Round up of today’s market news

North American News

Market Wrap-Up: Nasdaq Closes Week with Gains; Treasuries Surge

The U.S. stock market closed the week on a positive note, with the Nasdaq Composite leading the gains amidst a strong performance from tech stocks. Here are the key highlights from today’s trading session and the week:

Closing Numbers:

• Dow Jones Industrial Average: +50.23 points at 39,358.23
• S&P 500 Index: +28.56 points at 5,565.58
• Nasdaq Composite: +167.06 points at 18,355.36
• Russell 2000 Index: -9.89 points at 2,026.72

Weekly Performance:

• Dow Jones Industrial Average: +0.66%
• S&P 500 Index: +1.95%
• Nasdaq Composite: +3.50%
• Russell 2000 Index: -1.02%

Treasuries:

• The 10-year Treasury note yield fell by eight basis points to 4.27%.
• The 2-year Treasury note yield declined by 12 basis points to 4.60%.

Tech Stocks Highlights:

• Tesla extended its winning streak for the seventh consecutive day, closing the week with a remarkable gain of 27.12%.
• Netflix recovered all its losses for the year, ending the week up 1.22% and closing just below its record high set in November 2021.

Performance of Major Tech Stocks:

• Nvidia: +1.85% this week, up 154.09% year-to-date.
• Meta Platforms: +7.08% this week, up 52.53% year-to-date.
• Amazon: +3.49% this week, up 31.63% year-to-date.
• Alphabet: +4.64% this week, up 36.44% year-to-date.
• Apple: +7.46% this week, up 17.56% year-to-date.
• Microsoft: +4.61% this week, up 24.34% year-to-date.

Other Market Highlights:

• Oracle shares closed higher by 2.57% this week, reflecting a year-to-date gain of 37.37%.

Upcoming Economic Data (Week of July 9):

• Tuesday, July 9: Fed Chair Powell Testifies on Capitol Hill (USD)
• Tuesday, July 9: U.S. Treasury sells 3-year notes (USD)
• Tuesday, July 9: CPI y/y and PPI y/y (CNY)
• Tuesday, July 9: Official Cash Rate and RBNZ Rate Statement (NZD)
• Wednesday, July 10: Fed Chair Powell Testifies on Capitol Hill (USD)
• Wednesday, July 10: 10-year Bond Auction (USD)
• Thursday, July 11: GDP m/m (GBP)
• Thursday, July 11: Core CPI m/m, CPI m/m, CPI y/y, Unemployment Claims (USD)
• Thursday, July 11: 30-year Bond Auction (USD)
• Friday, July 12: Core PPI m/m, PPI m/m, Prelim UoM Consumer Sentiment, Prelim UoM Inflation Expectations (USD)

Looking Ahead: Investors will be closely monitoring economic data releases and central bank developments next week amidst ongoing volatility and global economic uncertainties.

New York Fed Nowcast growth estimate for Q2 falls to 1.8% down from 1.93% last week

• Q2 GDP growth estimate continues to weaken

The New York Fed Staff Nowcast growth estimate for Q2 growth falls to 1.8% down from 1.93% on June 28

• The New York Fed Staff Nowcast for 2024:Q2 is 1.8%, with the 50% probability interval at [0.8, 2.9] and the 68% interval at [0.3, 3.3]. The Staff Nowcast is 2.1% for 2024:Q3.
• News from this week’s data releases decreased the estimates for both 2024:Q2 and 2024:Q3 by 0.1 percentage point.
• A positive surprise from nonfarm payroll employment data was offset by negative surprises from unemployment and ISM manufacturing survey data, as well as a negative impact from data revisions for both quarters.

US May non-farm payrolls +206K vs +190K expected

• June 2024 US employment data from the non-farm payroll’s report

• Prior was +272K (revised to +218K)

Details of the May 2024 jobs report:

• Two-month net revision -111K vs -15K prior
• Unemployment rate 4.1% vs 4.0% expected
• Prior unemployment rate 4.0%
• Participation rate 62.6% vs 62.5% prior
• U6 underemployment rate 7.4% vs 7.4% prior
• Average hourly earnings +0.3% m/m vs +0.3% expected
• Prior avg hourly earnings +0.4% m/m
• Average hourly earnings +3.9% y/y vs +3.9% expected
• Average weekly hours 34.3 vs 34.3 expected
• Change in private payrolls +136K vs +190K expected
• Change in manufacturing payrolls -8K vs +6K expected
• Household survey +116K vs -408K prior
• Government jobs +70K vs +43K prior
• Full time -28K
• Part time +50K

Fed monetary policy report: Labor supply-demand balance resembles pre-pandemic period

• Comments in the Federal Reserve’s monetary policy report

• Further progress seen on inflation this year but still need ‘greater confidence’ before moving to cut rates
• Housing-related inflation to gradually decline
• Still significant disparities in the jobs market
• Financial system sound and resilient
• Valuations high relative to fundamentals in major asset classes
• “Inflation eased notably last year and has shown modest further progress so far this year”​​.
• “The labor market continued to rebalance over the first half of this year, and it remained strong”​​.
• “Real GDP growth is reported to have moderated in the first quarter after having increased at a robust pace in the second half of last year”​​.
• “Measures of longer-term inflation expectations are within the range of values seen in the decade before the pandemic and continue to be broadly consistent with the FOMC’s longer-run objective of 2 percent”​​.
• “Personal consumption expenditures price inflation slowed notably last year and has shown modest further progress this year, it remains above the FOMC’s longer-run objective of 2 percent”

Timiraos: The Fed may start the debate about a Sept cut at the upcoming meeting

• Comment from the WSJ Fedwatcher

Nick Timiraos says today’s jobs report wasn’t alarming enough to put a July rate cut on the table (pricing is just 5%) but says that it could open up a real debate about September.

The June jobs report will make the July Fed meeting more interesting because there may be—for the first time all year—a real debate over whether to cut at the *next* meeting (in September)

The thing is, the Fed will need to lay out some stronger hints of a cut but he also highlights next week’s CPI report as a key variable ahead of the July 30-31 meeting.

Fed’s Williams: Still a way to go to reach our 2% target

• Remarks from New York Fed President John Williams

• We still have a way to go to reach our 2% target on a sustained basis.
• We are committed to getting the job done.
• Uncertainty will continue to be the defining characteristic of the monetary policy landscape for the foreseeable future.

Canada June employment change by -1.4K versus 22.5K estimate

• Canada June employment changes details

• Prior month 26.7K
• Employment change -1.4K vs 22.5K estimate
• Unemployment rate 6.4% vs 6.3% estimate.
• Prior month employment rate 6.2%
• Full-time employment -3.4K vs -35.6K last month
• Part-time employment 1.9K vs 62.4K last month
• Participation rate 65.3% vs 65.4% last month
• Average hourly wages YoY 5.60% vs 5.20% last month

Other highlights from the report:

• The employment rate fell 0.2 percentage points to 61.1%.
• The unemployment rate increased 0.2 percentage points to 6.4% in June and has risen 1.3 percentage points since April 2023.
• Employment fell among young men aged 15 to 24 (-13,000; -0.9%) but increased for core-aged women (aged 25 to 54) (+19,000; +0.3%).
• Declines were seen in transportation and warehousing (-12,000; -1.1%) and public administration (-8,800; -0.7%).
• Increases were noted in accommodation and food services (+17,000; +1.5%) and agriculture (+12,000; +5.5%).
• Employment declined in Quebec (-18,000; -0.4%) but increased in New Brunswick (+3,000; +0.8%) and Newfoundland and Labrador (+2,600; +1.1%).
• Total hours worked were down 0.4% in June, but up 1.1% year-over-year.
• Average hourly wages among employees increased 5.4% in June year-over-year, following 5.1% growth in May (not seasonally adjusted).
• The employment rate for returning students aged 15 to 24 was 46.8% in June, down from 51.7% a year earlier (not seasonally adjusted).

Canada June PMI 62.5 vs 52.0 expected

• The Ivey manufacturing survey

• Prior was 52.0
• Non-seasonally adjusted vs 59.1 prior

Commodities

Gold Gains 1% as Investors Seek Safe Haven Amid Economic and Political Uncertainty

Gold prices surged by 1% as investors flocked to the precious metal in search of a safe haven amid rising political and economic uncertainties. The long-term bullish outlook for gold is supported by increasing purchases from major global players like Russia, China, India, and the Middle East. However, the recent rally had stalled following data that indicated a pause in China’s official gold purchases in May. Additionally, there is caution due to the growing gold-buying mania among Chinese retail investors.

Potential Short-Term Boost: Despite these factors, the gold market might be poised for a second leg up, driven by heightened political and economic uncertainty. The upcoming French election and significant political turbulence in the United States are contributing to this uncertainty. Concurrently, US economic data has shown signs of weakening, leading to fresh concerns about whether the economy will experience a hard or soft landing, and the potential for more rate cuts.

Key Considerations:

• Geopolitical Factors: Uncertainty surrounding political events, such as the French election and the volatile political climate in the US, is prompting investors to seek the safety of gold.
• Economic Indicators: Recent US economic data pointing to a slowdown is raising questions about the future trajectory of the economy and monetary policy.
• Global Demand: Long-term demand for gold from countries like Russia, China, India, and the Middle East remains a significant driver, despite the recent pause in Chinese official purchases.

As these factors converge, gold’s appeal as a safe haven asset is likely to sustain its upward momentum, at least in the short term.

Crude oil futures settle at $83.16

• Down $-0.72 or -0.86%

Crude oil futures are settling the day $83.16. That’s down $0.72 or -0.86% on the day. The high price today reached a $84.49. The low price extended to $83.12.

Although lower today, the price is up 2.15% for the trading week. At session highs for the week the presence of $3.05. Session was the price was unchanged. The current price is of about $1.78.

This week the inventory data showed a huge drawdown of -12.157M (versus expectations of -0.680M). That helped to support the price.

Silver rallies to $31 as US labor market strength eases in June

• Silver price jumps to near $31.00 as US yields decline after weak US NFP report.
• The payrolls data beats estimate but remain below May’s reading.
• Silver price strengthens after a Falling Channel breakout.

Silver posts a fresh three-week high near $31.00 in Friday’s American session. The white metal strengthens as US bond yields weaken after the US Nonfarm Payrolls report for June showed that the labor market lost momentum.

The Unemployment Rate rose to 4.1% from the estimates and the prior release of 4.0%.The number of individuals hired by employers came in higher at 206K from estimates of 190K but lower than the prior release of 218K, downwardly revised from 272K.

Baker Hughes oil rig count 479 unchanged on the current week

• Crude oil prices up on the trading week

Baker Hughes weekly rig count:

• Oil 479, unchanged on the week.
• Natural Gas 101, +4 on the week
• Total rig count 581, +4 on the week

EU News

European equity close give back early gains

Closing changes:

• Stoxx 600 -0.2%
• German DAX +0.1%
• UK FTSE 100 -0.6%
• French CAC -0.4%
• Italy MIB -0.4%
• Spain IBEX -0.5%

Eurozone May retail sales +0.1% vs +0.2% m/m expected

• Latest data released by Eurostat – 5 July 2024
• Prior -0.5%; revised to -0.2%

The reading is marginally off estimates but a better revision is seen for April at least. Here is the breakdown:

Germany May industrial production -2.5% vs +0.2% m/m expected

• Latest data released by Destatis – 5 July 2024
• Prior -0.1%; revised to +0.1%

It’s another dismal reading for German industrial output, once again reflecting rather poor conditions in the sector. If you exclude the energy and construction sectors, production actually fell by 2.9% in May compared to April. Looking at the details, there were falls across the board in the production of capital goods (-4.0%), intermediate goods (-2.7%), and consumer goods (-0.2%).

France May trade balance -€7.99 billion vs -€7.58 billion expected

• Latest data released by the French MOF – 5 July 2024
• Prior -€7.58 billion; revised to -€7.56 billion

Here is the breakdown:

UK June Halifax house prices -0.2% vs -0.1% m/m prior

• Latest data released by Halifax – 5 July 2024
• Prior -0.1%; revised to 0.0%

House prices eased marginally in the UK and remained thereabouts for a third successive month now. The average UK property value is now seen at £288,455. Halifax notes that it reflects “a market that remains subdued, though overall activity has been recovering”.

SNB’s Jordan “relatively comfortable” with inflation

• His comments on inflation are a preview of what might be coming from others:

• Interest rates are our main policy tool
• Also ready for forex interventions

Labour party wins UK general election, beating 326-seat majority threshold in the Commons

• This is the biggest swing of votes from one party to another in modern UK politics

The current tally sees them at 337 seats, surpassing the 326 seats needed for a working majority in the House of Commons.The result is as expected, with it being a landslide victory for Labour.There’s still more counting to do and they should win anything just north of 400 seats based on current projections.

Incumbent prime minister, Rishi Sunak, has come out to concede defeat and apologise for his failures. This has been the worst showing by the Tories since 1906. Absolutely catastrophic by them. The backlash has also seen Jacob Rees-Mogg lose his seat in North East Somerset.

Asia-Pacific-World News

The PBOC is preparing capacity for large scale yuan bond sales

• Chinese bond yields rising in response

People’s Bank of China said to be readying capacity for ‘hundreds of billions’ in yuan bond sales.

• Aimed at tempering the bond rally by creating a multibillion-yuan pool of bonds it’ll borrow from major banks, then sell them

• Will buy and sell bonds ‘based on market conditions.
• to borrow bonds on an open-ended unsecured basis
• PBOC has signed bond lending agreements with major banks

Bloomberg with the info

More on the People’s Bank of China move to stabilize government bond yields

• PBOC “has hundreds of billions of yuan of bonds at its disposal”

The PBOC is preparing to step into the Chinese government bond market in a larger way, seeking to stem the bond rally by selling medium- and long-term bonds it plans to borrow from the market:

• PBOC has signed agreements with several major financial institutions regarding bond borrowing
• will borrow the bonds on an open-ended unsecured basis
• will then sell them depending on market conditions

PBOC sets USD/ CNY reference rate for today at 7.1289 (vs. estimate at 7.2704)

• 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%

• 50bn mature today
• thus a 48bn drain

Reserve Bank of New Zealand policy meeting next week – rates to be left on hold

• The consensus is the RBNZ will first cut its cash rate in Q4 2024

Reuters have polled analysts on expectations for the RBNZ’s interest rates path ahead.

The next policy meeting is on July 10, with no change the consensus expectation. The Bank is holding rates at their highest in 15 years, at 5.5% for the Official Cash Rate (OCR), due to sticky high inflation. The most recent official CPI is at 4.0%, which the RBNZ target band is 1 to 3%. The next official CPOI report is due on July 17, a week after the bank’s next meeting.

According to the poll:

• Reserve Bank of New Zealand will hold its key cash rate at 5.50% for an eighth straight meeting on Wednesday
• 22 of 32 surveyed forecast interest rates to fall to 5.25% or lower by year-end, 10 expected no change.

Japan May leading indicator index 111.1 vs 110.9 prior

• Latest data released by the Japan Cabinet Office – 5 July 2024
• Coincident index 116.5 vs 115.2 prior

Japan data – May household spending -1.8% y/y (expected +0.1%)

• The Japanese consumer not showing up

Household Spending for May 2024 -1.8% y/y

• expected 0.1%, prior 0.5%

For the m/m -0.3%

• expected +0.5%, prior -1.2%

Cited amongst reasons for the dramatic drop:

• higher prices continued to squeeze consumers’ purchasing power

Julius Baer like further upside in Japanese equities

• The broad TOPIX index of Japanese stocks hit a record high on Thursday

The broad TOPIX index of Japanese stocks hit a record high on Thursday, finally surpassing the high set in December of 1989.

Comments via an analyst at Swiss private bank Julius Baer, in summary indicate further upside ahead, citing:

• corporate reforms
• currency and flows
• pay hikes
• earnings revisions
• geopolitics
• large market caps

Japan official with excuses for poor household spending in May

A Japanese government official:

• higher food prices pushed down spending
• weaker yen pushed down overseas package tour spending

Japan finance minister Suzuki says weak yen is pushing up import costs

• Suzuki says weak yen is having an impact on prices

• says weak yen is pushing up import costs
• weak yen is having an impact on prices
• will monitor stock and FX markets with vigilance

Cryptocurrency News

Bitcoin Plummets to Lowest Level Since February as Bearish Momentum Escalates

Bitcoin has experienced a sharp decline this week, plunging to its lowest point since February and breaking key technical levels. The cryptocurrency dipped below its 200-day moving average, eventually breaking May’s low and continuing to slide. The current bearish momentum highlights significant technical weakness in Bitcoin’s chart.

Key Drivers:

• Technical Breakdowns: Sellers tested and breached critical support levels, intensifying the downside momentum. The break of the May low and the 200-day moving average underscored the growing bearish sentiment.
• Potential Catalysts: Speculation points to Mt. Gox-related flows as a contributing factor, though the volatile nature of the crypto market means various influences are at play.
• Market Sentiment: Despite the drop, Bitcoin bulls maintain that the long-term outlook remains unchanged. However, the current price action suggests otherwise, with the $50,000 mark now in sight as the next potential support level. Additionally, the 61.8% Fibonacci retracement level at around $51,998 might offer some minor support.

Impact on Other Cryptocurrencies: The bearish sentiment isn’t limited to Bitcoin. Ether is also showing signs of potential breakdown, with its price verging on critical support levels.

As bearish momentum continues to dominate, the market’s focus remains on whether Bitcoin and other cryptocurrencies can find support or if further declines are imminent.

Ripple Faces Steep Correction Amid Crypto Market Turbulence

Ripple (XRP) has suffered a significant setback, mirroring the broader cryptocurrency market’s downturn. Amidst a widespread market correction triggered by Bitcoin’s drop below the critical support level of $55,000, XRP plummeted to $0.38 early on Friday, erasing all gains accumulated over the past fifteen months.

Key Points:

• Market Performance: XRP extended its losses by 7% to trade at $0.39 at the time of writing on Friday, reflecting the intensified selling pressure across major cryptocurrencies.
• SEC vs. Ripple Lawsuit: Recent developments in the legal battle between Ripple and the Securities and Exchange Commission (SEC) have favored Ripple. Judge Amy Berman Jackson’s reference to Judge Torres’ 2023 ruling as precedent in the SEC’s case against Binance has bolstered Ripple’s position. Torres’ ruling had previously indicated that XRP does not qualify as a security in secondary market sales, providing a partial victory for Ripple.
• Investor Sentiment: Traders have been offloading XRP holdings at a loss since April 2024, underscoring heightened market uncertainty and negative sentiment towards Ripple amidst regulatory and market volatility.

Context:

The downturn in XRP and other altcoins has been exacerbated by external factors such as the German government’s scrutiny over Bitcoin transactions and ongoing payouts to Mt. Gox creditors, which have introduced additional uncertainty into the cryptocurrency market.

As Ripple navigates these challenges, its performance remains closely tied to broader market trends and regulatory developments, making it susceptible to swings in sentiment and market dynamics.

Mt Gox and German cops hit Bitcoin lower, under US$56K

• BTC/USD has dropped further, two factors cited

• Collapsed cryptocurrency exchange Mt Gox moved over 47,000 BTC -6.22% to another wallet late evening on Thursday
• comes ahead of its impending $9 billion worth of bitcoin repayment to creditors, “This significant payout, amounting to US$9 billion, is expected to add substantial selling pressure as the market absorbs the additional supply,”

CoinDesk adds:

• the German Federal Criminal Police Office moved over $75 million to crypto exchanges
• “Among the top reasons for the price drop was the German government moving more than $50 million to crypto exchanges, creating sell speculation in the market”

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