth for over two years, with June seeing output and new order growth sustained at robust rates similar to May’s recent highs. The performance of the domestic market remains a real positive, providing a ripe source of new contract wins. In contrast, the ongoing weak export performance is concerning, with manufacturers reporting difficulties in securing new business in several key markets including the US, China and mainland Europe.

“Although June also saw manufacturers maintain a relatively high degree of optimism towards the future, this was not sufficient to lessen their focus on cost minimisation and cash flow protection. This led to further job losses, cuts to non-essential spending and efforts to operate on leaner stock holdings. This is coming from a backdrop of renewed cost inflation pressure, with manufacturers’ input prices now rising at the quickest pace since the start of 2023. This renewed upward lurch in manufacturing prices will likely add to concerns over the potential stubbornness of underlying inflationary pressures among hawkish rate setters at the Bank of England.”

UK May mortgage approvals 59.99k vs 59.90k expected

• Latest data released by the BOE – 1 July 2024

• Prior 61.14k; revised to 60.82k
• Net consumer credit £1.5 billion
• Prior £0.7 billion; revised to £0.8 billion

Individuals borrowed, on net, £1.2 billion of mortgage debt in May – down from £2.2 billion in April. That sees the annual growth rate for net mortgage lending rising to 0.3% in May, up from 0.2% in April – which was the first rise in the growth rate since October 2022.

UK June Nationwide house prices

• Latest data released by Nationwide Building Society – 1 July 2024
• +0.2% vs -0.1% m/m expected
• Prior +0.4%

House prices in the UK continue to hold up but Nationwide argues that activity in the market remains fairly subdued despite that. The firm notes that: “Housing market activity has been broadly flat over the last year, with the total number of transactions down by around 15% compared with 2019 levels. Transactions involving a mortgage are down even more (nearly 25%), reflecting the impact of higher borrowing costs. By contrast, the volume of cash transactions is actually around 5% above pre-pandemic levels.”

Switzerland June manufacturing PMI 43.9 vs 45.2 expected

• Latest data released by Procure – 1 July 2024
• Prior 46.4

This is the 18th straight month that the Swiss manufacturing sector remains in contraction. Softer readings across the region continue to indicate that a rebound in conditions for Switzerland also remains unlikely. Here is the breakdown for the month:

SNB total sight deposits w.e. 28 June CHF 452.0 bn vs CHF 451.8 bn prior

• Latest data released by the SNB – 1 July 2024
• Domestic sight deposits CHF 443.0 bn vs CHF 443.4 bn prior

ECB Pres. Lagarde: it will take time to be certain that inflation is on track

• ECBs Lagarde

• It will take time to be certain that inflation is on track
• strong labor market means we have time to gather information.
• Soft landing for euro zone economy not guaranteed.
• We also need to be mindful of the fact that the growth outlook remains uncertain.
• We are still facing several uncertainties regarding future inflation, especially in terms of how the nexus of profits, wages and productivity will evolve and whether the economy will be hit by new supply-side shocks

ECBs Wunsch: The markets pricing on rate cuts reasonable

• ECB’w Wunsch believe markets’ rate cut forecast is rational, cautious approach urged

• The first two breakouts are relatively easy
• The markets pricing on rate path is reasonable
• The ECB would need convincing to cut more than twice this year.
• A July cut is an option in theory, but in practice ECB must be cautious
• ECB won’t solve fiscal problems with the use of Transmission Protection Instrument

ECBs Sinkus: There is a possibility for 2 more cuts in 2024

• ECBs Sinkus speaks

• Two more cuts are possible in a 2024 if data is as expected
• ECB should not limit rate moves to projection meetings
• Adds that a case before a July interest rate cut has gone

French antitrust regulators preparing to charge Nvidia

• Reuters report, citing Nvidia

French antitrust regulators are preparing to charge Nvidia with anti-competitive practices, according to Reuters.

This isn’t wholly a surprise as back in September, France raided the offices of Nvidia. Shares haven’t been hurt since the report and are down 1.3%.

Asia-Pacific-World News

China Caixin Manufacturing PMI for June 2024

• 51.8 (expected 51.2, prior 51.7)
• 51.8 is the highest in three years

The Caixin / S&P Global Manufacturing PMI on the second Manufacturing PMI for June 2024 .

Comes in at 51.8, the highest since May of 2021 and the eighth consecutive reading above 50

• expected 51.2, prior 51.7

From the report, in brief:

• Demand also rose, keeping the subindex for total new orders in expansionary territory for the 11th consecutive month. Demand for consumer and intermediate goods was stronger than that for investment goods. Exports continued to grow, but at the slowest pace in six months, indicating slightly weaker overseas demand.
• The job market stabilized somewhat. Although the employment subindex remained in negative territory for 10 months consecutively, the magnitude of the contraction moderated in June, suggesting that the number of companies expanding their workforce was roughly equal to those reducing it. The employment picture was better at companies making consumer and intermediate goods than at those producing investment products.
• Prices rose slightly in June.Higher prices of raw materials such as steel,copper and aluminum coupled with rising freight costs pushed up input costs, causing the corresponding gauge to hit its highest in two years. Output prices ticked up, with the indicator entering expansionary territory for the first time this year.

PBOC sets USD/ CNY reference rate for today at 7.1265 (vs. estimate at 7.2558)

• PBOC CNY reference rate setting for the trading session ahead

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

• 50bn mature today
• thus a 48bn drain in Open Market Operations (OMOs)

China’s Xi says willing to work with Australia

• China is Australia’s largest export market.

Chinese state media reporting comments from Communist Party Chair Xi Jinping:

• A healthy and stable development of China-Australia relations is in the fundamental and long-term interests of the two countries and peoples
• A healthy, stable development of China-Australia relations is also conducive to regional and world peace, stability, development and prosperity
• Willing to work with Australia to promote the building of a more mature, stable and fruitful China-Australia comprehensive strategic partnership

Chinese national security authorities have greater power to inspect smartphones from today

• Permitted to inspect baggage and electronic devices on suspicion of espionage.

Via Nikkei today (gated):

• Chinese national security authorities will have greater power to inspect smartphones and other electronic devices beginning Monday
• The new powers are part of stronger anti-espionage laws that took effect,. The power of inspection extends to the phones of foreigners in the country.
• The new espionage law broadens the information covered to anything involving “national security and interests.”
• National security authorities now are permitted to inspect baggage and electronic devices simply on suspicion of espionage.

Weekend data – China’s official PMIs for June were mixed

• Manufacturing came in 49.5 vs expected 49.5
• Prior 49.5
• Services at 50.5 vs expected 51
• Prior 51.1

China’s manufacturing PMI contracted for a second consecutive month in June.

The non-manufacturing PMI expanded, but a slower pace than in May.

Australian final manufacturing PMI for June plunges further into contraction

• The fifth consecutive month in contraction for the Judo Bank S&P Australian Manufacturing PMI

The final June reading is 47.2, the lowest in 3 months and the fifth month in a row in contraction

• Manufacturing PMI 47.2
• Preliminary was 47.5
• May was 49.7

Some of the comments from the report:

• manufacturing sector’s key activity indicators have softened to the cyclical lows seen earlier in the year
• Manufacturers are marginally scaling back production through reduced headcounts and inventories in response to prolonged difficult trading conditions in the sector
• employment index dipped back below the neutral level. Manufacturers, on average, have been gradually reducing headcounts throughout 2024
• margin pressures in the manufacturing sector appear to be picking up.The input price index climbed significantly to 58.4 in June,which, while slightly down on the prior month, is above the average reading of 56.0 seen over the first four months of the year. The rise in input price pressures doesn’t appear to have been passed onto consumers, with the output price index remaining subdued at cyclical lows in June.

Australian private survey of inflation, June 2024: +0.3% m/m (prior +0.3%)

• This is not official CPI data, but the advantage is it comes out well before Australian Bureau of Statistics measures

Private survey of inflation from the Melbourne Institute

Inflation for June 2024 comes in at +0.3% m/m

• prior +0.3%

For the y/y, +3.2%

• prior 3.1% (lowest in 21 months)

Trimmed mean (core measure) +0.2 %m/m and +3% y/y

• prior 0.3 and 3.2 respectively

Japan final manufacturing PMI for June

• Jibun S&P Global June 2024 Manufacturing PMI

• Manufacturing PMI 50.0
• prior 50.4
• preliminary was 50.1

From the commentary to the report:

• “Notably, the latest PMI data revealed the first rise in Japanese factory production for over a year, and a rebound in business confidence. Although employment continued to be impacted by retirements, there was another round of net job creation in June.
• “However, there were some concerning aspects in the latest figures, with companies grappling with heightened cost pressures as yen depreciation exacerbated the price of imported materials. Labour was another factor straining budgets. There was clear evidence that the sharp rise in overall purchasing prices was not caused by supply-chain issues, as delivery times in fact improved to the greatest extent in over 15 years.
• “Manufacturers raised their selling prices at the strongest rate in over a year as a result, an unfavorable consequence given that both domestic and external demand remain weak.”

Japanese firms expect the CPI at 2.4% a year from now

• The Bank of Japan Corporate Price Expectations survey is part of the Tankan

• Firms expect consumer prices to rise 2.4% a year from now vs +2.4% in the previous survey
• Expect consumer prices to rise an annual 2.3% three years from now vs +2.2% in the previous survey
• Firms expect consumer prices to rise an annual 2.2% five years from now vs +2.1% in the previous survey

Japan Q1 GDP (revised) -2.9% (from -1.8%)

• Terrible number

Worse economic contraction than was thought for Japan in Q1 2024.

• January – March real GDP annualised -2.9% vs previously revised -1.8%
• October -December2023 real GDP revised to annualised +0.1% from previous +0.4%
• July September 2023real GDP revised to annualised -4.0% from previous -3.7%

BoJ Tankan: Large manufacturing index rises to +13 (expected 12, prior 11)

• Bank of Japan Tankan report for Q2 2024

Bank of Japan Tankan for the April to June quarter of 2024.

Headlines via Reuters:

• June big manufacturers index +13 (Reuters poll: 12), this is a 2 year high
• September big manufacturers index seen at +14 (Reuters poll: 13)
• June big non-manufacturers index +33 (Reuters poll: 33)
• September big non-manufacturers index seen at +27 (Reuters poll: 31)
• June small manufacturers index -1 (Reuters poll: -1)
• September small manufacturers index seen at 0 (Reuters poll: 1)
• June small non-manufacturers index +12 (Reuters poll: 12)
• September small non-manufacturers index seen at +8 (Reuters poll: 9)
• Japan all firms see dollar averaging 144.77 yen for FY2024/25
• Japan all firms see euro averaging 155.40 yen for FY2024/25
• Japan big manufacturers see dollar averaging 142.68 yen for FY2024/25
• June all firms employment index -35
• June all firms financial condition index +12 vs March +11
• June big manufacturers’ production capacity index +3 vs March +3
• Japan big manufacturers see FY2024/25 recurring profits -8.8%
• Japan big firms see FY2024/25 capex +11.1% (Reuters poll: 13.9%)
• Japan small firms see FY2024/25 capex -0.8% (Reuters poll: 0.5%)

Separately, firms expect the CPI to rise to 2.4% in a year.

Cryptocurrency News

Ethereum Outflows and Potential US Government ETH Sale Could Derail Positive July Projections

• Global Ethereum ETF outflows threaten expectations of successful spot ETH ETF launch.
• ICO whale and US government hint at ETH sale after recent transfers.
• Ethereum’s historical July returns could attract bulls as spot ETH ETF launch draws closer.

Ethereum (ETH) is up more than 2% on Monday despite increased outflows across global ETH ETF products and exchange deposits from key whale wallets.

Ethereum outflows, whale transfers

In an X post on Monday, Nate Geraci, President of the ETF Store, predicted that spot Ethereum ETFs would be the second most successful ETF debut in history behind spot Bitcoin ETFs.

However, flows across international Ethereum investment products suggest otherwise. According to CoinShares, global Ethereum ETFs saw outflows of $61 million last week, its highest since August 2022.
This pushes its two-week net flows to $119 million in outflows.

CoinShares noted that the move places ETH as the worst-performing digital asset this year in terms of net flows. ETH net flows could turn positive in the coming weeks if the Securities & Exchange Commission (SEC) approves the S-1 drafts of issuers in the US.

The SEC approved 19b-4 filings of prospective spot ETH ETF issuers on May 23 but also needs to greenlight their S-1 registration statements before the ETFs can begin trading.

According to Wu Blockchain, an ICO-era whale moved 7K ETH worth $24.8 million to Kraken exchange within the past 24 hours after staying silent for 209 days. The whale wallet still has more than 40K ETH, worth about $139.5 million, within its possession. Notably, the whale purchased 254.9K ETH at an average price of $0.311 during its ICO in 2014.

Historically, long-term holders becoming active often indicates that the market is approaching the peak of a bull cycle.

Additionally, an address linked to the US government transferred 3,375 ETH to an unknown address, according to Arkham Intelligence. The address contains the seized funds of Estonia duo Potapenko and Turogin, who were extradited to the US for an alleged $575 million Ponzi scheme.

Ripple ruling by Judge Torres accepted by court in SEC vs. Binance lawsuit

• Ripple ruling that states XRP is not a security in secondary market sales was cited by Judge in SEC vs. Binance lawsuit. 
• The ruling acted as a precedent, and the Judge clarified whether secondary market sales of crypto were securities. 
• XRP climbs above $0.48 resistance on Monday, extending gains by nearly 1%. 

Ripple (XRP) ruling acted as a precedent when Judge Amy Berman Jackson ruled in the US Securities and Exchange Commission (SEC) vs. Binance lawsuit. The Judge for the US District Court for the District of Columbia dismissed part of the charges against Binance concerning the secondary market sales of Binance’s native BNB token. 

The Judge relied on Judge Torres ruling in the SEC vs. Ripple lawsuit, where secondary market sales of the token did not satisfy the Howey test, and XRP was free of security status. 

Ripple ruling cited in SEC vs. Binance lawsuit

• Judge Analisa Torres’ ruling from July 2023 was used in the SEC vs. Binance lawsuit to determine whether a cryptocurrency is a security in secondary-market sales. 
• Judge Jackson dismissed charges against Binance concerning secondary-market sales of its native token, BNB. 
• The Ripple ruling laid the basis for dismissing the charges, and the Judge’s decision in the SEC vs. Binance lawsuit provided clarity on the “security” status of cryptocurrencies sold on exchange platforms. 
• There has been no update in the SEC vs. Ripple lawsuit since the agency asked for $102.6 million in fines from the payment remittance firm on May 29. 
• XRP holders await updates on the lawsuit and are closely following the launch of the stablecoin Real USD (RLUSD). 

“Roaring Kitty” sued for Securities Fraud

• Gamestop pump and dump alleged

Roaring Kitty, Keith Gill, has been sued for securities fraud in the US District Court Eastern District of New York

Source here: https://securities.stanford.edu/filings-case.html?id=108392

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