Round up of today’s market news

North American News

US Stocks Post Biggest One-Day Gain Since February, Mega Caps Lead Final July Session

US stock indices saw their most significant one-day gains since February 22, 2024, with the Nasdaq and S&P 500 leading the charge. Despite this surge, the major indices finished the month with mixed performances, but still managed to retain solid gains.

Daily Performance:

• Nasdaq Composite: +2.3%
• S&P 500: +1.4%
• Russell 2000: +0.5%
• DJIA: +0.2%

Monthly Performance:

• Nasdaq: -0.75%
• S&P 500: +1.1%
• Russell 2000: +10.1%
• DJIA: +4.4%

Highlights:

• Mega Cap Stocks: The Vanguard Mega Cap Growth ETF (MGK) closed July down 2.6%, while the Nasdaq Composite experienced a 1.0% decline for the month. However, the equal-weighted S&P 500 demonstrated a notable 4.5% gain.
• Nvidia: Surged 14% on the largest one-day market cap gain in history, with further gains in after-hours trading. This was driven by optimism around increased capital expenditures in the tech sector.
• Microsoft & Meta: Both companies announced increased capex plans, boosting investor confidence in tech and chipmakers.

Overall, the end of July saw a strong rebound in stock prices, particularly driven by mega cap stocks and positive news from major tech players.

Meta and Qualcomm Surge After Earnings Reports

Qualcomm (QCOM) and Meta Platforms (META) saw significant gains following their latest earnings reports. Qualcomm’s stock soared by 14%, while Meta’s shares climbed by 8%.

Key Highlights:

• Qualcomm (QCOM):
  • The company reported robust earnings that exceeded expectations, driving its stock up by 14%.
  • Qualcomm’s performance underscores strong demand and growth in the semiconductor sector.
• Meta Platforms (META):
  • Meta boosted its capital expenditure (capex) estimate for the year, projecting “significant” growth in capex through 2025.
  • The announcement was well-received by investors, leading to an 8% increase in Meta’s stock price.
• Broader Market Trends:
  • The surge in Meta and Qualcomm’s stocks reflects ongoing enthusiasm in the AI sector. The gold rush mentality in AI investments is proving resilient, as evidenced by the substantial gains in Nvidia’s market cap (+12%) following similar positive news from Microsoft.

The strong earnings reports from Qualcomm and Meta highlight the continued vigor in technology and semiconductor industries, reinforcing investor confidence amid a competitive AI landscape.

Meta Platforms ($META) Q2 2024 Financial Results: Strong Performance and AI Growth

Meta Platforms delivered impressive financial results for Q2 2024, reflecting significant gains across key metrics and robust growth in its AI initiatives.

Key Financial Metrics:

• Revenue: $39.07 billion, up 22% year-over-year (Y/Y)
• Net Income: $13.47 billion, up 73% Y/Y
• Earnings Per Share (EPS): $5.16, up 73% Y/Y
• Operating Margin: 38%, up from 29% Y/Y
• Ad Impressions: Increased by 10% Y/Y
• Average Price per Ad: Up by 10% Y/Y
• Free Cash Flow: $10.9 billion

Highlights:

• Revenue Growth: Meta saw a 22% increase in revenue, driven by strong ad performance and growing user engagement across its platforms.
• Profitability: The company’s net income and EPS both surged by 73%, reflecting improved operational efficiency and cost management.
• Ad Performance: There was a 10% rise in ad impressions and average price per ad, highlighting the continued strength of Meta’s advertising business.
• Operating Margin: The operating margin expanded to 38%, indicating improved profitability.
• Free Cash Flow: Meta generated $10.9 billion in free cash flow, showcasing its strong financial health and capacity for reinvestment.

Meta’s strong Q2 2024 results underscore its successful execution of AI initiatives and ongoing growth across its apps, positioning the company favorably in a competitive digital landscape.

ADP July employment 122K vs 150K expected

• ADP July 2024 data

• Prior was 150K (revised to 155K)
• Annual pay growth for job-stayers slowed to 4.8%, lowest in 3 years, down from 5.0% prior
• Job-changers’ pay gains dropped to 7.2% from 7.7%

More details:

• Goods-producing sectors added 37K jobs, with construction leading at +39K
• Services sectors added 85K, led by trade/transportation/utilities at +61K
• Professional/business services saw notable job losses of -37K

“With wage growth abating, the labor market is playing along with the Federal Reserve’s effort to slow inflation,” said Nela Richardson, chief economist, ADP. “If inflation goes back up, it won’t be because of labor.”

US Q2 employment cost index +0.9% vs +1.0% expected

• US second quarter wage data

• Prior was +1.2%
• Wages q/q +0.9% vs +1.1% prior
• Benefits +1.0% vs +1.1% prior

Annual growth in compensation costs eased to 4.1% from 4.5% a year ago and it’s even better when stripping out government as private wages rose 3.9% compared to 4.5% a year ago.

US June pending home sales +4.8% vs +1.5% expected

• US June 2024 pending home sales data
• Prior was -2.1%
• Index at 74.3 vs 70.8 prior (revised to 70.9)

Boeing Reports Q2 2024 Results $BA

Safety and Quality Plan

• Boeing submitted a comprehensive safety and quality plan to the FAA.

Acquisition Announcement

• Boeing announced an agreement to acquire Spirit AeroSystems, expected to close mid-2025.

Financial Performance

• Revenue: $16.9B

• GAAP loss per share: ($2.33)

• Core loss per share (non-GAAP): ($2.90)

• Operating cash flow: ($3.9B)

• Free cash flow (non-GAAP): ($4.3B)

Backlog

• Total company backlog: $516B, including over 5,400 commercial airplanes.

Segment Results

Commercial Airplanes

• Revenue: $6B (down 32% YoY)

• Deliveries: 92 airplanes (down 32% YoY)

• Operating margin: (11.9)%

• Backlog: Over 5,400 airplanes valued at $437B

Defense, Space & Security

• Revenue: $6B (down 2% YoY)

• Operating margin: (15.2)%

• $1B losses on fixed-price development programs

• Backlog: $59B (31% from non-US customers)

Global Services

• Revenue: $4.9B (up 3% YoY)

• Operating margin: 17.8%

• Contracts secured: Apache performance-based logistics (US Army), FliteDeck Pro service (Hainan Airlines, Ryanair)

Cash Flow and Debt

• Operating cash flow: ($3.9B)

• Free cash flow (non-GAAP): ($4.3B)

• Cash and marketable securities: $12.6B (up from $7.5B in Q1 2024)

• Debt: $57.9B (up from $47.9B in Q1 2024)

Additional Information

• Boeing issued $10B in new debt to bolster liquidity.

• The company has access to $10B in credit facilities.

CEO Statement:

“Despite a challenging quarter, we are making substantial progress in strengthening our quality management system and positioning our company for the future. We are executing our comprehensive safety and quality plan and have reached an agreement to acquire Spirit AeroSystems. While we have more work ahead, the steps we’re taking will help stabilize our operations and ensure Boeing is the company the world needs it to be. We are making important progress in our recovery and will continue to build trust through action and transparency.” – Dave Calhoun, Boeing President and CEO

Mastercard $MA

• EPS. vs Forecast
• 3.59 / 3.51

• Rev. vs Forecast
• 7B / 6.85B

• Market Cap: 415.96B

• EPS $3.50
• Purchase Volume $1.97T, est. $2.01T
• Cross-border Volumes 17%, est.16.4%

Mastercard sees ‘continued healthy customer spending’

• No signs of a spending drop in Mastercard earnings

Shares of Mastercard are 2.7% higher pre-market after reporting earnings and revenues that beat expectations. More importantly, the company highlighted that it wasn’t seeing a slowdown from consumers.

Revenues of 7.00 billion compared to 6.85 billion expected and earnings were $3.59 vs $3.51 expected.

We delivered another strong quarter across all aspects of our business with double-digit net revenue and earnings growth,” said Michael Miebach, Mastercard CEO. “This was supported by continued healthy consumer spending, robust cross-border volume growth of 17%.”

Purchase volume increased by 10% on a local currency basis and the numbers show a healthy appetite for travel. The regional breakdown shows positive GDV growth across all major regions, including the United States (6.4%), Europe (14.3%), Latin America (16.5%), and Canada (5.8%).

The company also does not see slowing ahead with 2024 revenue growth forecast in the ‘low double digits’.

US MBA mortgage applications w.e. 26 July -3.9% vs -2.2% prior

• Latest data from the Mortgage Bankers Association for the week ending 26 July 2024

• Prior -2.2%
• Market index 201.2 vs 209.3 prior
• Purchase index 132.8 vs 134.8 prior
• Refinance index 570.7 vs 614.9 prior
• 30-year mortgage rate 6.82% vs 6.82% prior

Powell: We have made no decisions about September but broad sense is we’re moving closer

• Comments from the Fed chair in response to questions

• A reduction in our policy rate could be on the table as soon as our next meeting
• If we were to see inflation moving down quickly or more-or-less in-line with expectations then I would think a rate cut could be on the table in Sept
• If inflation were to prove stickier, then we would weigh that along with other things
• It won’t just be one thing, it’s going to be the balance of risks
• It’s just a question of seeing more good data
• I can imagine everything from zero to ‘several’ rate cuts this year
• Path ahead is going to depend on the economy
• Data in labor market shows a gradual normalization
• We don’t think of the labor market as it is currently as a likely source of inflation pressures
• There could be seasonality in inflation data so that’s why we look at 12 month inflation, which is at 2.5%
• Inflation data now is so much better than a year ago
• We’re balancing the risks of going too early with going too late
• We do look at private demand extra carefully (vs gov’t)
• Strong majority supported not moving today
• The lags of monetary policy are showing up
• The picture is not one of a slowing or really bad economy
• The chances of a hard landing are ‘low’

“The broad sense of the committee is the economy is moving closer to the point at which it will be appropriate to reduce our policy rate. In that we will be data dependent, but not data point dependent,” he said.

Powell opening statement: Labor market is ‘strong but not overheated’

• Highlights from Powell in the opening statement

• Labor market is ‘strong but not overheated’ and about where it was pre-pandemic
• Longer-term inflation expectations appear to be well anchored
• Unemployment rate remains low
• Labor market has cooled, inflation has declined and risks have moved into better balance
• Attentive to both sides of dual mandate
• Q2 inflation readings have added to confidence on inflation
• Need greater confidence on inflation
• We will carefully assess incoming data for future decisions
• Policy is well-positioned to deal with risks and uncertainties

FOMC interest rate decision: Rates unchanged but statement highlights dual risks

• Highlights of the FOMC decision and statement

• Fed says it’s attentive to risks on both sides of the mandate, a change from previous text that said it was highly attentive to inflation risks
• In recent moths there has been ‘some’ further progress to 2% inflation goal vs ‘modest’ further progress previously
• Says inflation remains ‘somewhat elevated’
• Economy continues to expand at ‘solid’ pace, job gains have moderated, employment rate has moved up but remains low
• Repeats that it does not expect to cut until it has gained greater confidence that inflation is moving closer to 2%

Deutsche Bank says late (US) summer is often a ‘difficult time’ for equities

• DB wary of a VIX spike in Q3 and late summer

A note conveyed via CNBC from Deutsche Bank, analysts there say the average run higher for VIX is highest in Q3 compared with any other quarter.

Canada May GDP MoM 0.2% vs 0.1% estimate

• Canada May 2024 GDP data

• Prior month 0.3%
• May GDP 0.2 % vs 0.1% estimate. The Advanced GDP released with the April report was 0.1%
• June advanced GDP 0.1%. Construction, real estate, and rental and leasing and finance and insurance increased, with manufacturing and wholesale trade falling
• Services producing industries 0.1%
• Good producing industries 0.4%
• total of 15 of 20 sectors increased in May

Details

• Manufacturing sector (+1.0%) led the growth in May and has been up for two months. The gain was the largest since January 2023
  • nondurable goods +1.4%. The largest growth rate since November 2023
  • durable goods +0.7% with six of 10 subsectors increasing.
• Public-sector increase by 0.8%
• retail trade was the largest decliner with the fall of -0.9%
  • food and beverage -2.3%
  • health and personal care stores -1.4%
  • Gen. merchandise -1.4%
  • motor vehicle and parts dealers rose 0.8%
• wholesale trade also fell by -0.8%

Commodities

Gold Surges 1.50% After Fed Holds Rates, Powell Emphasizes Job Market Importance

Gold rallied sharply by over 1.50% to $2,447 late in the North American session following the Federal Reserve’s decision to hold interest rates steady.

Key Highlights:

• Fed’s Decision:
  • The Federal Reserve opted to maintain the current interest rate levels, signaling a balanced approach towards inflation and employment.
  • Jerome Powell’s Remarks: Fed Chairman Jerome Powell underscored the growing importance of US jobs data in shaping future monetary policy. Powell noted that the disinflation process has “broadened” and acknowledged downside risks in the labor market, suggesting that a potential downturn could prompt policy adjustments.
• Market Reactions:
  • Gold: The precious metal surged to $2,447, reflecting market optimism about the Fed’s decision and Powell’s focus on employment.
  • US Dollar Index: The index fell by 0.42% as Treasury yields dropped, driven by the Fed’s balanced stance on inflation and employment.
  • Interest Rate Cuts: Market participants are now pricing in 70 basis points of interest rate cuts towards the end of the year, influenced by Powell’s comments.
• Upcoming Data:
  • July Nonfarm Payrolls Report: The upcoming report will be crucial in assessing the Fed’s future policy moves, as Powell highlighted the job market’s impact on monetary policy.
• Fed’s Monetary Policy Statement:
  • Officials stated, “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.” They acknowledged that, despite easing, inflation remains “somewhat elevated” and noted that the risks associated with the dual mandate have become more balanced.

Gold’s gains reflect a market response to the Fed’s cautious approach and Powell’s focus on employment, with investors closely watching upcoming economic data for further policy insights.

Oil Prices Surge Amid Geopolitical Tensions

WTI Crude Oil experienced a significant jump of $3.00, or 3.9%, today, reaching $77.64 per barrel. This marks the largest single-day gain in six weeks. The surge comes amidst a backdrop of heightened geopolitical tensions and market dynamics.

Key Drivers Behind the Oil Rally:

1. Geopolitical Tensions:
   • Middle East Unrest: The recent assassination of a Hamas political leader in Tehran and a Hezbollah commander in Beirut has intensified fears of retaliation and escalation in the region. This geopolitical uncertainty has contributed to the substantial increase in oil prices.
   • Venezuela’s Political Situation: Reports indicate that Venezuelan President Nicolás Maduro may retain military support. If Maduro maintains power, the U.S. is likely to impose stricter oil sanctions, potentially disrupting Venezuelan oil supply. This adds another layer of bullish sentiment to the market, despite the risk of potential unrest or an uprising.
2. U.S. Oil Production and Inventory Data:
   • Production Decline: The U.S. Energy Information Administration (EIA) reported a decline of 61,000 barrels per day (bpd) in May, marking the first decrease since January. This drop highlights a slowdown in U.S. drilling activities, exacerbated by recent falling oil prices.
   • Inventory Data: Weekly U.S. oil inventory data showed moderate bullish signals, contributing to the upward movement in prices.
3. Market Reactions and Technical Indicators:
   • Chart Patterns: Technical analysis reveals a potential three-candle reversal pattern, particularly if the price closes above $77.69. However, the bullish sentiment driven by geopolitical factors raises skepticism about the sustainability of the rally.
4. China’s Economic Outlook:
   • Disappointing PMIs: Recent data from China showed weaker-than-expected PMIs, which could dampen global oil demand. Despite this, there is optimism that China might introduce stimulus measures, which could support oil prices in the long term.

Conclusion:

While geopolitical tensions and supply concerns have significantly boosted oil prices today, it’s essential to approach this rally with caution. The impact of these geopolitical events might not be sustainable, and the market may need to adjust as further developments unfold. The crude oil chart suggests potential for further gains if prices maintain momentum above key resistance levels, but the influence of geopolitical factors warrants careful consideration before making investment decisions.

EIA weekly US oil inventories -3436K vs -1088K expected

• Oil data from the US

• Prior was -3741K
• Gasoline -3665K vs -1043K exp
• Distillates +1534K vs -1242K exp
• Refinery utilization -1.5% vs +0.7% expected
• Production unchanged at 13.3 mbpd
• Cushing: -1.106M

OPEC meeting (JMMC) coming up this week

• After the BOJ and Fed today, the BoE and this OPEC+ committee meet on Thursday

The OPEC+ meeting of the Joint Ministerial Monitoring Committee (JMMC) will be held via videoconference on Thursday.

The JMMC’s primary role is to monitor compliance with production agreements among OPEC+ members and assess market conditions.

This includes

• reviewing monthly production levels,
• ensuring that member countries adhere to agreed production cuts or increases,
• and making recommendations to the broader OPEC+ group on adjustments to production targets.

Private survey of oil inventories shows larger headline crude draw than expected

• The inventory data from the private survey is out now, official data follows Thursday morning (US time).

API Inventory:

• Crude -4.495 million (exp. -2.3 million)
• Gasoline -1.917 million
• Distillates -322,000
• Cushing -929,000
• SPR +700,000

EU News

European equity close mixed

• Closing changes on Wednesday

• Stoxx 600 +0.8%
• German DAX +0.5%
• UK FTSE 100 +1.0%
• French CAC +0.75%
• Italy MIB -0.5%
• Spain IBEX -1.2%

Eurozone July preliminary CPI +2.6% vs +2.5% y/y expected

• Latest data released by Eurostat – 31 July 2024

• Prior +2.5%
• Core CPI +2.9% vs +2.8% y/y expected
• Prior +2.9%

Germany July unemployment change 18k vs 15k expected

• Latest data released by the Federal Employment Agency – 31 July 2024

• Prior 19k
• Unemployment rate 6.0% vs 6.0% expected
• Prior 6.0%

Germany June import price index +0.4% vs +0.1% m/m expected

• Latest data released by Destatis – 31 July 2024

• Prior 0.0%
• Import prices +0.7% vs +0.5% y/y expected
• Prior -0.4%

France July preliminary CPI +2.3% vs +2.4% y/y expected

• Latest data released by INSEE – 31 July 2024

• Prior +2.2%
• HICP +2.6% vs +2.7% y/y expected
• Prior +2.5%

Italy July preliminary CPI +1.3% vs +1.2% y/y expected

• Latest data released by Istat – 31 July 2024

• Prior +0.8%
• HICP +1.7% vs +1.2% y/y expected
• Prior +0.9%

Switzerland July UBS investor sentiment 9.4 vs 17.5 prior

• Latest data released by UBS and CFA Society Switzerland – 31 July 2024

The index eased further on the month but keeps in positive territory, suggesting that the outlook is still moderately optimistic. UBS also noted that analysts were forming a larger consensus on the view that lower short-term rates are coming in Switzerland, the Eurozone, and the US.

Asia-Pacific-World News

PBOC to shift MLF date to the 25th as part of policy framework overhaul

China’s central bank is set to move its one-year liquidity injection date to the 25th of each month, starting as early as August, according to sources cited by Bloomberg. This change, part of a broader policy framework overhaul, aims to decouple the Medium-term Lending Facility from the Loan Prime Rates.

Highlights of the article:

• MLF operations to move from the 15th to the 25th of each month
• Change supports PBOC’s transition to using 7-day reverse repo as main policy tool
• Shift likely to impact bank liquidity management
• Move aligns with PBOC’s plans to expand toolkit, including government bond operations

The PBOC’s recent unexpected MLF injection on June 25th, coupled with rate cuts, hinted at this upcoming change.

US weighs new restrictions on China’s access to memory chips

• AI memory chips from Samsung and Sk Hynix could be targeted

China June 2024 Official Manufacturing PMI 49.4 (expected 49.4)

• Official Chinese PMIs come from the National Bureau of Statistics (NBS)

Manufacturing PMI 49.4

• expected 49.3, prior 49.5
• production index fell to 50.5 (prior 50.6)
• new order index 49.3 (prior 49.5)
• new export order index remained in contraction for the third consecutive month

Services PMI 50.2

• expected 50.2, prior 50.5

The Composite comes in at 50.2

• prior 51.0

China Vice Finance Minister says will strengthen fiscal policy adjustments

• More talking from China after the poor PMIs earlier

China Vice Finance Minister:

• Will strengthen fiscal policy adjustments, deepen fiscal and tax reforms
• Will steadily implement consumption tax reform in step-by-step way
• Will standardise management of local govts’ non-tax revenues

PBOC sets USD/ CNY central rate at 7.1346 (vs. estimate at 7.2419)

• PBOC CNY reference rate setting for the trading session ahead

In open market operations:

• PBOC injects 252bn via 7-day RR, sets rate at 1.7%
• 66bn yuan mature today
• net 18bn yuan drain today

Here’s a forecast for a 25bp RBA rate hike next week – citing inflation not falling

• Reserve Bank of Australia forecast

ING responding to the inflation data from Australia today:

• If you wanted to find a reason to leave rates unchanged at the 6 August meeting, there is some support in the core numbers published today to say, “Let’s give the economy the benefit of the doubt”.
• The August decision is certainly more finely balanced today than it was yesterday.
• However, for us, the evidence to suggest that inflation, even if it is trending lower (debatable) is doing so too slowly is more compelling.
• Add to that, another strong retail sales figure for June (0.5% MoM after the 0.6% May figure) and you get a picture where domestic demand is holding up too well to allow for a satisfactory decline in inflation to the RBA’s target range over the medium term.
• We still favour a 25bp rate hike on 6 August to take the cash rate target to 4.6%.
• The initial market response to today’s data was for the AUD to weaken sharply, most likely due to the core inflation figures. Markets, which had been pricing about a 25% chance of an August hike priced it back out again. This seems like an overreaction to today’s figures, but maybe if the market is not pricing in a hike, the RBA will be less willing to surprise them…? We’ll know soon enough.

Australian Q2 core inflation +0.8% q/q (expected 1.0%)

• Trimmed mean inflation is a key for the Reserve Bank of Australia

0.8% q/q

• expected 1.0%, prior 1.0%

Australia Weighted mean CPI (YoY) (Q2)

• Actual: 4.1%
• Expected: 4.3%
• Previous: 4.4%

Australia Trimmed Mean CPI (YoY) (Q2)

• Actual: 3.9%
• Expected: 4.0%
• Previous: 4.0%

Australia CPI (QoQ) (Q2)

• Actual: 1.0%
• Expected: 1.0%
• Previous: 1.0%

Australia CPI (YoY) (Q2)

• Actual: 3.8%
• Expected: 3.8%
• Previous: 3.6%

Australia Monthly CPI Indicator (YoY) (Jun)

• Actual: 3.80%
• Expected: 3.80%
• Previous: 4.00%

Australian data: Private sector credit (June) 0.6% m/m (expected +0.4%)

• Data from the Reserve Bank of Australia

Australian data: Retail sales for June 0.5% m/m (expected +0.2%)

• The focus was the inflation data

• sales volumes -0.3% q/q and -0.6% y/y … this while Australia’s population is rising by around 2.6% annually.
• per capita (per person), sales down 0.9% q/q, the 8th consecutive quarter falling and down 3% y/y

New Zealand business confidence, July 2024: 27.1 (prior 6.1)

• ANZ New Zealand Business Survey for July 2024

Business confidence has a huge jump to 27.1%

• prior 6.1

Activity outlook 16.3%, also higher

• prior 12.2

ANZ’s Key points

• Business confidence jumped 21 points to +27 in July, and expected own activity lifted 4 points to +16. To be fair, these up/down responses are relative to an ever-weaker starting point (past own activity dropped 6 points to -24), so there’s a bit of a “well, can’t get any worse” vibe to it.
• Pricing intentions lifted 3 points to 38, but inflation expectations eased from 3.5% to 3.2%. Inflation indicators were softer in the later sample.

New Zealand Building Permits (June 2024) -13.8% m/m (prior -1.7% )

• New Zealand Building Consents for June 2024

New Zealand Building Consents slump

• -13.8% m/m (prior -1.7% )
• -24% y/y

Stats NZ today:

• “The number of homes consented in the year ended June 2024 has fallen to levels last seen five years ago”
• “The lower number of working days in June 2024 contributed to the decrease in the number of homes consented in the month”

Japan’s largest lender to raise prime lending rate to 1.625% following BOJ rate hike

• Mitsubishi UFJ Bank will raise its short-term prime lending rate to 1.625% from 1.475% starting from 2 September

That is very much expected and it reflects the 15 bps increase by the BOJ on their policy rate earlier. But it is of course the first time they’re raising the rate in 17 years. So, a significant moment perhaps. Meanwhile, MUFG as a whole are only going to be raising the rates of their ordinary yen deposits to 0.10% – up from 0.02% previously. Something, something funding costs excuse surely. 

BOJ governor Ueda: Does not have 0.50% policy rate in mind as a ceiling

• Remarks by BOJ governor, Kazuo Ueda, in his press conference

• Must pay due attention to financial, FX markets and its impact on the economy, prices
• Upside risks to prices require attention
• Judged it to be appropriate to adjust degree of easing
• Real rates likely remain significantly negative, so easy conditions will keep supporting economy
• Appropriate to taper JGB purchases in predictable manner while ensuring stability
• Will keep raising rates, adjust degree of easing if current economic and price outlook will be realised
• Private consumption remains solid despite inflation impact weighing
• Wage hikes are becoming more widespread
• Rising wages will continue to support private consumption
• Doesn’t believe rate hike will have significant negative impact on the economy
• Does not have 0.50% policy rate in mind as a ceiling
• Will analyse impact of rate hikes up until now when considering additional rate hikes to come
• Doesn’t believe economy, prices will slow due to additional rate hike
• Major issue is where to stop raising rates when getting closer to neutral rate
• But Japan is definitely far below the uncertain levels of neutral rate now
• Economic indicators to be watched include wages, inflation, service prices, GDP output gap
• Hard to comment on FX impact of stronger yen on economy, prices
• The impact of a stronger yen compared to a weaker yen is an “interesting matter”
• It depends on economic indicators
• 0.25% policy rate is still extremely low
• If you think of real rates, it’s profoundly negative
• Weak yen did not move our central price outlook but we recognised its as an important risk
• Hard to tell when the next rate hike may be

Japan chief Cabinet secretary says expects BOJ to continue to conduct policy appropriately

• Remarks by Japan chief Cabinet secretary, Yoshimasa Hayashi

• Expects BOJ to conduct policy towards realising sustainable, stable 2% inflation target
• Expects BOJ to be in close coordination with government in achieving that goal

BOJ raises policy rate to 0.25% in July monetary policy meeting

• The latest monetary policy decision from the BOJ – 31 July 2024

• Prior 0.10%
• Nakamura, Noguchi dissented to decision on rates
• To taper bond purchases to ¥3 trillion as of Q1 2026
• That means to reduce scheduled monthly bond buying by around ¥400 billion each quarter
• Bond tapering vote was unanimous
• To review bond tapering plan in June next year via midterm review
• Underlying inflation expected to increase gradually
• Japan economy recovering moderately although some weakness has been seen
• If outlook for economic activity and prices are realised, will continue to raise policy rates and adjust degree of monetary accommodation accordingly

Latest BOJ projections below:

Japan July consumer confidence index 36.7 vs 36.4 prior

• Latest data released by METI – 31 July 2024

Looking at the details:

• Overall livelihood: 34.5 (previously 33.8)
• Income growth: 40.4 (previously 40.6)
• Employment: 42.0 (previously 41.7)
• Willingness to buy durable goods: 30.0 (previously 29.6)

Japan Industrial Production (preliminary, June 2024) -3.6% m/m (expected -4.8%)

• For the y/y -7.3% (prior +1.1%)

Japanese manufacturers’ outlooks:

• see August output +0.7% m/m
• see July output +6.5% m/m

Japan June 2024 Retail Sales (YoY) (Jun)

• Retail trade in Japan
• +3.7% y/y (expected +3.3%)

Japan Large Retailers’ Sales (MoM) (Jun)

• Actual: 0.6%
• Previous: 1.7%

Japan Large Scale Retail Sales YoY (YoY) (Jun)

• Actual: 7.0%
• Previous: 4.0%

Cryptocurrency News

Bitcoin Faces Resistance at $67,000 Amid Mt. Gox Transfer Concerns

Bitcoin (BTC) has been trading around $66,000 on Wednesday, facing resistance at $67,000 and missing a chance to close above $70,000 earlier in the week. The cryptocurrency market is currently grappling with several key developments.

Key Market Developments:

• Mt. Gox Transfers:
  • Large Transfer: Mt. Gox has transferred 47,229 BTC, valued at $3.13 billion, to three unknown wallets on Wednesday. This move adds to the 61,559 BTC, worth $3.89 billion, already transferred since July 5.
  • Ongoing Concerns: With Mt. Gox holding $5.23 billion in Bitcoin, these transfers are fueling concerns and FUD (Fear, Uncertainty, Doubt) among traders, potentially contributing to Bitcoin’s price volatility.
• Market Movements:
  • Whale Activity: A whale, identified as “12QVsf,” withdrew 1,300 BTC, valued at $85.56 million, from Binance on Wednesday. This withdrawal adds to the 5,800 BTC worth $387.88 million taken from the exchange over the past two days.
  • ETF Inflows: US spot Bitcoin ETFs saw inflows of 2,129 BTC, worth $140.33 million, on Tuesday. Monitoring these ETFs is essential for understanding investor sentiment and market dynamics.
• Global Influence:
  • Justin Sun’s Advocacy: Tron Founder Justin Sun has called for China to adopt Bitcoin, highlighting that increased competition between China and the US in Bitcoin policy could benefit the entire industry. His comments reflect ongoing debates about global Bitcoin policies and their impact on market sentiment.

Market Sentiment:

Bitcoin’s current resistance at $67,000 and the ongoing concerns surrounding Mt. Gox’s large transfers are influencing the market. As the cryptocurrency navigates these challenges, investor sentiment remains cautious, with significant moves from whales and ETF inflows adding to the market’s volatility.

Avalanche Partners with California DMV to Digitize 42 Million Car Titles

Avalanche (AVAX) has secured a landmark partnership with the California Department of Motor Vehicles (DMV) to transform how vehicle titles are managed. The initiative will see 42 million car titles digitized using blockchain technology, promising to enhance efficiency and security.

Key Details:

• Blockchain Implementation: The project aims to digitize all 42 million car titles in California, leveraging Avalanche’s blockchain technology to bolster transparency and prevent fraud. This move is set to streamline title transfers and detect fraudulent activities more effectively.
• Impact and Adoption:
  • Mark Cuban’s Insight: Billionaire investor Mark Cuban has highlighted that this partnership could substantially boost AVAX’s growth and adoption. Cuban’s endorsement underscores the potential for Avalanche to gain significant traction and increase its market presence.
  • Rising Development Activity: On-chain data indicates that development activity for AVAX is on the rise. This uptick suggests increased engagement with the blockchain and could signal potential future rallies for the token.
• Service Features: California’s 39 million residents will soon be able to access their vehicle titles through a mobile app. This initiative marks a pioneering effort in the U.S., setting a precedent for how blockchain can be used to streamline governmental processes.
• Collaborations: Avalanche is working alongside Oxhead Alpha for this project and has also collaborated with other blockchain platforms like Algorand and Solana. These partnerships highlight Avalanche’s commitment to advancing the blockchain ecosystem and driving innovation across various industries.

Market Update:

• Current Price: AVAX is trading at $26.46 as of Wednesday. The digitization project and rising development activity may contribute to potential upward movement in the token’s value.

This groundbreaking initiative by Avalanche is not only a significant step for blockchain technology in public services but also a potential catalyst for increased adoption and value growth of AVAX in the crypto market.

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