Round up of today’s market news

North American News

Nasdaq Tumbles, The Russell Climbs Higher as Sector Divergence Defines Market Dynamics

Thursday witnessed significant divergences in the U.S. stock market, with the Russell 2000 soaring while the Nasdaq experienced notable declines, reflecting varied sectoral performances.

The Russell 2000 index surged impressively by 3.57%, marking its strongest single-day gain of the year and echoing its last major rally observed on November 14, 2023. In contrast, the Nasdaq index faced substantial headwinds, plummeting by 364.04 points or 1.95%, marking its worst trading day since April 30 and one of its most significant declines of the year.

Meanwhile, the Dow Industrial Average managed a modest uptick of 32.39 points, closing at 39,753.76, while the S&P 500 retreated by 49.37 points to settle at 5,584.55, despite seven of its eleven sectors posting gains.

Among the winning sectors, real estate led with a robust surge of 2.66%, followed by utilities (+1.84%), materials (+1.49%), industrials (+1.24%), and energy (+1.09%). In contrast, technology stocks faced notable sell-offs, with the information technology sector plunging by 2.74%, telecommunications services dropping by 2.56%, and consumer discretionary falling by 1.47%.

Notably, the day’s losers included prominent tech giants:

• Tesla (-8.44%) stumbled significantly after postponing its highly anticipated Robo-taxi press conference, pushing its year-to-date performance into negative territory.
• Meta Platforms (-4.11%), Amazon (-2.37%), Nvidia (-5.57%), Alphabet (-2.93%), Apple (-2.32%), and Microsoft (-2.48%) also experienced declines, reflecting broader weakness in the technology sector.

Today’s market movements underscore the ongoing volatility and sector-specific dynamics influencing investor sentiment and portfolio strategies amid evolving economic conditions.

There is a flow of funds out of the high flying tech stocks including

• Meta Platforms -3.86%
• Amazon -2.70%
• Nvidia -4.84%
• Google -2.77%
• Apple -2.17%
• Microsoft -2.39%
• Tesla -6.40%

U.S. Treasury auctions off $22 billion of 30 year bonds at a high yield of 4.405%

• WI level at the time of the auction 4.383%

• High-yield 4.405% versus 4.403% last month
• WI at the time of the auction 4.383%
• Tail +2.2 basis points vs six-month average of -0.9 basis points
• Bid to Cover 2.30X vs six month average of 2.42X
• Dealers 15.88% vs six-month average of 14.9%
• Directs 23.36% vs six-month average of 17.5%
• Indirects 60.76% vs six-month average of 67.6%

US June CPI +3.0% vs +3.1% y/y expected

• US June 2024 consumer price index

Headline measures:

• Prior y/y 3.3%
• m/m -0.1% versus +0.1% expected
• Prior m/m 0.1%
• Unrounded % vs +0.313% m/m prior

Core measures and details:

• Core CPI m/m +0.1% versus +0.2% expected.Prior month 0.2%
• Unrounded core +0.065% vs +0.163% prior
• Core CPI y/y +3.3% versus 3.4% expected. Prior month was 3.4%
• Supercore m/m -0.054% vs -0.045% prior
• Supercore y/y +4.651% vs +4.8% y/y prior
• Shelter +0.2% versus +0.4% prior month
• Shelter y/y +5.2% vs +5.4% prior
• Real weekly earnings +0.3% vs +0.4% prior
• Food +0.2% m/m vs +0.1% m/m prior
• Food +2.2% y/y vs +2.1% y/y prior
• Energy -2.0% m/m vs -0.2% m/m prior
• Energy +1.0% vs +3.7% y/y prior
• Rents +0.3% m/m vs +0.4% prior
• Owner’s equivalent rent +0.3% vs +0.4% prior
• Motor vehicle insurance +0.9% vs -0.1% m/m prior

US initial jobless claim 222K vs 236K estimate

• The initial and continuing claims for the current week

• Prior week 238K revised to 239K
• Initial jobless claims 222K vs 236K estimate
• 4-week MA of initial jobless claims 233.5K vs 238.75K last week
• Continuing claims 1.852M vs 1.860M est.
• Prior week continuing claims 1.858M revised to 1.856M
• 4 week moving average continuing claims 1.840M vs 1.831M last week

June Cleveland Fed median CPI +0.2% vs +0.2% prior

• The Cleveland Fed’s median CPI and trimmed mean CPI

• Median CPI +0.2% m/m and +4.15% y/y
• Trimmed mean CPI +0.2% and 3.34% y/y

US June Federal budget deficit -66.0B vs -83.0B expected

• June 2024 fiscal data for the US
• Last June was -347B

Fed’s Musalem: CPI data shows ‘encouraging further progress’

• Comments from the St Louis Fed President

• Job market strong but has cooled in recent months
• We are making progress on inflation
• Supported June Fed decision, says mon policy is restrictive now
• Economy is on a good path but he would like to see more data
• Wants to see more improvement in supply conditions
• Wants to see general demand conditions moderate some more going forward
• The economy may be shifting into a higher-rate regime

SF Fed President Mary Daly: Likely some policy adjustments will be warranted

• San Francisco Fed’s Mary Daly :

• Likely some policy adjustments will be warranted
• Recent inflation prints a relief, but progress bumpy
• My expectation is inflation will come down gradually, labor market is gradually slowing
• Economy looks to be on path where 1 or 2 rate cuts this year would be ‘more or less’ the appropriate path
• Need more information before we can fully take the next step
• Every meeting is live
• Shelter prices are coming down, but lack of supply means process is slower than in history
• Still more room for monetary policy to push down on shelter inflation
• Decline in super-core ex-housing inflation is welcome
• We are at the point where additional labor market slowing is more likely to result in a rise in unemployment
• Labor market has softened but still solid

Tesla plans to delay robotaxi event to October from August

• Elon Musk will push back the date

Shares of Tesla are down sharply on this headline. Shares were working on a 13-day winning streak earlier today but this should be the end of that.

The initial event was scheduled for August 8 but it appears as though the robotaxi won’t be ready.

On Tesla’s ‘Megafactory’ in Lathrop

• The Lathrop factory which has 40GWh of capacity (10,000 megapacks/year) can produce storage products that could generate profit equivalent to as many as 1 million Tesla vehicles.
• The Lathrop factory sits just outside of Stockton in the site of a former JC Penney distribution center.Check it out on Google Maps and you will see it’s right next to an Ashley Furniture warehouse and down the street from an In-N-Out Burger distribution center. It’s around 4.36k square feet.
• See the relatively small size of the Lathrop factory. The Lathrop facility packages Tesla battery packs (shipped from Giga Nevada) into shipping container sized battery modules combined with bi-directional inverter, thermal management system, and AC main in a single electronic system. The Lathrop factory compares to the 10 million square foot Giga Texas vehicle factory in Austin.
• See our recent report where we increased the value of Tesla Energy to $50/share from $36 previously while reducing the value of the core auto business to $380/share from $422/share.
• Investors have taken for granted that the US energy grid will be stable although generating power equivalent to EV sales. Given increasing demands from buildings and AI/datacenters, rising temperatures and stress to the grid, and given that fewer accidents we are increasingly worried about the stress on the grid and the need for adoption.
• US data center power usage may be equivalent to the power used by 150 million electric cars by 2030. We estimate a typical EV has a distribution efficiency of approximately 4 miles/kWh by 2030.MOST EVs can today achieve ranges of approximately 3-4 miles per kWh.Assuming a data center has a power usage effectiveness of approximately 1.2 (meaning a data center uses 1.2kWh to deliver 1.0kWh of power to its server racks) then 500MW of data center power usage at 90% efficiency means the effective range in TWh of power consumed by data centers by 2030 can be the equivalent of 1.8 million EVs in one year or 5.0 million miles driven (3-4 miles/kWh times 150 million EVs) versus approximately 1.0 TWh today, or approximately 3 million miles. This implies an effective range of approximately 3 miles/kWh for a typical EV.

JPMorgan moves up Fed rate cut call to September from December

• JPMorgan brings forward rate cut call

“Today’s report is, to use Powell’s words, ‘good news’ and we now think this paves the way for a first cut in September,” said economist Michael Feroli.

Fed’s Cook says would be responsive if unemployment rate situation changes quickly

• speaking on “Global Inflation and Monetary Policy Challenges” before the 2024 Australian Conference of Economists

• “very attentive” to what is happening with the unemployment rate, would be responsive if situation changes quickly
• “My baseline forecast…is that inflation will continue to move toward target over time, without much further rise in unemployment,”
• soft landings are “more likely when policy easing began with inflation already close to target and when there was a relatively firm growth backdrop”
• “In the U.S., what Ihave seen so far appears to be consistent with a soft landing:Inflation has fallen significantly from its peak, and the labor market has gradually cooled but remains strong.”

Canadian finance minister could walk the plank. Mark Carney could be tapped

• Chrystia Freeland could be shuffled out of cabinet

A report in the Globe and Mail reports that the relationship between Canadian PM Trudeau and finance minister Chrystia Freeland has become tense and that a cabinet shuffle could be coming.

“Senior officials in Prime Minister Justin Trudeau’s office are concerned that Finance Minister Chrystia Freeland has not been effective in delivering an upbeat economic message as the Liberal government struggles to reconnect with Canadians amid low approval ratings, sources say,” the report says.

The report says that former BOC and BOE Governor Mark Carney could be tapped to replace Freeland.

Commodities

Gold Surges $51, Approaching All-Time High Close

Gold prices soared by $51 to reach $2422, nearing all-time record highs as market volatility and economic concerns drive investor demand. The precious metal’s rally comes amidst a backdrop of global uncertainties, including potential rate cuts, sluggish economic growth, fiscal deficits, political instability, and geopolitical tensions.

The week began with a slight downturn following reports that China had refrained from adding to its gold reserves for the second consecutive month. However, this setback failed to dampen overall market sentiment, with gold continuing its upward trajectory.

Today’s trading session positions gold just shy of its all-time closing high of $2425, set in May. Although surpassing the intraday high of $2449 from the same period seems improbable for today, it remains a tangible target in the near future.

Investors are closely monitoring geopolitical developments and economic indicators, which continue to influence gold’s appeal as a safe-haven asset. The current surge underscores heightened market volatility and the persistent allure of gold in uncertain times.

Copper trades strong for the time being – TDS

The industrial metals complex remains in the crosshairs for CTAs, TDS senior commodity strategist Ryan McKay notes.

Base metals remain on demand

“With the upcoming plenum in China gaining plenty of market focus, base metals have held strong as stimulus optimism gets baked in. However, our gauge of global commodity demand continues to weaken, while depressed premiums and surging inventories in the Middle Kingdom argue against fundamental tightness in Copper.”

“With still bloated money manager positioning on Comex and LME, the lack of evidence supporting current physical tightness, or a disappointment on potential Chinese stimulus, can continue to see these positions unwind. Indeed, speculators on the Shanghai Futures Exchange (SHFE) hold only modest positions across the base metals complex.”

“In this sense, as upside momentum fails to manifest, CTAs have turned into sellers of the Red Metal. However, funds could halt their selling if prices move back above $9,760/t, while further downside toward $9,142/t would be needed to fuel additional liquidations.”

IEA sees oil demand growth slowing as China consumption eases

• IEA lowers its oil demand growth outlook for 2025 by 50k bpd to 980k bpd

As for this year itself, the agency is keeping their demand growth forecast largely steady at 970k bpd. IEA notes that the post-pandemic rebound in Chinese consumption has now run its course. And while China has accounted for roughly 70% of global demand gains last year, it is only holding a share of around 40% for this year and next.

Besides that, IEA notes that subpar economic growth, greater efficiencies and vehicle electrification to continue to weigh on demand in 2024 and 2025.

EU News

Germany June final CPI +2.2% vs +2.2% y/y prelim

• Latest data released by Destatis – 11 July 2024

• Prior +2.4%
• HICP +2.5% vs +2.5% y/y prelim
• Prior +2.8%
• (MoM) Actual: 0.2% vs Expected: 0.2%
• Prior 0.2%

Germany German CPI (MoM)

Actual: 0.1%
Expected: 0.1%
Previous: 0.1%

UK May monthly GDP +0.4% vs +0.2% m/m expected

• Latest data released by ONS – 11 July 2024

• Prior 0.0%
• Services +0.3% vs +0.2% m/m expected
• Industrial output +0.2% vs +0.2% m/m expected
• YoY Actual: 0.4% vs Expected: 0.6%
• Manufacturing output +0.4% vs +0.4% m/m expected
• YoY Actual: 0.6% vs Expected: 1.2%
• Construction output +1.9% vs +1.0% m/m expected
• YoY Actual: 0.8% vs Expected: -1.9%

Looking at the breakdown, the services sector contributed 0.22% of GDP growth in May while production contributed 0.03% and construction 0.11%. Of note, the services sector has been a key outperformer in the last few months. In the three months to May, it grew by 1.1% – the most since the three months to December 2021.

German manufacturers still taking a more pessimistic view for the remainder of the year

• More than half see a realistic upturn in revenue only coming next year, according to the latest survey by VDMA

VDMA economic analyst, Ralph Wiechers, says that:

“Quite a few companies had pinned their hopes on a positive second half of 2024. However, in terms of incoming orders, these hopes have not materialised for many.”

Asia-Pacific-World News

China announced more short-selling curbs, pledged tighter scrutiny of program trading

• More curbs on short-selling

China Securities Regulatory Commission (CSRC) announced on Wednesday a number of measures.

• securities re-lending – in which brokers borrow shares for clients to short sell – would be suspended from today, Thursday, 11 July 2024
• margin requirements would be raised for short-sellers, from 80% to 100%

Urged stock exchanges to publish detailed rules to regulate program trading, especially high-frequency trading.

PBOC sets USD/ CNY central rate at 7.13 (vs. estimate at 7.2730)

• 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%
• 2bn mature today
• thus net neutral

Australian data – CBA’s household spending survey +0.6% m/m in June (prior +1.1%)

• Solid 3.9% jump y/y

The Australian consumer is not running on empty just yet according to this data.

CBA Household Spending for June 2024 +0.6% m/m

• prior +1.1%

and +3.9% y/y

• prior +4.3%

Australian Inflation Expectations 4.3% (prior 4.4)

• Melbourne Institute Survey of Consumer Inflationary Expectations

New Zealand data – June Food Price Index +1.0% m/m (prior -0.2%)

• New Zealand food prices in June 2024:
• +1% m/m and -0.3% y/y

“We finally got a noticeable softening in tone” from the RBNZ, to cut in November

• These guys were ahead of the curve on the RBNZ

Via Kiwibank, on this shift from the RBNZ:

• importantly, we finally got a noticeable softening in tone. It was a welcome shift given the total collapse in business confidence last week. Enough is enough.
• The economy is clearly responding to restrictive monetary policy.Economic activity looks likely to contract over Q2 and unemployment is set to rise further. We expect inflation to fall in line, eventually. With a softening in language and tone, we, along with all market traders, have grown in confidence that a rate cut should be delivered this year.
• Market pricing has moved to price in a full 60bps of cuts by November, with the first 25bp cut for October. We agree with the market, but don’t think the RBNZ will deliver as much as priced. Regardless, it’s good news for most businesses and households.

ANZ on what to watch for timing the first RBNZ interest rate cut. Spoiler, next week’s CPI

• Responses to the Reserve Bank of New Zealand statement yesterday

ANZ has eyes focused on the inflation data due from NZ next week:

• The accompanying commentary had similarities to May, but it clearly acknowledged the weaker tone of recent indicator data, with the Record of Meeting revealing the Committee “discussed the risk that this may indicate that tight monetary policy is feeding through to domestic demand more strongly than expected.”
• We highlighted last week that risks are tilting towards the first cut coming in November rather than February as we are forecasting; today’s Review tilts things a little further that way. But the data will decide: next week’s CPI data was always going to be more important for the OCR outlook than whatever the RBNZ had to say today. A cooperative vibe would certainly smooth the path to a cut this year.

ANZ on the market response:

• Financial markets reacted swiftly, with the bellwether 2yr swap rate around 18bp lower, and the NZD around half a cent lower, within an hour of the MPR. We think that reaction was understandable given the number of dovish judgements in the press release and summary record of meeting, which read like a mini-pivot.
• Although we think it’s a stretch to call this a full-blown pivot given the Committee’s assessment of balanced risks around inflation and their caution around the impact of tax cuts, markets are behaving as though it was just that. And that assessment isn’t likely to change given how downbeat markets are on the economy. Ignoring hawkish messaging and latching onto dovish messaging is where the market mood is, and the trend lower in rates is likely to continue, barring any major upside surprises, which have been absent of late.

BNZ forecast a November rate cut from the RBNZ (previously February)

• A ‘pivot’ from the Reserve Bank of New Zealand

BNZ moved quickly to bring forward its expectation for the first rate cut from the RBNZ to November 2024:

• The statement, accompanying the expected ‘on hold’ decision, represented a significant moderation in the Bank’s hawkish stance from the May Policy Statement.
• Unlike May, a rate hike wasn’t discussed, and alongside weak activity it was noted that restrictive monetary policy has ‘significantly reduced consumer price inflation’.
• As a result of the shift in tone, we have reverted to forecasting the RBNZ will cut rates in November.

Japan intervened in the forex market – report

• Report from Asahi TV

The report cites a source.

Japan Foreign Bonds Buying

Actual: 237.7B
Previous: -254.2B

Japan Foreign Investments in Japanese Stocks

Actual: 603.7B
Previous: 185.0B

Japan Core Machinery Orders (YoY) (May 2024)

Actual: 10.8%
Expected: 7.2%
Previous: 0.7%

Japan Core Machinery Orders (MoM (May 2024)

• Actual: -3.2%
• Expected: 0.9%
• Previous: -2.9%

Bank Korea drops phrase ‘upside risks to inflation forecasts have increased’ from statement

• A rate cut is expected from the Bank some time from August to October

Bank of Korea comments on their policy decision today:

• Will maintain restrictive policy stance for sufficient period of time
• Will examine the timing of a rate cut
• Economy to continue moderate growth
• To monitor trend of slowing inflation
• To assess trade-off between policy variables, such as growth and financial stability
• Growth temporarily weaken in q2
• Gdp growth in line with earlier forecast
• Drops phrase ‘upside risks to inflation forecasts have increased’ in policy statement
• Inflation could be slower than forecast
• Core inflation seen consistent with earlier forecast
• Inflation will gradually converge on the target level

Bank of Korea monetary policy meeting – leaves base rate unchanged @3.5%

Cryptocurrency News

Bitcoin Struggles at $58,500 Amid German Government’s Significant BTC Transfer

Bitcoin (BTC) faced resistance around the $58,500 level on Thursday, edging up by 0.5% despite challenges posed by a substantial BTC transfer from the German Government. The transfer of 10,853 BTC, valued at $637.67 million, has raised concerns over its potential impact on Bitcoin’s price.

Bitcoin spot ETFs, however, saw positive inflows for the third consecutive day, totaling $147.40 million on Wednesday. This influx underscores growing investor confidence and hints at possible short-term price gains for Bitcoin.

On-chain data reveals contrasting trends: small Bitcoin wallets are reportedly being liquidated, while the number of large holders, known as whales and sharks, continues to increase. These dynamics add complexity to Bitcoin’s current price movement.

The upcoming Bitcoin 2024 conference in Nashville has also captured attention, particularly with former President Donald Trump scheduled to speak on July 27. This event is expected to highlight contrasting views on cryptocurrency policy, especially in comparison to President Joe Biden’s approach.

As the crypto landscape evolves with regulatory developments and market dynamics, Bitcoin’s performance remains pivotal, influenced by both institutional movements and retail investor sentiment.

Ripple CEO Criticizes Democrats Over SEC’s Crypto Crackdown at Roundtable

Ripple CEO Brad Garlinghouse delivered strong criticism against Democrats for what he perceives as their lack of engagement with the Securities and Exchange Commission’s (SEC) crackdown on crypto during a roundtable event on Wednesday. The discussion, attended by key congressional leaders and Coinbase CLO Paul Grewal, underscored concerns over regulatory overreach stifling American innovation in the crypto sector.

Garlinghouse’s remarks come amid ongoing legal battles, including the SEC’s lawsuit against Ripple over alleged securities violations. The outcome of this lawsuit, expected in July, could have significant implications for XRP’s future and regulatory clarity within the crypto industry.

At present, XRP is trading around $0.45, reflecting a modest 0.50% increase on Thursday. Investors and stakeholders are closely monitoring developments in the SEC vs. Ripple case, particularly Judge Analisa Torres’ impending ruling on financial penalties, where the SEC has proposed $102.6 million while Ripple suggests a $10 million settlement.

Garlinghouse emphasized the impact of SEC Chair Gary Gensler’s actions on stifling crypto innovation, contrasting Republican support for a more favorable regulatory environment. The CEO’s statements have drawn attention to the intersection of politics and crypto policy, highlighting a critical issue ahead of the US Presidential election.

Goldman Sachs expand crypto offerings, to launch three tokenization projects by year end

• Two areas targeted are the fund complex and European debt issuance

Goldman Sachs intends to expand its crypto offerings, set to launch three tokenization projects by the end of the year.

The firm’s digital assets global head Mathew McDermott spoke with Fortune (gated).

In brief:

• Goldman Sachs is set to launch three tokenization projects by the end of the year with major clients, including its first in the US
• didn’t provide specifics on the three tokenization projects, but McDermmott said that one is focused on the fund complex in the US, and another on debt issuance in Europe.

Trump to speak at Bitcoin 2024 conference in Nashville in late July

• Will speak at Bitcoin 2024 conference, taking place in Nashville, Tennessee, July 25-27

Trump met with major U.S. Bitcoin miners last month in a move to engage with the crypto folks and garner their votes. He is well-positioned to do so. Incumbent President Biden has overseen further Bitcoin regulation, so he is out of favour with the Bitcoin et al community.

Trump has said he wants ensure the future of Bitcoin and crypto will be made in the USA. He’s promised to protect the right to self-custody to the nation’s 50 million crypto holders, if elected.

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