North American News
Dow and S&P Close at Record Highs; Russell 2000 Soars 3.5%
Market Summary:
- Closing Levels:
- Dow Industrial Average: +742.74 points (+1.85%) at 40,954.49 (2nd consecutive record close).
- S&P 500: +36.40 points (+0.64%) at 5667.21 (record close).
- NASDAQ: +36.77 points (+0.20%) at 18,509.34, still below last Wednesday’s all-time high of 18,647.45.
- Russell 2000: +76.65 points (+3.50%) at 2263.67, marking its second gain of 3.5% or more in four days.
Top Performers:
- Notable Dow Stocks:
- UnitedHealth: +6.48%
- Caterpillar: +4.28%
- Boeing: +3.89%
- Home Depot: +2.96%
- Dow Inc.: +2.7%
Magnificent 7 Performance:
- Positive Movers:
- Amazon: +0.16%
- Apple: +0.18%
- Tesla: +1.55%
- Decliners:
- Meta Platforms: -1.28%
- Nvidia: -1.62%
- Alphabet: -1.40%
- Microsoft: -0.98%
Year-to-Date Performance:
- Dow Industrial Average: +8.66%
- S&P 500: +18.81%
- NASDAQ: +23.3%
- Russell 2000: +11.67%, up 5.37% for the week after a 5.99% rise last week.
Conclusion: The major indices closed higher, with the Dow and S&P setting new records while the Russell 2000 continued its strong performance, signaling a broad-based market rally.
Atlanta Fed GDPNow Q2 growth estimate rises to 2.5% versus 2.2% last
The Atlanta Fed GDPNow Q2 growth estimate rises to 2.5% from 2.2% last.In their own words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 2.5 percent on July 16, up from 2.0 percent on July 10.After this morning’s retail sales report, the nowcast of second-quarter real personal consumption expenditures growth increased from 1.6 percent to 2.1 percent.
US June retail sales 0.0% versus -0.3% expected
- US June 2024 retail sales data
- Prior month of 0.1% revised +0.3%
- Retail sales came in at $704.3B va $704.5B last month.
Details:
- Retail sales 0.0% vs -0.3% estimate
- Retail sales YoY +2.3%
- Ex Autos 0.4% vs 0.0% estimate
- Prior ex autos -0.1% revised to 0.1%
- Control group 0.9% vs 0.2% estimate
- Prior month control group 0.4%
- Ex autos and gas 0.8% vs 0.3% last month. Prior month revised from 0.1%
- Non store retailers were up 8.9% from last year while food services and drink places were up 4.4% from a year ago
Some other details MoM and YoY changes:
- Furniture is 0.6% MoM and -4.0% year on year
- building materials and garden equipment is 1.4% MOM and -0.9% year on year
- gasoline stations -3.0% MoM and -0.4% year on year
- clothing +0.6% MoM and +4.3% year on year
- nonstore retailers +1.9% MoM and +8.9% year on year
- food services and trading places +0.3% MoM and +4.4% year on year
- Autos -2.0% MoM and -2.2% year on year
Stronger from most angles vs expectations. In addition, the revisions for the retail sales were better as well. Dow up 160 points.S&P is up 14.28 points and NASDAQ is up 57 points.The 2-year yield is trading near highs at 4.463% up 1.0 basis points.THe 10 year is at 4.208%, -2.1 basis points.
A poor performer is the auto (and gasoline stations) which did not do well last month. Motor vehicle and parts dealers fell -2.0% MoM.
US June import prices 0.0% vs -0.1% expected
- US June import/export price data
- Prior import prices -0.4% m/m (revised to -0.2%)
- Import prices y/y 0.0% vs +1.1% prior
- Export prices m/m -0.5% vs -0.1% expected (prior -0.6%)
US NAHB housing market index 42 vs 43 expected
- US home builder sentiment data
- Prior was 43
- Current sales 47 vs 48 prior
- Six month sales 48 vs 47 prior
US May business inventories 0.5% versus 0.4% expected
- US May 2024 business inventories data
- Prior month 0.3%
- Business inventories 0.5% vs 0.3% expected
- Inventories ex autos 0.0% vs 0.2% prior period
Fed’s Kugler: It may be appropriate to hold rates steady ‘a little longer’
- Comments from Kugler
- Upside risks to inflation and downside risks to jobs have become more balanced
- If labor market cools too much, it will be appropriate to cut rates sooner rather than later
- It may be appropriate to hold rates steady ‘a little longer’
- Inflation has continued to trend down despite ‘a few bumps’ at the start of this year
- Continued labor market rebalancing suggests inflation will continue to move towards 2% target
Geopolitics trumps higher inflation as top tail risk in latest BofA fund manager survey
- Being long in tech shares is still the most crowded trade ‘by a country mile’
Just a couple of findings from the latest BofA fund manager survey:
- Investors stay bullish amid expectations for Fed rate cuts, soft landing
- 68% of investors anticipate a soft landing scenario
- 67% of investors expect no recession in the next 12 months
- Staying long in the “Magnificent Seven” is the most crowded trade still
- Geopolitics takes over as the top tail risk for investors, beating higher inflation
Elon Musk plans to commit around US$45 million a month backing Trump
- Musk just one of the uber-wealthy supporting Trump
Wall Street Journal info, citing ‘people familiar with the matter’:
- Elon Musk has said he plans to commit around $45 million a month to a new super political action committee backing former President Donald Trump’s presidential run
Fed’s Daly says she sees a policy adjustment over the coming term
- ‘Policy adjustment’ is a rate cut
Federal Reserve Bank of San Francisco President Mary Daly:
- Confidence is growing that we are getting nearer to a sustainable pace of getting inflation to 2%
- I see a policy adjustment over the coming term
- Some normalisation of policy is a likely outcome
- US economy is slowing
- Inflation is lower but we are not there yet
- We are nearer to the time of achieving our goals
BlackRock’s Rieder says “much, much closer to normalcy” – see September Fed rate cut
- Rieder is BlackRock’s chief investment officer of global fixed income, he spoke with CNBC
Rick Rieder is BlackRock chief investment officer of global fixed income.
He spoke with CNBC on his thoughts on Federal Open Market Committee (FOMC) rate cuts to come, and why:
- on inflation, he said the US is “at a place that is much more like 2019, much, much closer to normalcy”
On timing:
- Said probably not in July – “I think the odds are low. It’s not impossible. You’ve gotten some data that would allow you to do it, I would do it”
- “I think they’ll set up for a September cut.”
Canadian CPI cements a Bank of Canada rate cut next week – CIBC
- The inflation data for June gave the Bank of Canada what it needed in order to cut interest rates at next week’s meeting
The Bank of Canada meets on July 24 and economists are increasingly sure of a rate cut.That’s also reflected in interest rate derivatives which are now showing a 93% probability of a cut.
CPI decelerated to 2.7% from 2.9% with core numbers also slowing. The numbers show that the prior month’s upside surprise in inflation was just a blip in a broader trend of disinflation as demand in the economy remains under pressure, according to CIBC.
They note that a big disinflationary tailwind is coming via housing and that rent slowed to +0.4% m/m and edged lower to 8.8% y/y.
“As population growth slows with the government restrictions tied to NPRs, and more people move into the homeownership market as interest rates fall, rents should continue to decelerate. Soon, the combination of fading MIC and a further gradual slowdown in rent will mean shelter will start to add material downward pressure on inflation,” CIBC economists write.
“On the surface, the demand-driven part of inflation appears to fading with only a few idiosyncratic pockets keeping inflation above target. In our view, the Bank of Canada can be comfortable gradually moving away from it’s meeting- by-meeting and data-dependent strategy, and operate on something close to auto-pilot by trusting its forecasts which have been much more accurate over the past year. The economy is clearly in need of interest rate relief to ensure a soft landing with future headwinds such as large mortgage renewals and population growth that could cater. With headline inflation back within the target zone and the BOS survey showing firm’s inflation expectations are edging down, any worries of upside risks to inflation or inflation being stuck above target is missing the mark.”
Canada June CPI 2.7% versus 2.8% expected
- Canada June 2024 inflation data
- Prior month 2.9%
- CPI m/m -0.1% vs 0.0% expected
- Prior m/m +0.6% prior
Core measures
- CPI Bank of Canada core y/y 1.9% vs 1.8% prior
- CPI Bank of Canada core m/m -0.1% versus 0.6% prior
- Core CPI m/m SA +0.1% vs 0.3% prior
- Trim 2.9% versus 2.9% prior
- Median 2.6% versus 2.8% prior (prior revised to +2.7%)
- Common 2.3% versus 2.4% prior
The monthly decrease was driven by lower prices for travel tours (-11.1%) and gasoline (-3.1%).
Year over year, lower prices for durable goods (-1.8%) also contributed to the slowdown in the all-items CPI in June with auto prices down 0.4% y/y.Moderating the deceleration was an increase in prices for food purchased from stores (+2.1%), as well as a smaller decline for cellular services in June (-12.8%) compared with May (-19.4%).
Canada June housing starts 241.7K vs 255.0K expected
- Canadian housing starts data from the CMHC
- Prior was 264.5K (revised to 264.9K)
- Single detached +2% vs +2% prior
- Multi-urban starts -12% vs +13% prior
Commodities
Gold Price Hits All-Time High of $2,465 Amid Fed Rate Cut Expectations
Market Summary:
- Current Price: Gold soared to a record $2,465, gaining over 1.70% as traders anticipate a Federal Reserve rate cut in September.
Key Drivers:
- Fed Rate Cut Outlook: Growing expectations of a 25-basis point rate cut in September are fueling demand for non-yielding assets like gold, with the FedWatch Tool indicating a 100% probability of this move.
- Political Climate: Speculation around former President Donald Trump’s potential victory in the November election is adding volatility to the market, pushing investors towards safe-haven assets.
Economic Context:
- Recent lower-than-expected inflation data has contributed to a bullish sentiment for gold, aligning with the Fed’s dovish stance.
- Powell’s comments emphasized the economy’s strength and the Fed’s commitment to lowering borrowing costs once inflation trends toward the 2% target.
Market Sentiment:
- Trump’s administration is expected to promote increased tariffs and tax cuts, likely leading to a higher budget deficit and inflationary pressures, further bolstering gold’s appeal.
Conclusion: With the combination of favorable economic indicators, political developments, and a clear path toward monetary easing, gold is positioned for continued upward momentum as investors seek safety in uncertain times.
Crude Oil Futures Settle at $80.76: Price Declines Amid Demand Concerns
Market Summary:
- Current Price: Crude oil settled at $80.76, down $1.15 or -1.40%.
- Price Drivers: The decline is primarily due to weak growth in China, raising concerns about future demand.
Key Factors Influencing Prices:
- China’s Economic Slowdown: China, the world’s largest oil importer, reported a 4.7% growth in Q2, the slowest in five quarters, driven by a debt crisis in the real estate sector and rising youth unemployment.
- Political Climate: Expectations surrounding former President Trump’s potential victory in the November election may also impact oil markets, given his pro-drilling stance and criticism of the Biden administration’s regulations.
Broader Market Context:
- Despite falling oil prices, there are rising hopes for a U.S. interest rate cut, which could eventually lead to increased demand. Fed Chair Jerome Powell’s recent comments on inflation trending towards the central bank’s 2% target support this sentiment.
Technical Analysis:
- Oil prices dipped below the 100-day moving average (MA) at $80.56 but failed to maintain downward momentum, settling slightly above this key level.
- For sellers to maintain pressure, prices need to remain below the $80 support level. Conversely, dip buyers are looking for prices to stay above $80.56 or preferably above $80 to foster optimism.
Conclusion: The oil market is navigating a complex landscape of demand concerns, geopolitical influences, and technical signals, setting the stage for potential volatility in the coming days.
Oil private survey of inventory shows a large headline crude oil draw vs build expected
- This is from the privately surveyed oil stock data ahead of official government data tomorrow morning out of the US.
- API inventory:
- Crude -4.44M
- Cushing -746k
- Gasoline +365k
- Distillate +4.92M
- SPR +600,000
US oil industry group (API) warn about trade war backlash if US ramps up tariffs
- American Petroleum Institute express concerns over Trump tariff proposals
CEO of the American Petroleum Institute spoke with Dow Jones/Market Watch, said the oil industry was very much in favour of Trump’s first term agenda
- included “a real focus on increased American development of our resources, and I think the opposite has been true of the Biden administration”
- “We want to make sure that our products can get to overseas markets without potential tariffs, and, if you put tariffs in place in the United States, it’s inevitable that there’s going to be a trade war throughout the rest of the world”
EU News
European indices close lower on the day
- 2-days of declines for the major indices to start the new trading week.
The major European indices are closing the day with declines for the second consecutive day to start the new trading week.
A snapshot of the closing levels shows:
- German DAX -0.35%
- France CAC, -0.69%
- UK FTSE 100 -0.22%
- Spain’s Ibex -0.47%
- Italy’s FTSE MIB -0.02%
Eurozone May trade balance €13.9 billion vs €15.0 billion prior
- Latest data released by Eurostat – 16 July 2024
The euro area trade balance narrowed with the seasonally adjusted number coming in at €12.3 billion on the month. That comes as exports were seen down 2.6% while imports were down 0.1% in May.
Germany July ZEW survey current conditions -68.9 vs -74.5 expected
- Latest data released by ZEW – 16 July 2024
- Prior -73.8
- Outlook 41.8 vs 42.3 expected
- Prior 47.5
Italy June final CPI +0.8% vs +0.8% y/y prelim
- Latest data released by Istat – 16 July 2024
- Prior +0.8%
- HICP +0.9% vs +0.9% y/y prelim
- Prior +0.8%
Asia-Pacific-World News
Goldman Sachs trim its forecast for China’s 2024 growth to 4.9%
- Goldman Sachs response to yesterday’s poor GDP data for Q2
Goldman Sachs lowered its forecast for China’s 2024 growth to 4.9% from 5.0%.
GS offered up some advice the the Chinese government, saying more easing is needed for the rest of 2024, and further fiscal support and property/housing market support.
China Plenum continues today – GDP miss yesterday increases calls for stimulus
- Standard Chartered expect cuts from the People’s Bank of China, rates and RRR
Standard Chartered concur. In brief:
- GDP growth decelerated in Q2 …
- China’s growth drivers remain uneven
- trade tensions are rising, with the US and EU imposing new tariffs on China EVs, and a likely new round of tariffs after the US elections in November
- We expect the Politburo, which is likely to convene in late July, to call for concrete measures to boost domestic demand.
- Ramping up fiscal spending by fully utilising bond issuance proceeds and reducing housing inventory are likely to top the policy agenda
WSJ: China’s Economy Is in Trouble
- China’s real-estate crisis, now in its third year, has become a major drag on the economy
The Wall Street Journal is gated but if you can access this it paints a dour outlook for China’s economy:
- Growth is slowing and becoming more unbalanced, propped up by exports and a gusher of investment into factories, while much of the rest of the economy languishes.
- Consumers are reining in spending, the housing market is depressed, local governments are swimming in debt and foreign investors are pulling their cash—all at a time when China’s population is rapidly aging.
- Yet expectations are low for Xi to make a significant course correction at a Communist Party conclave this week, as he continues to put measures to enhance China’s economic security above other priorities.
Xi seems more focused on steps to make China less dependent on Western technology.
Its an interesting piece if you can access it, link here.
PBOC sets USD/ CNY reference rate for today at 7.1328 (vs. estimate at 7.2671)
- PBOC CNY reference rate setting for the trading session ahead
In open market operations:
- PBOC injects 676bn via 7-day RR, sets rate at an unchanged 1.8%
- 2bn mature today
- thus net 674bn injection
IMF leaves 2024 global growth forecast unchanged, bumps up 2025 GDP
- The latest growth forecasts from the IMF
- 2024 global GDP unchanged from April at 3.2%
- 2025 boosted to 3.3% from 3.2%
- US GDP 2024 forecast cut to 2.6% from 2.7%, 2025 forecast unchanged at 1.9%
- China 2024 forecast raised to 5.0% from 4.6%
- China 2025 forecast raised to 4.5% from 4.1%
- Eurozone 2024 raised to +0.9% from +0.8%, 2025 unchanged at 1.5%
- Japan 2024 forecast lowered to +0.7% from +0.9%
- IMF says global disinflation momentum is slowing with higher inflation in services prices, brisk nominal wage growth
- IMF chief economist says China needs to restore household confidence, resolve property crisis to boost domestic consumption
This is what the report says about the US:
Growth is expected to slow to 1.9 percent in 2025 as the labor market cools and consumption moderates, with fiscal policy starting to tighten gradually. By the end of 2025, growth is projected to taper to potential, closing the positive output gap.
In the United States, after a sustained period of strong outperformance, a sharper-than-expected slowdown in growth reflected moderating consumption and a negative contribution from net trade”
A more-detailed look at the changes highlights the improvement in China at a time when all the commentary in the market about China is downcast. Note that the third plenum is ongoing and pronouncements there could certainly change the trajectory.
New Zealand global daily trade price index rises 0.4%
New Zealand global daily trade price rises 0.4%. The average sell price comes in at $3,837/Tonne. The move higher comes after a sharp drop in the last report.
BOJ data suggests Japan also intervened in the FX market on 12 July
- Reuters says the data suggests that Japan may have spent a little over ¥2 trillion to intervene last Friday
There were some decent shoves lower on Friday in USD/JPY but it came after the US PPI report. It wasn’t immediate but it is something worth noting, with the BOJ data suggesting the intervention amount to be ¥2.14 trillion.
Hayashi says no comment on FX intervention
- Japan chief cabinet secretary Hayashi
- No comment on forex intervention
- believe forex should reflect fundamentals
Cryptocurrency News
Ethereum ETFs Set to Propel ETH to New All-Time Highs: Analysts Predict Surge Above $5,000
Market Outlook:
- Predicted Surge: Analysts from Bitwise forecast that Ethereum ETFs could push ETH to exceed $5,000, marking a new all-time high.
- Estimated Inflows: Citi predicts that Ethereum ETFs will attract approximately $5 billion in net inflows within six months of launch.
Key Insights:
- Bitwise’s Perspective: Matt Hougan, CIO of Bitwise, emphasizes the significant impact of Ethereum ETFs, stating that strong inflows could elevate ETH’s price substantially by year-end. He notes that ETH’s potential rise could outpace Bitcoin’s previous ETF-driven growth.
- Price Movement Potential: Trader Peter Brandt suggests ETH could see a 60% rally if it achieves a critical price level, reinforcing the bullish sentiment surrounding the upcoming ETF launches.
Current Market Performance:
- ETH Price Movement: Ethereum is up nearly 2% on Tuesday, reflecting growing optimism in the market as anticipation builds around the ETF approval.
Conclusion: With substantial inflows expected and analysts projecting significant price appreciation, Ethereum ETFs are poised to play a pivotal role in driving ETH toward new heights in the coming months.
WSJ: Spot Ether ETF likely to start trading next week
The Wall Street Journal is reporting that spot Ether ETF trading is likely to begin next week.According the story:
- The Securities and Exchange Commission (SEC) has informed several asset managers that the first U.S. exchange-traded funds (ETFs) holding ether could launch next Tuesday, July 23.
- The SEC is expected to declare fund-registration statements effective next Monday after asset managers submit a final round of filings this week.
- Once the statements are effective, the sale of ETF shares can begin.
An SEC spokesperson declined to comment on individual filings.
In May, the SEC approved stock exchanges to list these funds, surprising the crypto community. Eight asset managers, including BlackRock and Fidelity Investments, have applied to launch these spot ether ETFs, which buy and sell the digital currency itself, unlike existing ETFs that rely on ether futures.Many of these managers also launched the first batch of spot bitcoin ETFs, which have recorded nearly $16 billion in total net inflows since debuting in January.
The price of ether is currently trading at $3435. Technically, the price is trading just above the 50% of the recent move down from the end of June high. That midpoint comes in at $3391.70. The price has traded above and below that midpoint level today, but still is a risk defining level in the short term for buyers.
Meme Coins Rally as Ethereum ETF Approval Hype Fuels Market Optimism: PEPE Gains 10%
Market Highlights:
- PEPE Surge: PEPE rallied nearly 11% on Tuesday, reflecting strong market sentiment amidst expectations of the SEC approving a Spot Ethereum ETF this week.
- Market Cap: PEPE’s market capitalization has climbed to $5.21 billion, positioning it among the top 25 cryptocurrencies.
Broader Context:
- Crypto Rally: Alongside Bitcoin and Ethereum, meme coins are benefiting from the overall bullish outlook, recovering from declines earlier in July.
- Current Price: PEPE trades at $0.00001262, showcasing robust growth over the past week.
Market Sentiment:
- The anticipation surrounding the Ethereum ETF approval has created a favorable environment for meme coins and other Ethereum-based assets, contributing to PEPE’s impressive performance with a 37% gain over the last seven days.
Potential for Growth:
- Analysts suggest that if Ethereum’s Spot ETF is approved, it could lead to gains across various categories, including staking tokens, Layer 2 solutions, and other Ethereum ecosystem assets. This pattern mirrors the positive impact seen with Bitcoin Spot ETF approvals.
Top 20 Aspirations:
- PEPE is eyeing entry into the top 20 cryptocurrencies, with the current market cap of the 20th asset at $6.21 billion. Continued gains could help PEPE break into this elite group.
Conclusion: The excitement surrounding the impending Ethereum ETF approval is driving significant interest and investment in meme coins, particularly PEPE, as traders anticipate further upward momentum in the broader crypto market.
BlackRock CEO Larry Fink says he was wrong on Bitcoin
- “My opinion five years ago was wrong”
BlackRock CEO Larry Fink spoke in a US media interview (CNBC), endorsing the cryptocurrency:
- “My opinion five years ago was wrong”
- “I believe bitcoin is a legitimate financial instrument”
- BTC should be part of every investor’s portfolio
- an instrument you invest in when you’re more frightened … when you believe that countries are debasing their currency by excess deficits
- “There’s a real need for everyone to look at it as one alternative”
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