North American News
Stocks Bounce into Close, Dow Hits New High
Closing Summary:
- Dow Jones: +210.82 at 40,211.72 (new all-time high)
- Nasdaq: +74.12 at 18,472.57
- S&P 500: +15.87 at 5,631.22
- Russell 2000: +1.80%
Market Overview: The stock market showed resilience today, with the Dow closing at a fresh record high. The Russell 2000 outperformed, while the S&P 500 and Nasdaq also posted modest gains. Advancers outnumbered decliners by a 3-to-2 margin across both the NYSE and Nasdaq.
Key Drivers:
- Bank Stocks: Strong earnings reports lifted bank stocks, with Goldman Sachs (+2.6%) standing out after its earnings release. The SPDR S&P Bank ETF (KBE) rose 2.7%, and the SPDR S&P Regional Banking ETF (KRE) jumped 2.9%.
- Sector Performance: The financial sector closed 1.4% higher, leading gains, followed closely by energy (+1.6%). Utilities lagged, falling 2.4%.
Political Impact: The recent assassination attempt on former President Trump has increased speculation about his election chances in November, perceived as beneficial for the market due to expected deregulation and lower corporate tax rates.
Interest Rates: Market rates rose early on the belief that Trump’s return could influence economic policies. The 10-year note yield settled up four basis points to 4.23%, while the 2-year note yield dipped one basis point to 4.45%.
Year-to-Date Performance:
- Nasdaq Composite: +23.1%
- S&P 500: +18.1%
- S&P Midcap 400: +9.3%
- Russell 2000: +7.9%
- Dow Jones: +6.7%
Economic Data:
- July NY Fed Empire State Manufacturing: -6.6 (prior: -6.0)
Looking Ahead: Tuesday’s Economic Releases:
- 8:30 ET: June Retail Sales, Import Prices, Export Prices
- 10:00 ET: May Business Inventories, July NAHB Housing Market Index
New York Fed manufacturing index for July -6.6 versus -7.0 estimate
- New York Fed manufacturing index for July 2024
- Prior report -6.00
- new orders -0.6 versus -1.0 last month
- prices paid +26.5 versus +24.5 in June
- employment index -7.9 versus -8.7 in June
- 6-month business conditions Index +25.8 versus +30.1 in June (in June it was a two-year high)
Other details:
- shipments 3.9 versus 3.3 last month.
- Prices received 6.1 versus 7.1 last month
- Unfilled orders -11.2 versus 1.0 last month.
- Delivery time -9.2 versus -4.1 last month.
- Inventories -6.1 versus 1.0 last month.
- Prices received 6.1 versus 7.1 last month.
- Average employee work wake -0.1 versus -9.9 last month
- Supply availability is 0.0 versus -1.0 last month
6- month forward details:
- new orders 20.8 versus 30.0 last month.
- Employment 5.8 versus 9.4 last month
- prices paid 39.8 versus 37.8 last month
- prices received 27.6 versus 22.4 last week
- shipments 25.3 versus 28.7 last month
Prices paid/received remained nearer lower levels and close to pre-pandemic levels (see charts above).
Fed’s Powell: Economy performed really well over the last couple of years
- Fed Powell speak at the Economic Club of Washington
- Economy performed really well over the last couple of years
- This year expected economy to slow and inflation to continue to make progress. Something like that is happening
- labor market no tighter than before the pandemic
- 2Q of inflation does represent progress with three better readings
- Now that inflation is coming down will look at both mandates.
- If we did see unexpected weakening in labor market, that would merit reaction from us
- Not going to send any signal on any particular meeting
- Will make decisions based on evolving data and outlook
- The Feds undertaking is to make decisions on data and only on data, not politics.
- If the Fed waited for inflation to get a 2% to cut it has waited too long.
- We want to have greater confidence that inflation is moving sustainably down toward 2%
- What increases their confidence is better inflation data, we have been seeing that lately.
- Fed takes confidentiality seriously
- Inflation coming out of the pandemic was out of the goods sector helped by the supply chain.
- We saw that goods inflation as temporary
- We overestimated how quickly the economy would return to normal.
- It’s very hard to know what the economy is going to do
- I have always felt there was a pathway to getting inflation back to 2% without the kind of pain that has been typical
- A hard landing scenario isn’t a likely scenario
- I am very happy doing this job
- Will stay in office until May of 2026
- When the Fed gets confidence in inflation it will be time to move
- The eurozone went through a significant period of lower growth, is in a different position than the US
- There are little differences in timing between global central banks but when the history is written, it will be about the commonalities in policy
- The Fed meeting is usually over by 11 am before the decision
- Fed has the authority it needs, Fed Reserve Act is in a ‘fine place’
- I’m worried ‘over time’ about the levels of US deficits but not the Fed’s job to advise policy
Goldman Sachs expects US equites to be flat for the rest of the year –
- Goldman Sachs says the full year returns for the index have already been achieved in the first half
A Goldman Sachs Asset Management view on US stocks for the rest of 2024, in brief:
- “What do we expect for the rest of the year? Essentially a flattish market”
- “Our view is that the full-year market return has been achieved in the first half”
Citing:
- earnings growth of the first half of 2024 will decelerate in the next six months
- uncertainty over Fed rate cuts and inflation
- geopolitical risks (GS think oil could be a useful hedge here, gold too)
Analysts at Fitch say the Fed has “an incentive to start cutting rates sooner than later”
- Citing potential concern at the Federal Reserve over the labour market
US economic research analysts at Fitch with the heads up on earlier Federal Open Market Committee (FOMC) rate cuts:
- The Fed will be worried (about) additional weakness in the labor market down the road
- Powell signaled that the balance of risk between the unemployment rate and inflation is now two-sided and the labour market is now back in balance
- Which gives the Fed an incentive to start cutting rates sooner than later, now that inflation seems to be back on that path down to 2%
Bank of Canada business outlook survey highlights growing pessimism
- Business outlook survey -2.90 vs -2.39 prior
- Business sentiment 21% vs 17% prior
- Firms’ sales outlooks are mostly unchanged from last quarter and remain more pessimistic than average
- Businesses tied to discretionary spending reported particularly weak sales expectations, while those tied to essential spending see population growth continuing to benefit their sales.
- Investment spending plans also remain below average
- The share of firms reporting labour shortages is near survey lows
- Future sales indicator -1 vs +4 prior
- Businesses expect inflation to average 2.9% over the next two years, down from 3.2% in the previous quarter and closer to the Bank of Canada’s 2% target
- The share of firms planning larger-than-normal price increases has fallen to 21% for the next 12 months, down from 27% in 2023.
Firms tied to discretionary spending:
Labor shortages falls to survey lows:
Canada May wholesale sales -0.8% vs -0.9% expected
- Canada May wholesale and manufacturing sales
- Prior was +2.4%
- Manufacturing sales +0.4% vs +0.2% expected
- Prior manufacturing sales +1.1%
- Wholesale inventories +0.9%
- Inventory-to-sales ratio increased from 1.53 in April to 1.55 in May
Sales declined in five of the seven subsectors in wholesale sales, with the largest decline coming from the motor vehicle and motor vehicle parts and accessories subsector, which fell 3.8%. Wholesale sales were 0.9% lower in May compared with the same month one year earlier.
Manufacturing sales were mainly driven by higher production in the aerospace product and parts industry group (+11.2%), followed by higher sales in the food (+1.4%) and paper (+5.5%) product subsectors. Meanwhile, sales of motor vehicles (-4.2%) and petroleum and coal products (-2.2%) decreased the most.
Commodities
Gold Extending Gains for Three Consecutive Weeks
Market Overview:
- Current Price: Gold has risen 0.51%, reaching $2,422 per ounce, marking a third consecutive week of gains.
- Recent Highs: The metal briefly touched $2,439 before trading lower due to market fluctuations.
Influencing Factors:
- Fed Chair Powell’s Comments: Powell’s cautious stance on inflation and lack of forward guidance have contributed to a positive market sentiment surrounding gold.
- Political Landscape: Recent developments, including the assassination attempt on Donald Trump, have stirred political tensions, boosting the dollar initially but ultimately supporting gold’s bullish trend.
Trading Dynamics:
- Market Response: Gold opened lower on Monday but quickly resumed its upward trajectory, reflecting resilience amid external pressures.
- Intraday Movements: Gold reached its peak for the day, gaining $23 to trade at $2,433.
Broader Context:
- Economic Uncertainty: Ongoing trade tensions and tariff disputes are prompting governments to consider expanding their gold reserves, further supporting prices.
Conclusion: Gold’s upward momentum continues as investors lean towards safe-haven assets amid a dovish Federal Reserve outlook and global uncertainties, pushing prices toward record highs.
Crude Oil Futures Settle at $81.91, Slight Decline Amid Mixed Technical Signals
Market Summary:
- Current Price: Crude oil futures settled at $81.91, down $0.30 or -0.36%.
- Price Range: The day’s trading saw a high of $82.58 and a low of $81.47.
Technical Analysis:
- Trendlines: The price remains below a key topside trendline around $84.75, indicating potential resistance.
- Moving Averages: The rising 100-day moving average sits at $80.54, serving as a crucial support level. A move below this could increase the bearish outlook.
Current Market Sentiment:
- Trading Position: With prices fluctuating between these key levels, the technical outlook on the daily chart remains neutral.
Conclusion: Crude oil futures are experiencing a slight decline while trading within a tight range, with critical technical levels indicating potential future movements.
Crude oil: Downside pressures to continue – TDS
Crude oil markets are also particularly vulnerable to a down tape, TD Securities senior commodity strategist Daniel Ghali notes.
Trend-followers to liquidate -40% of their positions
“While the downside in crude markets has remained relatively tame over the last weeks, a down tape could now force trend-followers to liquidate a massive -40% of their max size, suggesting the window for large-scale algorithmic liquidations is now open.”
“With our gauge of global commodity demand trending notably lower, we expect downside pressures to continue to build without an additional boost to supply risk.”
The Third Plenum is set to give a boost to base metals – TDS
The gathering of top Chinese party officials amid the Third Plenum has kept base metals from weakening further, as traders await for signs of additional stimulus to turn the tide, TD Securities senior commodity strategist Daniel Ghali notes.
Third Plenum to provide information on structural reforms
“The Third Plenum promises to offer additional information on structural reforms. Traders will be watching for information regarding China’s plan to tackle the downward spiral in real estate, alongside plans for local government finances, ‘new quality productive forces’ including the metal intensive new energy industries.”
“For the time being, our real-time gauge of global commodity demand continues to plummet, pointing to a hangover from stockpiling associated with the squeeze on Comex Copper in an otherwise deteriorating local demand environment.”
“CTAs could still modestly add to their length in Copper markets.Our simulations suggest that algos are likely to buy back some length in nearly every scenario over the next week. Aluminium markets appear particularly vulnerable to additional algo liquidations.”
EU News
European equity close: Struggles to start the week
- Closing changes on the main European bourses
- Stoxx 600 -1.0%
- German DAX -0.8%
- UK FTSE 100 -0.9%
- French CAC -1.2%
- Italy MIB -0.4%
- Spain IBEX -0.8%
Eurozone May industrial production -0.6% vs -1.0% m/m expected
- Latest data released by Eurostat – 15 July 2024
- Prior -0.1%; revised to 0.0%
Euro area industrial output slumped by less than estimated in May with the breakdown as follows:
SNB total sight deposits w.e. 12 July CHF 458.9 bn vs CHF 453.4 bn prior
- Latest data released by the SNB – 15 July 2024
- Domestic sight deposits CHF 450.3 bn vs CHF 444.4 bn prior
After weeks of decline, Swiss sight deposits look to be stabilising a bit. That might indicate the SNB is staying more on the sidelines in the last two to three weeks. Here’s the trend:
Switzerland June producer and import prices 0.0% vs -0.3% m/m prior
- Latest data released by the Federal Statistics Office – 15 July 2024
Looking at the breakdown for the month, producer prices were up 0.1% but import prices were marked down by 0.2%. In particular, there were lower prices for petroleum products, petroleum and natural gas, as well as for motor vehicles. This was offset by higher prices in non-ferrous metals and products made therefrom, green coffee, leather and related products and footwear.
Bank of England Dhingra says demand is too soft for inflation to rise sharply
- Bank of England Monetary Policy Committee member Dhingra spoke on a podcast. Reuters with the info.
- demand is too soft for inflation to rise sharply
- now is the time to start normalising interest rates so we can finally stop squeezing living standards
European Central Bank meeting this week – preview – rate cuts seen September and December
- Lagarde to be guarded in her responses to questions on France
The European Central Bank statement is due on Thursday 18 July at 1215 GMT / 0815 US Eastern time
- no change to interest rates is widely expected
Lagarde’s press conference follows a half hour later.
From the Deutsche Bank preview, in brief:
- we expect the ECB to leave policy unchanged
- ECB is not on a pre-determined path … the ECB does not want to commit to when and how much it will cut … it wants to be led by the data
- expect the ECB to avoid explicit guidance
- as inflation converges towards target, restrictive monetary policy stance will unwind further
- baseline remains two more 25bp cuts, in September and December this year … a cut in September is not a done deal … but remains the most likely outcome
- recent data suggest the ECB staff need to revise the near-term inflation outlook higher
- continue to see the terminal rate in a landing zone of 2.00-2.50% in late-25/early-26
On the press conference:
- we expect President Lagarde to be guarded in her responses to direct questions on France, saying that the ECB is attentive to what is happening in markets at all points in time and that euro area member states have agreed a fiscal framework with which they are expected to comply
Asia-Pacific-World News
Firms lower China 2024 growth forecast after soft data
- Goldman Sachs and JP Morgan cut their growth outlook for China for the year
This comes after the miss on Q2 numbers earlier today.
Goldman Sachs is cutting their 2024 GDP forecast for China to 4.9%, down from 5.0% previously. Meanwhile, JP Morgan slashed their estimate to 4.7% compared to 5.2% previously. On the revision, JP Morgan continues to argue that the Chinese economy remains “fragile, unstable and uneven”.
The PBoC has kept the 1-year MLF interest rate unchanged at 2.5%, as expected
- People’s Bank of China set MLF rate at 2.5% (prior 2.5%)
The PBoC has kept the 1-year MLF interest rate unchanged at 2.5%, as expected
Injects 100bn yuan via a one-year MLF
- 103bn yuan come due on Wednesday
- net drain of 3bn yuan in MLF
Current LPR rates are:
- 3.45% for the one year
- 3.95% for the five year
PBOC sets USD/ CNY reference rate for today at 7.1313 (vs. estimate at 7.2548)
- PBOC CNY reference rate setting for the trading session ahead
In open market operations:
- PBOC injects bn via 7-day RR, sets rate at an unchanged 1.8%
- 2bn mature today
- thus net neutral
China Stats spokesperson says demand not sufficient
- National Bureau of Statistics (NBS) comments following the weak Q2 GDP data
NBS spokesperson:
- 5% GDP growth in h1 ‘hard won’
- Businesses face relatively big pressures and key sectors face many risks since this year
- China’s economy remains key growth engine for the world economy
- Q2 economic growth affected by short-term factors such as extreme weather, flooding
- China’s economy medium- to long-term improving trend remains unchanged
- China’s economy faces increasing external uncertainties and many domestic difficulties and challenges in h2
- Property market still in process of adjustments
China plenum meeting against the background of calls for more economic stimulus
- Follows China’s poor Q2 GDP data
The reasons behind relatively slow growth in China are:
- protracted property downturn
- the property sector is debt-ridden
- household consumption is weak
The third plenum is an important meeting of Chinese Communist Party leadership meeting.It starts today, Monday, and will try to balance boosting growth and cutting debt.China is aiming for growth of ‘around’ 5% this. year.
Measures taken to stimulate domestic demand and counter the negative impact of the property crisis include:
- boosted infrastructure investment
- diverting funds into high-tech manufacturing
China June Industrial output +5.3% y/y (expected +5.0%) Retail sales +2.0% (3.3%% exp)
- Q2 GDP along with June Retail sales, Industrial production, Unemployment rate, Investment data
Key economic indicators from China for June 2024.
Industrial Production +5.3% y/y
- expected 5%, prior 5.6%
Retail Sales +2.0% y/y, a substantial miss
- expected 3.3%, prior 3.7%
Fixed Asset Investment (YTD) 3.9% y/y
- expected 3.9%, prior 4%
Unemployment rate 5.0%
- expected 5.0%, prior 5.0%
Q2 GDP 4.7% y/y – big miss
- expected 5.1%, prior 5.3%
Q2 GDP +0.7% q/q – big miss
- expected 1.1%, prior 1.6%
China June new house prices -4.5% y/y (prior -3.9%)
- For the m/m June is -0.7% (prior -0.7%)
China new home prices continue their slump. On a brighter note used home prices dropped 0.85% m/m, slightly slower than the drop in May.
The prospect of an RBNZ rate cut in 2024 is rising
- Downside risks to the growth and inflation outlooks
Via Westpac on their outlook for the Reserve Bank of New Zealand.
- RBNZ’s July OCR Review was markedly less hawkish than May.
- The RBNZ’s growth forecasts seem to have been significantly downgraded and crucially the RBNZ seems more confident that annual inflation will be below 3% quite soon.
- The recent QSBO survey likely crystalised the downside risks to the growth and inflation outlooks that were evident in other high frequency indicators.
- The RBNZ’s abrupt change in messaging at the July Review suggests a non-trivial risk of policy easing before long. Our central expectation remains that the RBNZ will begin easing policy in February next year. But an earlier move is very feasible and will be data dependent.
New Zealand services PMI for June 2024: 40.2 (prior 43.0)
- The previous, May, report was titled: “Bottom of the Barrel”
New Zealand Performance of Services Index for June 2024, via BusiznessNZ, performed even worse than the appalling May report.
- prior 43.0
- Employment sub index @45.6 was at its lowest point since February 2022
BNZ’s Senior Economist Doug Steel said that “the Performance of Services Index has been well below average for more than a year. Moreover, the weakness appears to be accelerating”.
Heads up for a holiday in Asia today – Japanese markets are closed
Japanese markets are closed for the public holiday in Japan today, its Marine Day.
Cryptocurrency News
Ethereum ETFs Set to Launch Next Tuesday: Why ETH’s Price Could Soar
Key Developments:
- ETF Launch Date: Bloomberg analysts report that the SEC is preparing to launch Ethereum ETFs next Tuesday, July 23, after requesting final S-1 submissions from issuers.
- Recent Inflows: Ethereum investment products have seen inflows of $72 million, the highest since March, signaling growing investor confidence.
Market Outlook:
- Potential Price Surge: With the ETF approval on the horizon, Ethereum is poised for a possible new yearly high, having risen nearly 7% on Monday following the bullish news.
Analyst Insights:
- Bloomberg’s Eric Balchunas indicated that the SEC’s actions are highly positive for the crypto market, especially with the upcoming Bitcoin conference featuring notable speakers, including Donald Trump.
- Necessary Approvals: The SEC approved ETH ETF 19b-4 filings last week, but final approval of S-1 registration statements is essential for trading to commence.
Investor Sentiment:
- Traditional investors are increasingly bullish as the ETF launch approaches, evidenced by the substantial inflows into Ethereum ETFs.
Technical Indicators:
- Circulating Supply: The low circulating supply of ETH, due to a significant amount locked in staking protocols, is expected to amplify price movements as ETF inflows increase.
Open Interest Growth:
- CME Open Interest: Ethereum CME open interest is rising faster than that of other derivatives exchanges, reflecting a growing appetite among US investors for ETH.
Conclusion: The impending launch of Ethereum ETFs is generating substantial excitement in the market, with bullish sentiment and increased inflows suggesting that ETH’s price could be set for significant gains in the coming weeks.
Traditional Investors Bet Big on Crypto Despite Recent Market Drawdown
Strong Inflows Signal Confidence:
- Weekly Inflows: CoinShares’ latest report reveals digital asset investment products attracted $1.44 billion in inflows last week, demonstrating significant investor confidence.
- Bitcoin’s Performance: Bitcoin recorded its fifth-largest weekly inflows, totaling $1.35 billion.
- Ethereum’s Surge: Ethereum saw inflows of $72 million, the highest level since March.
Market Context:
- Buy-the-Dip Strategy: Traditional investors are capitalizing on recent market drawdowns as a buy-the-dip opportunity, boosting overall buying pressure.
- Year-to-Date Totals: Year-to-date inflows for crypto ETFs have reached an impressive $17.8 billion, surpassing 2021’s figures by 67% within just six months.
US Market Dominance:
- US Crypto ETFs Lead: US-based crypto ETFs led the way with $1.3 billion in inflows last week. Major gainers included iShares US ETFs with $523 million and Fidelity ETFs with $358 million.
- Grayscale Struggles: In contrast, Grayscale ETFs experienced outflows of $34 million as the asset manager faces challenges in maintaining crypto holdings.
Global ETF Activity:
- Offshore Inflows: Several offshore digital asset ETFs also saw inflows, including:
- Hong Kong: $54.6 million
- Switzerland: $57.5 million
- Canada: $24.2 million
- Germany: $11.7 million
Conclusion: Despite recent market volatility, traditional investors continue to show strong commitment to the crypto space, with significant inflows reflecting a bullish sentiment and a strategic approach to market dips.
Ripple Whales Accumulate 300 Million XRP in Two Days, Altcoin Holds Strong Above Key Support
Whale Accumulation and Market Impact:
- Whale Activity: Ripple whales holding between 10 million and 100 million XRP have purchased 300 million tokens from July 12 to 15.
- Price Performance: XRP has extended gains by nearly 3%, trading above $0.5300, reaching a peak of $0.5661 on July 13.
Recent Milestones:
- Anniversary Celebration: XRP holders marked the one-year anniversary of Judge Torres’ ruling in the SEC vs. Ripple lawsuit, contributing to increased market enthusiasm.
- Current Price: As of the latest data, XRP is trading at $0.5333.
On-Chain Insights:
- Positive Sentiment: According to Santiment, the accumulation by large wallet investors typically signals bullish sentiment for the asset, suggesting potential for further gains.
- Additional Accumulation: In addition to the whale activity, investors holding between 100,000 and 1 million XRP added 10 million tokens during the same period.
Conclusion:
- The active accumulation by Ripple whales and the positive market sentiment surrounding the anniversary of the SEC ruling bolster XRP’s position, supporting its stability above key support levels.
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