Round up of today’s market news

North American News

Apple Earnings Report: Q2 2024

Apple reported strong earnings for Q2 2024, surpassing estimates in several key areas but missing expectations in China revenue. Here’s a breakdown of the results:

Financial Highlights:

• Earnings Per Share (EPS): $1.40 vs. $1.34 expected (Beat)
• Revenue: $85.75 billion vs. $84.44 billion expected (Beat)

Segment Performance:

• China Revenue: $14.73 billion (Down 3% on a constant currency basis) vs. $15.2 billion expected. Missed expectations.
• iPhone Sales: $39.3 billion (Expected $38.9 billion) – up 1.8% YoY. Beat expectations.
• Services Revenue: $24.21 billion (Expected $23.9 billion) – up from $21.2 billion last year. Beat expectations.
• iPad Sales: $7.16 billion (Expected $6.6 billion) – up from $5.7 billion last year. Beat expectations.
• Mac Revenue: $7.01 billion (Expected $7.02 billion) – modest growth compared to last year’s decline. Met expectations.
• Wearables: $8.10 billion (Expected $7.79 billion). Beat expectations.

Gross Margins:

• Gross Margin: 46.3% vs. 46.1% expected. Beat expectations.

Cash Reserves:

• Cash Pile: $153 billion, down from $162.3 billion last quarter.

Stock Performance:

• Current Trading Price: $218.92 – fluctuating above and below unchanged levels.

Summary:

Apple’s Q2 2024 results exceeded EPS and revenue expectations, with notable beats in iPhone sales, services, iPad, and wearables. However, the company missed expectations for China revenue. The stock is experiencing volatility but has generally performed well against market expectations.

US Stocks Close Sharply Lower Amid Negative Market Sentiment

US stock indices closed significantly lower today, with the small-cap Russell 2000 and NASDAQ leading the declines.

Final Numbers:

• Dow Jones Industrial Average: -496.00 points, or -1.21%, closing at 40,346.78
• S&P 500: -75.69 points, or -1.37%, ending at 5,446.60
• NASDAQ Composite: -405.25 points, or -2.30%, finishing at 17,194.15
• Russell 2000: Fell sharply, reflecting broader market weakness

The negative market sentiment reflects a day where bad news had a more pronounced impact, driving major indices lower across the board.

Intel Reports Q2 2024 Financial Results; Announces $10B Cost Reduction Plan $INTC

Financial Results:

• Revenue: $12.8B, down 1% YoY.
• GAAP EPS: $(0.38); Non-GAAP EPS: $0.02.
• Q3 2024 Forecast: Revenue between $12.5B and $13.5B; GAAP EPS of $(0.24); Non-GAAP EPS of $(0.03).

Cost Reduction Plan:

• Aims to reduce spending by over $10B by 2025.
• Includes more than a 15% headcount reduction by end of 2024.
• Suspension of dividends starting in Q4 2024 to improve liquidity.

Key Milestones:

Achieved key advancements on Intel 18A process. Launched Panther Lake and Clearwater Forest products on Intel 18A.
CEO Statement: Pat Gelsinger highlighted disappointing financial performance but stressed strategic milestones and efficiency improvements to drive future profitability.

CFO Statement: David Zinsner emphasized steps to improve profits and balance sheet strength through spending reductions.

Q2 Highlights:

• Gross margin: 35.4% (GAAP), 38.7% (Non-GAAP).
• Operating expenses: $6.5B (GAAP).
• Net income (loss): $(1.6)B (GAAP); $0.1B (Non-GAAP).

Segment Performance:

• Client Computing Group: Revenue $7.4B, up 9%.
• Data Center and AI: Revenue $3.0B, down 3%.
• Network and Edge: Revenue $1.3B, down 1%.
• Intel Foundry: Revenue $4.3B, up 4%.

Dividend Announcement:

Q3 dividend declared at $0.125 per share, payable Sept. 1, 2024.

Business Outlook:

Focus on cost reductions, maintaining core investments, and strategic realignment to improve market competitiveness and shareholder value.

Shares after the close are trading down -10.12% at $26.10.

Amazon reports softer sales, shares fall nearly 8%

Amazon Q2 2024 Summary

• Net Sales Up 10% to $148B,
• AWS Sales Increase 19% to $26.3B,
• Operating Income Doubles to $14.7B,
• Net Income Rises to $13.5B $AMZN

• Net Sales: Increased 10% to $148B, up 11% excluding FX impact.
• North America Sales: Grew 9% to $90B.
• International Sales: Up 7% to $31.7B, 10% excluding FX impact.
• AWS Sales: Increased 19% to $26.3B.
• Operating Income: Rose to $14.7B from $7.7B.
• Net Income: Increased to $13.5B, or $1.26 per diluted share, up from $6.7B, or $0.65 per share.
• Operating Cash Flow: Up 75% to $108B.
• Free Cash Flow: Increased to $53B, up from $7.9B.
• CEO Comments: Andy Jassy highlighted the continued growth in AWS and new generative AI opportunities.

Guidance for Q3 2024:

• Net sales expected between $154B and $158.5B.
• Operating income expected between $11.5B and $15B.

Why the selloff?

1. Revenue miss: Even though slight, any miss can spook investors in the current market.
2. Potential growth concerns: The market may be pricing in slower growth expectations.
3. High expectations: AMZN shares have had a strong run in 2023, setting a high bar for earnings.
4. Profit-taking: Some investors might be using the mixed results as an opportunity to lock in gains.

DoorDash Reports Q2 2024 Financial Results; Record Growth in Orders and Revenue $DASH

Key Financial Highlights:

• Total Orders: Increased 19% YoY to 635M
• Marketplace GOV: Increased 20% YoY to $19.7B
• Revenue: Grew 23% YoY to $2.6B
• Net Revenue Margin: Increased to 13.3% from 13.0% in Q2 2023
• GAAP Net Loss: $158M, improved from $172M in Q2 2023
• Adjusted EBITDA: $430M, up from $279M in Q2 2023

CEO Statement:
DoorDash highlighted its continued focus on local commerce, customer obsession, and expanding services. The company achieved strong growth, improved unit economics, and set new records in merchant sales and earnings opportunities for Dashers.

Operational Highlights:

U.S. Market: Added tens of thousands of new merchants and enhanced personalization features. Double-digit YoY increase in monthly active users.
New Verticals: Consistent YoY growth in order frequency and improved Dasher cost efficiency.
International Expansion: Expanded to four new countries and over 500 new cities since merging with Wolt. Maintained strong consumer retention and gained category share in international markets.

Financial Outlook:

• Q3 2024 Guidance: Marketplace GOV of $19.4B-$19.8B; Adjusted EBITDA of $470M-$540M
• Full-Year 2024 Expectations:
• Stock-based compensation: $1.1B-$1.2B
• RSU issuances: 6.0M-7.0M
• Depreciation and amortization: $560M-$590M

Block Announces Q2 2024 Results; Conference Call Scheduled for Today $SQ

Key Highlights:

Q2 2024 Financial Results: Available on Block’s Investor Relations website and filed with the SEC.
Earnings Call: Scheduled for 2:00 PM PT / 5:00 PM ET today.

About Block, Inc.:
Block, Inc. (NYSE: SQ), formerly Square, Inc., is a global technology company focusing on financial services. The company’s ecosystem includes:

• Square: Simplifies commerce and financial services for sellers.
• Cash App: Allows users to send, spend, or invest money in stocks or bitcoin.
• Afterpay: Connects consumers and businesses, integrating Square and Cash App.
• TIDAL: Empowers artists to connect with fans and succeed as entrepreneurs.
• TBD: Developing an open-source platform for global economic participation.

Block, Inc. Files Form 8-K, Announces $3B Share Repurchase Program Increase
Key Highlights:

Form 8-K Filing: Block, Inc. filed a Form 8-K report with the SEC detailing significant corporate events. Share Repurchase Program: Block’s board approved a $3B increase to its share repurchase program, adding to the previously completed $1B program.

Repurchase Details: Repurchases will occur through open market or private transactions, adhering to market conditions and legal requirements. The program aims to return capital to stockholders and can be suspended at the company’s discretion.

Financial Performance:

• Q2 2024 Results: Block reported a 20% YoY increase in gross profit to $2.23B. Operating income was $307M, and Adjusted Operating Income was $399M.
• Net Revenue: Total net revenue for Q2 2024 was $6.16B, up 11% YoY. Excluding bitcoin revenue, it was $3.54B, up 13% YoY.
• Adjusted EBITDA: $759M, up 98% YoY.

Operational Updates:

• Square: Focuses on platform flexibility, AI integration, and banking solutions. Introduced over a dozen product enhancements and a new onboarding platform.
• Cash App: Prioritizes banking services, increasing inflows, and providing credit access. Reported $2B in originations for Cash App Borrow in Q2 2024.

The Atlanta Fed GDPNow growth estimate for Q3 falls to 2.5% from 2.8%

The Atlanta Fed GDPNow growth estimate for Q3 came in at 2.5% from 2.8% previously. It is early in the quarter, so the growth will evolve. However, the first move is lower:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 2.5 percent on August 1, down from 2.8 percent on July 26. After this morning’s releases from the US Census Bureau and the Institute for Supply Management, the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real gross private domestic growth decreased from 2.9 percent and 2.0 percent, respectively, to 2.6 percent and 1.6 percent.

US July ISM manufacturing index 46.8 vs 48.8 expected

• US ISM manufacturing for July 2024

• Prior month 48.5
• Prices paid 52.9 versus 52.1 prior
• Employment 43.4 versus 49.3 last month
• New orders 47.4 versus 49.3 last month
• Production 45.9 versus 48.5 last month
• Supplier deliveries 52.6 versus 49.8 last month
• Inventories 44.5 versus 45.4 last month.
• Backlog of orders 41.7 versus 41.7 last month
• New export orders 49.0 versus 48.8 last month
• Imports 48.6 versus 48.5 last month

Comments from survey respondents highlighted concerns about slowing consumer spending, inventory reductions, and uncertainty about the economic outlook.

The Fed will be watching closely to see if weakness spreads to the broader economy as manufacturing makes up only about 10% of the economy.

Comments in the report:

• Business is relatively flat — the same volume, but smaller orders.” [Chemical Products]
• “Demand continued to soften into the second half of the year. Supply chain pipelines and inventories remain full, reducing the need for overtime. Geopolitical issues between China and Taiwan as well as the election in November remain weighing concerns.” [Transportation Equipment]
• “Even though we are used to a seasonal reduction in business over the summer, consumer behavior is changing more than normal. Sales are lighter, and customer orders are coming in under forecasts. It seems consumers are starting to pull back on spending.” [Food, Beverage & Tobacco Products]
• “Availability of parts is good, with small exceptions of missing materials here and there. Ordering is still well below typical levels as we continue to burn down inventory of raw goods, with ‘normal’ ordering trends expected to return sometime in the second half of 2024.” [Computer & Electronic Products]
• “It seems that the economy is slowing down significantly. The number of sales calls received from new suppliers is increasing significantly. Our own order backlog is also diminishing. We are hoping for an increase in customer demand, or we will possibly need to make organizational changes.” [Machinery]
• “Unfortunately, our business is experiencing the sharpest decline in order levels in a year. We were well below our budget target in June; as a result, it was the first month this year that we had negative net income.” [Fabricated Metal Products]
• “Business is slowing, and we are taking cost actions.” [Electrical Equipment, Appliances & Components]
• “Some markets that are usually unwavering are showing weakness. Weather is the common factor, but only so much.” [Nonmetallic Mineral Products]
• “Our sales forecast for July and August are slow, but we’re making every attempt to remedy that situation. Our medical end-user customers continue to meet their forecasts, which is promising.” [Textile Mills]
• “Elevated financing costs have dampened demand for residential investment. This has reduced our need for component products and inventory.” [Wood Products]

July US S&P Global manufacturing PMI 49.6 vs 49.5 prelim

• The July 2024 US manufacturing PMI from S&P Global

• Prelim was 49.5
• Prior was 51.6

Details:

• New orders decline for first time in 3 months
• Output growth slows to marginal pace
• Employment rises at softest rate since January
• Selling price inflation eases to one-year low
• The ISM manufacturing report is due at the top of the hour

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

“The manufacturing recovery moved into reverse in July, though the gloomier growth picture was accompanied by a marked cooling of inflation in the goods-producing sector.

“Business conditions worsened in July as the first fall in new orders since April caused a near-stalling of production. Purchasing activity is falling and hiring has slowed amid concerns over weaker-than-anticipated sales.

“Many firms are expecting the weakness to be temporary, linked to paused spending and investment ahead of the Presidential Election. However, firms’ expectations for output in one year’s time remain subdued by historical standards, reflecting additional concerns over the impact of higher interest rates and persistent inflation. While orders for investment goods such as plant and machinery fell especially sharply in July, underscoring the recent pull-back in capital spending, producers of consumer goods also reported a modest fall in demand.

“There was better news on the inflation front. Input cost inflation cooled for a second month after having risen to a 13-month high in May. This welcome lowering of cost pressures helped take further heat out of selling price inflation, which moderated sharply in July to the lowest for a year to signal only a marginal increase in prices during the month. This near-abeyance of producer price inflation should feed through to lower consumer price inflation in the coming months.”

US construction spending for June -0.3% versus 0.2% estimate

• US construction spending for June 2024. Prior month revised lower

• Prior month -0.1% revised to -0.4%
• Construction spending for June -0.3% versus 0.2% expected

Total Construction:

• June 2024 construction spending: $2,148.4 billion (seasonally adjusted annual rate)
• Decrease from May 2024: -0.3%
• Increase from June 2023 YoY: +6.2%
• First six months of 2024 spending: $1,034.8 billion
• Increase from first six months of 2023: 8.6%. The same 6-month period in 2023 was at $952.5

Private Construction:

• Private construction spending (June 2024): $1,664.6 billion (seasonally adjusted annual rate)
  • Decrease from May 2024: -0.3%
• Residential construction spending (June 2024): $928.0 billion
  • Decrease from May 2024: -0.3%
• Nonresidential construction spending (June 2024): $736.6 billion
  • Decrease from May 2024: -0.1%

Public Construction:

• Public construction spending (June 2024): $483.9 billion (seasonally adjusted annual rate)
  • Decrease from May 2024: -0.4%
• Educational construction spending (June 2024): $101.9 billion
  • Decrease from May 2024: -0.9%
• Highway construction spending (June 2024): $143.5 billion
  • Decrease from May 2024: -0.4%

US initial jobless claims 249K vs 236K estimate

• Weekly US initial jobless and continuing claims

• Prior week 235K
• initial jobless claims 249K versus 236K estimate. Highest level since last year this time
• 4-week moving average of initial jobless claims 238K vs 235.50K last week.
• Continuing claims 1.877M versus 1.856M estimate.
• Prior week continuing jobless claims 1.851M revised to 1.844M
• 4-week moving average of continuing claims 1.857M vs 1.852M last week

US Q2 unit labor costs +0.9% vs +1.8% expected

• US preliminary productivity data

• Prior was +4.0% (revised to +3.8%)
• Productivity +2.3% vs +1.7% expected
• Prior productivity +0.2% (revised to +0.4%)

Roblox Reports Q2 2024 Financial Results

Revenue Rises 31% to $893.5M; DAUs Increase 21% to Record 79.5M; Bookings Up 22% to $955.2M $RBLX

Revenue: $893.5M (up 31% YoY)

Bookings: $955.2M (up 22% YoY)

Net Loss: $205.9M attributable to common stockholders

Adjusted EBITDA: $66.5M

Net Cash from Operations: $151.4M (up 433% YoY)

Free Cash Flow: $111.6M (vs. $(95.5)M in Q2 2023)

DAUs: 79.5M (up 21% YoY)

Hours Engaged: 17.4B (up 24% YoY)

Average Bookings per DAU: $12.01 (up 1% YoY)

Liquidity: $3.6B in cash, short-term, and long-term investments

CEO David Baszucki’s Statement:

Growth Drivers: Diverse, high-quality content from a large, motivated creator community.

Future Investments: Focus on core platform to enhance safety and user experience.

CFO Michael Guthrie’s Statement:

Financial Strength: Significant improvement in cash flow due to strong topline growth and cost discipline.

Q3 and Full Year 2024 Guidance:

Q3 Revenue: $860M-$885M

Q3 Bookings: $1B-$1.025B

Full Year Revenue: $3.49B-$3.54B

Full Year Bookings: $4.18B-$4.23B

Earnings Call:

Date: August 1, 2024, at 8:30 a.m. ET

US July Challenger layoffs 25.89k vs 48.79k prior

• Latest data released by Challenger, Gray & Christmas, Inc. – 1 August 2024

US-based employers announced 25,885 job cuts in July, which is roughly a little over 9% higher compared to the same month a year ago.

Jeffrey Gundlach said the Federal Reserve should have cut rates on Wednesday

• “I think they should have cut today, quite frankly”

Gundlach spoke in an interview with US media, CNBC.

Headlines via Reuters:

• Says a lot of room for the fed to cut short term interest rates
• Fed should have cut today
• Think we have a 150 bp of cuts coming, certainly in a year from now
• Says still believe 2 yr, 3 yr, 5 yr Treasuries are a safe place to be
• Believe we will eventually say we were in a recession in September 2024
• Don’t think the economy is that strong

Canada S&P Global July manufacturing PMI 47.8 vs 49.3 prior

• Canadian manufacturing survey from S&P Global

• Prior was 49.3
• Canadian manufacturing sector deteriorates at fastest pace in 7 months
• Business confidence hits lowest level since May 2020
• Input cost inflation remains solid but below trend
• Supply chain delays worsen, especially for sea freight
• New orders fell sharply, with exports down the most since May 2020

Commenting on the latest survey results, Paul Smith, Economics Director at S&P Global Market Intelligence said:

“The latest manufacturing data disappointed in July, with accelerated declines in both output and new orders both recorded as we enter the second half of 2024. Panellists were subsequently circumspect in their purchasing and input inventory management by adjusting these both downwards to reflect the weaker and uncertain operating environment.

“Although employment growth was sustained, this was on the back of what looks like dwindling hopes for future output growth. Confidence about next year’s output may remain positive, but sentiment is at its lowest level since May 2020. It seems that the Bank of Canada’s recently announced second cut in interest rates could not have come soon enough as firms look to lower borrowing costs and reduced inflation to help reinvigorate demand in the coming months.”

Commodities

Gold Loses Shine Amid US Recession Fears Following ISM Data

Gold prices are retreating from their highs as economic data and market conditions shift. Here’s a summary of recent developments:

Key Data:

• Gold Price Movement: Gold hit a daily high of $2,462 but has since fallen to $2,438, a decrease of 0.35%. The drop is attributed to stronger US Dollar and recessionary fears.
• ISM Report: The Institute for Supply Management (ISM) reported that manufacturing activity for July fell to 46.8, deeper into contractionary territory, and the lowest reading since December 2023. This has sparked concerns about a potential economic slowdown.
• Jobless Claims: Initial Jobless Claims rose to 248K for the week ending July 27, exceeding estimates of 236K and the previous week’s 235K, highlighting labor market weakness.

Market Reactions:

• US Dollar Strength: The US Dollar strengthened following the ISM report and rising jobless claims, contributing to gold’s decline.
• Geopolitical Tensions: Despite the drop in gold prices, ongoing geopolitical tensions in the Middle East and safe-haven demand for gold and USD continue to influence market dynamics.

FedWatch Tool:

• Interest Rate Expectations: The FedWatch tool indicates that the Federal Reserve may reduce interest rates by 25 basis points in the September meeting, influenced by the recent economic data.

Summary:

Gold is experiencing downward pressure as recession fears mount following disappointing ISM manufacturing data and rising jobless claims. The stronger US Dollar and concerns about a potential economic slowdown are contributing to the decline in gold prices.

Silver Descends Over 2% Amid Recession Fears and Risk Aversion

Silver prices have dropped significantly due to recession concerns and market risk aversion. Here’s a detailed look at the recent movements and technical outlook for silver:

Recent Price Movement:

• Current Price: Silver trades at $28.37, down over 2% from recent highs.
• Weekly High: Silver reached $29.15 earlier this week but has since fallen below key technical levels.

Technical Analysis:

• 100-DMA: Silver has fallen below the 100-day moving average (DMA) at $28.61, signaling potential bearish momentum.
• Resistance Levels:
  • 50-DMA: $29.86
  • Psychological Level: $30.00
• Support Levels:
  • Initial Support: $28.00
  • Cycle Low: $27.31 (July 29 low)
  • Further Support: If the decline continues, the next significant support is at the 200-DMA of $25.98.

Market Context:

• Geopolitical Tensions: Growing tensions between Hamas, Hezbollah, and Israel have contributed to market uncertainties.
• Recession Fears: Concerns about a potential recession in the US are also impacting silver prices, adding to risk aversion in the market.

Summary:

Silver has experienced a decline of over 2% as it falls below the 100-DMA, with potential support levels at $28.00 and $27.31. Resistance remains at the 50-DMA and the $30.00 psychological level. The market’s reaction to geopolitical tensions and recession fears continues to drive volatility in silver prices.

OPEC+ JMMC: Phase-out of volume reductions could be paused or reversed

• Note from the OPEC monitoring committee

The JMMC monitoring committee met today and reiterated that the planned gradual phase-out of the voluntary cuts could be paused or reversed if necessary.

The next planned JMMC meeting isn’t until Oct 2.

OPEC+ JMMC meeting to make no recommendation on oil output policy

• Reuters with the headline, citing sources with knowledge of the meeting

That is to be expected as the bloc is set to continue with the current policy stance before unwinding some of the production cuts later in October.

OPEC+ reportedly to stick with output policy in latest meeting today

• Reuters reports, citing five sources familiar with the matter

For some context, OPEC+ will be holding an online JMMC meeting later today. According to the report, no changes to the current plan is likely. That means the bloc will continue its current deal and only start unwinding some of the output cuts starting from October.

Bank of America says oil’s Bermuda triangle is nearing an end

• Watching for a weekly close in Brent below $78

A report from Bank of America says:

• “Oil prices have been trading in a narrowing range, or a triangle pattern, for over a year now,”
• “When it becomes too tight and what’s holding it lets go, a sharp and sudden breakout trend occurs,”
• “This becomes increasingly likely after five or more swings within the triangle occur. Our weekly chart of Brent oil prices labels five swings … Another tendency is for price to break out from the triangle 61.8-76.4 percent of the way through it, which we estimate to be in August-October of 2024,”
• The report stated that a weekly close in Brent below $78 would look like a bearish triangle breakdown.

EU News

European equity close: Rough start to the new month

• Closing changes for the main European bourses

• Stoxx 600 +1.3%
• German DAX +2.3%
• UK FTSE 100 +1.1%
• French CAC +2.2%
• Italy MIB -2.6%
• Spain IBEX -2.0%

Eurozone July final manufacturing PMI 45.8 vs 45.6 prelim

• Latest data released by HCOB – 1 August 2024
• Prior 45.8

The revision to the headline reading sees it unchanged for the month of July, even as the output index declines to a seven-month low. Employment conditions also experienced a decline and there were further drops in purchasing activity and inventories, while business confidence weakened to a four-month low. HCOB notes that:

“The widely held belief that the eurozone’s recovery would pick up speed in the second half of the year is taking a hit, thanks to the latest HCOB PMI index for the manufacturing sector. Earlier this year, it looked like the sector might gradually climb out of the production slump it had been in for months, but the doubts that surfaced in June have been intensified by an accelerated decline in production in July. Given this weak data, we’ll probably need to lower our GDP growth forecast for the year from 0.8%.

“The weak demand situation has gotten even worse since June, meaning rising input prices can’t be passed on to customers so easily. This means shrinking profit margins for businesses. If this trend keeps up, it spells trouble for investment and future growth, as companies will likely start cutting costs. On the flip side, the European Central Bank might have mixed feelings about this. Sure, rising input prices could push inflation up, but falling profit margins might help keep that inflationary pressure in check.

“Demand won’t bounce back anytime soon. Incoming orders, which have now dropped for 27 months straight, declined even faster in July. Companies don’t seem to have much hope that things will get better soon. In fact, they cut their workforces more sharply in July and their confidence in future production growth has dipped below the long-term average.

“Industrial activity in the eurozone took a hit across the board in July. Among the countries covered by the PMI survey, only Greece and Spain are still seeing meaningful growth, although even there, momentum has slowed significantly. Austria and Germany are showing the greatest weakness. The widespread and steep downturn is surprising, making it more likely that the manufacturing sector will face tough times in the coming months.”

Eurozone June unemployment rate 6.5% vs 6.4% expected

• Latest data released by Eurostat – 1 August 2024
• Prior 6.4%

The jobless rate in the euro area ticks a little higher again at the end of Q2, matching the figure back in March and in the same month a year ago. As a whole, labour market conditions are still holding up but there have been tentative signs of softness creeping in.

Germany July final manufacturing PMI 43.2 vs. 42.6 prelim

• Latest data released by HCOB – 1 August 2024
• Final Manufacturing PMI 43.2 vs. 42.6 expected and 43.5 prior.

Key findings:

• HCOB Germany Manufacturing PMI at 43.2 (Jun: 43.5). 3-month low.
• HCOB Germany Manufacturing PMI Output Index at 42.5 (Jun: 45.1). 5-month low.
• Decline in input prices eases amid pressure from shipping costs.

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Germany’s industry is off to a rough start in the second half of the year. Manufacturing production dropped further in July, showing no signs of slowing down. At the same time, companies are ramping up their staff cuts, clearly having little hope for improvement. A look at the order intake backs up their concerns. Orders fell at the fastest rate in three months, continuing a persistent decline since spring 2022. It’s no wonder confidence in this sector has taken a hit. A manufacturing recovery probably won’t happen before autumn.”

“Due to the sharp drop in production and new orders, we’re revising our growth forecast down. With manufacturing being so crucial to Germany’s economy (accounting for 22.6% of gross value added), we are now expecting the overall economy to grow by just 0.2% this year, down from our previous forecast of 0.5%.”

“The old playbook is not working anymore. Back in the day, German companies could count on a boost whenever emerging markets were on the up. But these days, while industries in those countries are growing — as shown by the PMI data — German firms are not reaping much benefit. Instead, the drop in export orders keeps on going. Meanwhile, Chinese companies are seeing a rise in their foreign orders. This backs up the idea that competition from China is heating up.”

“The reduction in inventories of materials continues unabated. While the initial impression was that many companies had stocked up on too many goods in order to protect themselves from new supply disruptions, the reduction in inventories now has more to do with the fact that companies see no reason to prepare for increased demand for the time being. In addition, high interest rates mean that stockpiling is tying up capital, which is no longer as cheaply available as it was a few years ago.”

France July final manufacturing PMI 44.0 vs 44.1 prelim

• Latest data released by HCOB – 1 August 2024
• Prior 45.4

It is a marginal revision lower as the French manufacturing sector slumped further in July. Of note, production, new orders and employment all decreased at faster rates. Besides that, input cost inflation accelerated further to its highest in a year-and-a-half. HCOB notes that:

“French manufacturing isn’t recovering soon. In July, the headline HCOB PMI fell to 44.0, with demand dropping significantly both domestically and abroad, and especially in the investment goods sector. Overall, the situation doesn’t look too good for the French manufacturing sector, leading our nowcast to predict a 1% contraction for the third quarter.

“The French manufacturing downturn was broad-based in July. Each sub-sector – investment, intermediate and consumer goods – fell, with investment goods turning down at the fastest pace. Accordingly, business confidence for the coming twelve months was the most downbeat in the investment goods sector, while prices charged for capital goods decreased despite mounting cost pressures.

“French manufacturers are feeling less optimistic about the future. The corresponding index fell below its historic average and was only slightly above the positive 50 level. This marked a considerable turnaround given business confidence recovered to a 27-month-high as recently as May. French manufacturers cited fewer orders from the construction sector and lower client numbers as reasons for pessimism. As a result, the employment situation deteriorated with manufacturers bracing for tougher times ahead.

“Input prices in the French manufacturing sector are heating up again. Input price inflation accelerated to the highest level in 18 months, with the corresponding index increasing by almost five points. According to manufacturers, this increase was due to greater price rises from suppliers and higher raw material costs. Although manufacturers raised selling prices in July to offset higher input prices, the uplift surprisingly slowed compared to June, hinting at difficulties passing on costs to clients.”

Italy July manufacturing PMI 47.4 vs. 46.1 expected

• Latest data released by HCOB – 1 August 2024
• Manufacturing PMI 47.4 vs. 46.1 expected and 45.7 prior.

Key findings:

• Softer contractions recorded for new orders and production.
• Strongest input price inflation since late 2022.
• Lowest confidence levels this year so far.

Comment:

Commenting on the PMI data, Dr Tariq Kamal Chaudhry Economist at Hamburg Commercial Bank, said:

“The Italian industry is on a path to recovery. In July, the HCOB Manufacturing PMI made a significant leap towards growth, reaching 47.7 index points. Despite this progress, the Italian manufacturing industry remains in contraction territory for the fourth consecutive month.”

“Order intakes both at the total level and from foreign markets are falling at a sharp pace, with only a slight easing from June. As a result, it is understandable that surveyed companies are reluctant to hire new staff. Reports from Italian industrial firms indicate that the decline largely reflects non-replacement of departing employees and, in some cases, reduced workloads.”

“Input price inflation has returned. This marks a turn in the tide, as PMI data show that input prices, which had continuously fallen from early 2023 to March 2024, have accelerated in recent months. Rising raw material and energy costs were cited as reasons for the increase in expenses, according to survey respondents. However, companies are unable to pass these higher purchasing prices on to their customers, which will be a concern for businesses.”

“Looking ahead, the situation has deteriorated. Order backlogs and purchase volumes continued to shrink, despite the indices showing a marked increase compared to the previous month. Future output has now fallen below the historical average, yet optimism prevails. The hope for greater political stability and an economic recovery generally fostered a sense of optimism.”

Spain July manufacturing PMI 51.0 vs 52.5 expected

• Latest data released by HCOB – 1 August 2024

• Prior 52.3

A sign of change for the Spanish manufacturing sector? Perhaps. Output was higher on the month but orders declined, leading to just a marginal growth in July. But at least employment conditions are holding up well and the outlook remains fairly optimistic. HCOB notes that:

“The wind in Spain’s manufacturing sector appears to be shifting – headwinds are picking up. Similar to the Flash PMI of the Eurozone, the trend in Spain’s manufacturing sector is also deteriorating. Although the index still indicates marginal growth with 51.0 points, the trend has clearly been moving towards stagnation since May. Overall demand saw a slight decline in July for the first time this year, and foreign demand is also losing some momentum. This trend is weighing on purchasing activity, which is declining for the first time since January. Companies are now focusing on utilizing existing resources in production and slightly reducing their inventory of purchases. At first glance, the increased suppliers’ delivery times seem out of place. These are still due to shipping delays caused by the avoidance of the Suez Canal and the Red Sea, as panelists reported by anecdotical evidence.

“It is encouraging that companies are still hiring new personnel. However, this insight should be taken with caution, as the hiring pace is steadily decreasing, corresponding to the overall declining trend. The slowdown in growth momentum is widespread and spans all subsectors. This aligns with expectations, which have fallen to the lowest level of the year and below the historical average.

“High input prices remain a problem for Spanish manufacturing companies. As in the previous month, high prices for raw materials, particularly metals, as well as transportation, are cited. However, the momentum has slightly weakened compared to the previous month. Companies are increasingly managing to pass on input prices to consumers.”

UK July final manufacturing PMI 52.1 vs. 51.8 prelim

• Latest data released by S&P Global – 1 August 2024
• Final Manufacturing PMI 52.1 vs. 51.8 expected and 50.9 prior.

Key findings:

• Production growth fastest since February 2022.
• Input price inflation rises to 18-month high.

Comment:

Rob Dobson, Director at S&P Global Market Intelligence:

“UK manufacturing has started the second half of 2024 on an encouragingly solid footing. July saw growth of production and new orders strengthen and staffing levels rise for the first time since September 2022. Hopes for an economic revival and reduced political uncertainty took confidence to one of its highest levels for two-and-a-half years, with 60% of companies surveyed now forecasting output will rise over the coming 12 months. There were also further signs that the trend in new export business is close to stabilising following a prolonged period of decline.”

“Inflationary pressures remain a blot on the copybook, however, with input costs rising to the greatest extent in one-and-a-half years. The ongoing Red Sea crisis and associated freight issues are having a severe impact on prices which are then sustaining a focus on cost-caution and cash flow protection at manufacturers. This is leading to cutbacks in purchasing and a drive to leaner inventory holdings.”

“Selling prices are also rising at the quickest rate since mid-2023. Policymakers are likely to take a cautious approach to loosing monetary policy amid these signs that inflationary pressures may be pivoting away from services and towards manufacturing.”

UK July Nationwide house prices +0.3% vs +0.1% m/m expected

• Latest data released by the Nationwide Building Society – 1 August 2024
• Prior +0.2%

House price growth continues to push up slightly after the rebound since May with annual house prices now seen up 2.1% compared to the same month a year ago. That said, overall housing market activity remains on the mend as higher borrowing costs are still weighing.

Bailey Q&A: We will make our judgements based on evidence from meeting to meeting

• Bailey says that they will give no view on the path on rates

• BOE will decide appropriate degree of restrictiveness at each meeting
• Not giving any view on the path of rates to come (when asked about a “one and done”)
• We will go from meeting to meeting, making judgement based on evidence
• Does not want to comment on market curve on rate cuts

BOE governor Bailey: This was a finely balanced decision

• Remarks by BOE governor, Andrew Bailey, in his press conference

• Services price inflation and domestic inflation pressures remain elevated
• There might be a slight rise in services price inflation in August, before easing for the rest of the year
• Watching services prices very carefully
• Should not adjust our course with every data surprise that comes in
• There is still a question on whether persistent component of inflation can return to 2% sustainably
• Need to make sure policy is sufficiently restrictive to return inflation to 2% target
• Appropriate to adjust policy restrictiveness a little at today’s meeting

BOE cuts bank rate by 25 bps to 5.00% in knife-edge call

• The BOE announces its August 2024 monetary policy decision

• Prior 5.25%
• Bank rate vote 4-0-5 vs 4-0-5 expected (Pill, Mann, Haskel, Greene dissented to keep rates on hold)
• Decision was “finely balanced”
• Domestic inflationary persistence is expected to fade away over the next few years
• There is a risk that inflationary pressures from second-round effects will be more enduring in the medium-term
• Need to be careful not to cut rates too quickly or by too much
• Will ensure bank rate stays restrictive for sufficiently long to return inflation to 2% target sustainably
• Will decide on degree of policy restrictiveness at each meeting
• There is uncertainty about interaction between cutting bank rate and quantitative tightening

Asia-Pacific-World News

China’s factory activity contracts for first time in 9 months, Caixin PMI shows

China’s manufacturing activity in July shrank for the first time in nine months as new orders declined, a private sector survey showed on Thursday, boding ill for the country’s growth momentum in the second half of 2024.

China Caixin Manufacturing PMI for July 2024 49.8 (expected 51.5, prior 51.8)

• Earlier this week we had the official PMIs, this the private survey PMI now

Summary:

• Manufacturing output grew for the ninth consecutive month, but at a marginal rate.
• Total new orders declined, with consumer goods outperforming investment goods.
• Employment remained steady despite a shrinking labour market.
• Input costs rose, but selling prices decreased due to competition.

China – Henan province named 25 indebted and feeble local banks to be merged

• More than 60 small- and medium-sized lenders were dissolved or merged in China in the past two months

The info comes from noted China analyst Michael Pettis via X:

• Henan province announced its consolidation plans on Sunday, naming 25 institutions to be merged into a provincial-level rural commercial bank.

PBOC sets USD/ CNY reference rate for today at 7.1323 (vs. estimate at 7.2167)

• PBOC CNY reference rate setting for the trading session ahead

In open market operations:

• PBOC injects 10bn via 7-day RR, sets rate at 1.7%
• 235bn yuan mature today
• net bn yuan drain today

China’s State Planner Vice Head says will actively expand domestic demand

• The National Development and Reform Commission of the People’s Republic of China (NDRC) is China’s State Planner

China’s State Planner Vice Head:

• There is ‘sufficient’ room for counter-cyclical policy adjustments
• China has conditions, ability and confidence to achieve full-year growth target
• Will actively expand domestic demand, putting consumption boost in a more striking position
• will promote effective investment

Australian July Manufacturing PMI (final) 47.5 (prior 47.2)

• The preliminary / flash reading for this was 47.4

S&P Global / Judo Bank Australian Manufacturing PMI for July 2024

• prior 47.2, preliminary 47.4

From the report, key findings:

• Manufacturing output decline accelerates amid falling new orders
• Export orders contract at fastest pace in four years
• Job shedding unfolds at quickest rate since June 2020

In summary:

• Output and new orders are at cyclical low levels, indicating a slowdown in manufacturing.
• Employment index below 50 suggests job shedding, potentially due to structural changes.
• Input prices remain stable but elevated
• Output price inflation is low, aligning with RBA’s inflation target.
• Low inventory levels reflect caution in production.

Australian Q2 2024 Import price Index +1.0%q/q (expected -0.7%) Export -5.9% (exp -5.3%)

• Terms of trade data from Australia for Q2 2024

Terms of trade data from Australia for Q2 2024

Import Prices +1.0% q/q

• expected -0.7%, prior -1.8%

Export Prices -5.9% q/q

• expected -5.3%, prior -2.1%

Australian June Trade balance: Surplus of AUD5589mn (prior 5773mn surplus)

• June 2024 export and import data

BOJ says wages could come in hotter than expected in latest quarterly outlook report

• The BOJ releases its latest quarterly outlook report on the economy – 1 August 2024

• Underlying inflation is expected to increase gradually
• Firms’ behavior has shifted more toward raising wages and prices, as per the spring wage negotiations
• Baseline scenario is that virtuous cycle between wages and prices is projected to keep intensifying
• But there remain uncertainties regarding this outlook
• Need to carefully monitor factors such as firms’ wage and price-setting behaviour
• Moves to reflect wages in selling prices could strengthen to a greater extent than expected
• In this situation, there is a possibility that wages and prices will deviate upward from the baseline scenario
• Future developments in foreign exchange rates and international commodity prices also present a risk
• This may lead prices to deviate either upward or downward from the baseline scenario

Japan July Manufacturing PMI (final): 49.1 (prior 50.0)

• S&P Global / Jibun Bank Japanese Manufacturing PMI for July 2024

S&P Global / Jibun Bank Japanese Manufacturing PMI for July 2024 comes in at 49.1

• first time under 50 (and into contraction) in 3 months
• prior 50.0, preliminary 49.2

In summary:

• There was a significant reduction in new orders, leading to a sharp decline in production levels.
• Input price inflation reached its highest since April 2023, driven by increased costs in labor, logistics, and raw materials.
• Employment levels increased for the fifth consecutive month, reflecting optimism for future demand recovery.

Marubeni CFO says expects a limited impact from the Bank of Japan rate hike

• Marubeni is a Japanese conglomerate

Marubeni CFO:

• Expect limited impact on financing costs from BOJ’s rate hike
• The yen’s depreciation turning to appreciation due to monetary policies in Japan and US was as we had expected
• Weaker yen against US Dollar and Australian dollar in April-June period contributed about 9 bln yen to profit

Japan chief cabinet secretary Hayashi says important for FX to more in stable manner

Japan chief cabinet secretary Hayashi:

• Japan appoints former top fx diplomat Masato Kanda to special advisor to cabinet
• Kanda tasked to advise Japan PM Kishida on international financial trends
• Won’t comment on forex levels
• Important for currencies to move in stable manner reflecting fundamentals
• Closely watching fx moves thoroughly

Japan spent $36.8 billion on foreign exchange market intervention in July

The figures are from Japan’s Ministry of Finance for the June 27-July 29. 

Here is the link to the Reuters article for more info.

South Korean finance minister says will swiftly act to stabilize financial markets if need

South Korean finance minister:

• Says will swiftly act according to contingency plans to stabilize financial markets if needed
• Monitoring Middle East tensions, US election
• Says will focus on risk management related to household debt, project finance
• Will devise more liquidity support measures for online commerce platforms if needed

Cryptocurrency News

Uniswap Aims for Rally Following Positive On-Chain Data

Uniswap (UNI) is trading at $7.15 on Thursday, showing signs of potential bullish movement. Here’s a breakdown of the positive developments and investor sentiment:

Key Indicators:

• Uniswap Exchange Flow Balance: The Exchange Flow Balance has exhibited a significant negative spike, indicating more UNI tokens are leaving exchanges than entering. This suggests reduced selling pressure and potential bullish price movement.
• Supply Distribution: Data shows that a cohort of whales has been buying UNI on dips, signaling strong investor interest and confidence.
• Development Activity: Rising development activity on the Uniswap platform adds to the bullish outlook by indicating ongoing improvements and innovations.
• Supply on Exchanges: There has been a 2.3% decrease in UNI supply on exchanges in just one day, further supporting the bullish sentiment.

Caution:

• Active Addresses: Investors should be aware of the decreasing number of active addresses, which could signal potential future concerns if the trend continues.

Overall, the combination of whale buying activity, decreasing supply on exchanges, and increased development activity suggests a bullish outlook for Uniswap (UNI). However, investors should monitor active addresses and broader market conditions for a comprehensive view.

Ripple Unveils Tokenized US Treasury Bills on XRP Ledger, Market Reaction Mixed Amid SEC Uncertainty

Ripple announced the launch of tokenized US Treasury bills on the XRP Ledger in an official tweet. This strategic move comes as XRP traders grapple with the ongoing uncertainty surrounding the Securities and Exchange Commission (SEC) lawsuit.

Key Developments:

• Tokenization of US Treasury Bills: Ripple has partnered with OpenEden Labs to introduce tokenized T-bills on the XRP Ledger. The company plans to invest $10 million in these TBILL tokens.
• Market Reaction: Despite the announcement, XRP experienced a sharp decline, erasing nearly 7% of its value on Thursday. XRP currently trades above $0.58.
• Trader Sentiment: According to the Fear and Greed Index on CFGI.io, trader sentiment is currently characterized by “fear,” particularly on the four-hour timeframe.
• SEC Meeting Cancellation: The SEC has canceled a closed-door meeting scheduled for August 1. This cancellation adds to the uncertainty surrounding the SEC vs. Ripple lawsuit, which traders are closely watching.

Daily Market Movers:

Ripple’s introduction of tokenized T-bills has not yet provided a significant boost to XRP. The market’s reaction reflects broader concerns about the SEC’s legal actions and their potential impact on Ripple’s future.

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