North American News
US markets are closed today for the July 4th holiday
- US equity and fixed income markets are closed
Fed’s Goolsbee says getting inflation back to 2% will take time
- Warns against prolonging high interest rates
Federal Reserve Bank of Chicago President Austan Goolsbee spoke with UK media, BBC radio:
- getting inflation back to 2% will take time
- still much data to be had on the economy before cutting rates
- warns against prolonged high interest rates
- expressed concern about the pace at which the labour market was slowing
Commodities
Gold Holds Steady Above $2,350 as Traders Await US NFP Report
Gold Prices Consolidate Ahead of US NFP Data
Gold prices edged up 0.15% on Thursday amid subdued trading conditions due to the US Independence Day holiday. The precious metal traded around $2,356, maintaining its position above $2,350 following a recent rise to a two-week high of $2,365 on Wednesday.
Gold continued to hold firm as investors awaited Friday’s Nonfarm Payrolls (NFP) report for June, a key indicator for the US labor market. Recent weak economic data from the US has heightened expectations that the Federal Reserve may start easing monetary policy sooner than previously anticipated. Federal Reserve Chair Jerome Powell recently noted that while the disinflation process has resumed, further progress is needed before considering any interest rate cuts.
NFP Expectations:
- US Nonfarm Payrolls (NFP): Expected to show an addition of 190,000 jobs in June, down from May’s 272,000.
- Unemployment Rate: Projected to remain unchanged at 4%.
- Average Hourly Earnings (AHE): Expected to decelerate from 4.1% to 3.9% year-over-year.
Market participants will closely analyze the NFP report for insights into the health of the US labor market, which could influence future Fed policy decisions.
Silver Holds Steady Near $30.50 as Weak US Data Fuels Rate-Cut Speculation
Silver Prices Firm Near $30.50 Amid Fed Rate-Cut Expectations
Silver maintained its gains around $30.50 during Thursday’s New York session, buoyed by the prospects of Federal Reserve rate cuts, as US markets observed Independence Day.
Silver Steady at $30.50 as Weak US Data Boosts Fed Rate-Cut Bets
Silver held its position near $30.50 after a significant rise on Wednesday, supported by growing speculation that the Federal Reserve might start reducing interest rates in September. This speculation was fueled by weak US economic data, including a decline in private payrolls and a contraction in the ISM Services PMI, indicating a slowing economy.
Key Highlights:
- ADP Employment Data: The private sector added 150K jobs in June, missing estimates of 160K and falling from May’s 157K.
- ISM Services PMI: The index fell sharply, signaling the lowest service sector activity in four years, with significant contractions in New Orders and slower price increases.
The weak economic data strengthened the case for early Fed rate cuts, putting pressure on the US Dollar, which dropped to near 105.20 on the US Dollar Index.
Looking ahead, investors are turning their attention to the US Nonfarm Payrolls (NFP) data for June, set to be released on Friday, for further insights into the labor market and economic health.
China asked State Firms to Boost Oil Reserves by 60 Million Barrels – Reuters reports
China has asked its state oil companies to add 8 million metric tons, or nearly 60 million barrels, of crude oil to the country’s emergency stockpiles to boost supply security, according to trading sources.
More at the link here
EU News
European equity close: UK stocks finish strong ahead of the election results
- Closing changes in the main European equity markets
- Stoxx 600 +0.6%
- German DAX +0.4%
- UK FTSE 100 +0.8%
- French CAC +0.8%
- Italy MIB +0.8%
- Spain IBEX +0.1%
Germany June construction PMI 39.7 vs 38.5 prior
- Latest data released by HCOB – 4 July 2024
- Prior 38.5
Germany May industrial orders -1.6% vs +0.5% m/m expected
- Latest data released by Destatis – 4 July 2024
- Prior -0.2%; revised to -0.6%
If you strip out large orders, incoming orders in May were down 2.2% relative to the month before. Looking at the details, the drop owes much to a decline in foreign orders (2.8%) while domestic orders were higher (+0.5%) on the month.
UK June construction PMI 52.2 vs 53.6 expected
- Latest data released by S&P Global – 4 July 2024
- Prior 54.7
Overall activity continues to expand in the UK construction sector, although the rise has cooled since the month before. That owes to a renewed downturn in housing activity. Meanwhile, commercial activity continues to expand at a sharp rate and that is helped by a modest rise in civil engineering activity as well. S&P Global notes that:
“Continued growth of the UK construction sector in June meant that the sector has recorded sustained expansion throughout the second quarter of the year. While there were signs of a slowdown in the latest survey period, most notably around housing activity, firms indicated that a slowdown in new order growth was in part related to election uncertainty. We may therefore see trends improve once the election period comes to an end.
“Moreover, confidence in the year ahead outlook remained strong and firms increased employment to the largest extent in ten months. “In terms of inflation, there remains little sign of cost pressures picking up to any great extent, encouraging firms to expand purchasing activity. Supply-chain conditions also remained favourable.”
Switzerland June CPI +1.3% vs +1.4% y/y expected
- Latest data released by the Federal Statistics Office – 4 July 2024
- Prior +1.4%
- Core CPI +1.1% y/y
- Prior +1.2%
Switzerland June seasonally adjusted unemployment rate 2.4% vs 2.4% expected
- Latest data released by SECO – 4 July 2024
- Prior 2.4%
The Swiss jobless rate remains table in June, with the number of registered unemployed persons falling to 104,518 from 105,465 in May.
ECB accounts show some mixed views on confidence towards inflation outlook
- The ECB releases its accounts of the June monetary policy meeting – 4 July 2024
- Some members felt that the data available since the last meeting had not increased their confidence that inflation would converge to the 2% target by 2025
- These members also viewed risks to the inflation outlook as being tilted to the upside
- Wage growth had surprised to the upside and inflation seemed to be stickier
- Services inflation momentum was very high, and the pace of domestic disinflation had been overestimated
- It was also suggested that further significant wage pressures were in the pipeline
- All of this suggested that the last mile, as the final phase of disinflation, was the most difficult
- It was argued that a small undershooting of inflation would be much less costly than a continued overshooting
- These considerations suggested that cutting interest rates was not fully in line with the principle of data-dependence
- There was a case for keeping interest rates unchanged at the current meeting
- But willingness to support Lane’s proposal to cut interest rates was expressed, notwithstanding the reservations put forward
ECB’s Lane: Wage tracker shows much lower wage growth in 2025 and 2026
- Remark by ECB chief economist, Philip Lane
- Firms are telling us that wage pressures are coming down
Goldman Sachs assess the UK economic outlook under the incoming Labour government
- Stronger near-term growth and slightly higher inflation
This via Goldman Sachs, in summary (from a much longer piece) of the economic outlook under the new government:
- Taken together, we would look for slightly stronger near-term growth and slightly higher inflation under a Labour majority than current government plans.
- In particular, we would see a growth upside of about 0.1pp in each of 2025 and 2026, which would likely marginally increase wage growth and inflation.
- The implications for the BoE would likely be limited, but with risks of slower rate cuts if Labour delivered a sizeable increase in the Living Wage.
Asia-Pacific-World News
Wall Street Journal: The Underground Network Sneaking Nvidia Chips Into China
- U.S. export controls easily circumvented
The Journal (may be gated) with a piece on a barely concealed network of buyers, sellers and couriers bypassing the Biden administration’s restrictions aimed at denying China access to Nvidia’s advanced AI chips.
- More than 70 distributors are openly advertising online what they purport to be Nvidia’s restricted chips,
PBOC sets USD/ CNY reference rate for today at 7.1305 (vs. estimate at 7.2656)
- PBOC CNY reference rate setting for the trading session ahead
In open market operations:
- PBOC injects 2bn via 7-day RR, sets rate at an unchanged 1.8%
- 100bn mature today
- thus a 98bn drain
Australian May trade balance: Surplus of AUD 5.773bn
- Imports with a huge turnaround from the previous month
- Actual: 5.773B
- Expected: 6.200B
- Previous: 6.548B
Australia Exports (MoM) $AUD
- Actual: 2.8%
- Previous: -2.5%
Australia Imports (MoM) $AUD
- Actual: 3.9%
- Previous: -7.2%
The rise in exports is the best in 9 months, but this was overshadowed by the rise in imports. A huge turnaround in imports from the -7% drop in April. An economy that is sucking in imports is generally perceived as one in good shape. Yesterday we had a solid retail sales report for May.
New Zealand’s YTD budget deficit has come in NZD 1 bn lower than expected
- 11 months into the financial year
New Zealand updates its budget deficit 11 months into its financial year.
- deficit is NZD 7.75bn for the 11 months, which is 1bn lower than was forecast.
Japan stocks – Topix index, and Nikkei have each hit a record high
- Japan equities are seeing inflows, helped by a bargain basement yen
Japan’s Topix hit a record high on Thursday
- rose to as high as 2,890.52, breaking a high of 2,885.50 set in December 1989
- also beat a record closing high of 2,884.80 on the same day
- Nikkei 225 also hit a record high, it had done so earlier on the year in February
Cryptocurrency News
SEC Delays Approval of Ethereum ETF as ETH Faces Bearish Pressure
Ethereum experienced a significant decline of over 5% on Thursday after the Securities & Exchange Commission (SEC) postponed its decision on approving S-1 drafts for ETH ETF issuers. The delay, which came after the US Independence Day holiday, heightened market uncertainty and contributed to Ethereum breaching a critical support level, triggering approximately $90 million in long liquidations.
Key Developments:
- SEC Decision Delay: The SEC has yet to approve spot ETH ETFs despite previously approving issuers’ 19b-4 filings in May. Analysts, including Bloomberg’s James Seyffart, now speculate on a potential approval date around next weekend.
- Impact on Market: The delay in ETF approval exacerbated bearish sentiment, causing Ethereum to fall below key technical support levels. This triggered significant liquidations, including a whale who faces liquidation risk if ETH drops to $2,984.
- Whale Liquidation Risk: A large investor who utilized the Compound protocol deposited 12,734 ETH valued at $40 million and borrowed $31.4 million in stablecoins. With a health ratio of 1.06, this investor risks liquidation if Ethereum’s price continues to decline.
Looking Ahead: Market analysts and participants are closely monitoring SEC announcements and Ethereum’s price movements amid ongoing regulatory developments and market volatility. The next critical dates for potential ETF approvals and subsequent market reactions are anticipated around mid-July, pending SEC updates and issuer responses.
J.P. Morgan bullish on Stablecoins – see the market ‘growing again’
- Tether remains the predominant player
J.P. Morgan says the rally in crypto/bitcoin so far this year has fueled much of the growth in stablecoins:
- In contrast to last year when market participants were still reeling from the collapses of several high-profile crypto entities, the regional banking crisis, and of course, the Fed’s tightening campaign, the stablecoin market is growing once again.
JPM cite industry sources saying the size of the stablecoin market is around US$160bn today.
- 30% increase from the local low in late 2023
- just shy of the peak of $180bn in early 2022
Bitcoin drops again, faces mounting technical pressure
- The cryptocurrency is falling below its 200-day moving average for the first time since October 2023
After what looked to be a hold of the $60,000 mark has quickly turned ugly for Bitcoin. The cryptocurrency dipped in trading yesterday and is continuing that drop today under the figure level. Of note, the low earlier even briefly touched below $57,000 and is threatening a bigger break on the charts.
For buyers, there is still some hope with the 1 May low coming in at $56,500. However, the break of the 200-day moving average should see sellers gather more conviction to push for a stronger downside move. As such, this key level might not hold up too well.
Standard Chartered says Bitcoin could hit US$100,000 by US election day
- But could drop to $50,000 is Biden pulls out
Standard Chartered analysts on BTC:
- if Biden drops out, the price of bitcoin could drop to $50,000
- bitcoin prices will stay soft if Biden is supplanted by alternative candidates
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