North American News
US Equities Dip Slightly, Ending Eight-Day Winning Streak
US stock markets closed modestly lower on Tuesday, marking the end of an impressive eight-day winning streak. Despite some mid-day sell orders and a brief dip, the market stabilized and recovered to only slight declines. The Russell 2000 lagged behind, seeing a more significant drop compared to the other indices.
Closing Figures:
- S&P 500: -0.2%
- Nasdaq Composite: -0.3%
- DJIA: -0.2%
- Russell 2000: -1.0%
Philly Fed Non-Manufacturing Employment Index Hits Pandemic Low
The latest Philly Fed non-manufacturing survey reveals a significant downturn in full-time employment, hitting its lowest point since the pandemic. The index fell sharply by 10 points, highlighting concerns about the robustness of the job market as we approach next week’s non-farm payrolls report.
Key Highlights:
- Main Index: Improved to +8.3 from -10.0, signaling a positive shift in overall conditions.
- Full-Time Employment: Dropped to -14.9, marking the lowest level since May 2020. This suggests a growing trend of firms planning to reduce full-time positions.
- New Orders Index: Remained nearly unchanged at -0.3.
- Sales/Revenues Index: Rebounded to 6.8.
- Prices Paid Index: Steady at 30.0, with firms expecting a 2.0% increase in their own prices over the next year.
- Future Activity Index: Positive but declined to 19.4, indicating a slowdown in expected future activity.
The sharp drop in the full-time employment index raises questions about the sustainability of the current job market strength, particularly in light of upcoming labor market reports.
US job seekers rise to highest since 2014 in NY Fed survey
- The New York Fed yesterday released its quarterly survey of the employment market and there was a notable softening.
- Job seekers jump to 28.4% in July 2024, highest since March 2014
- The increase was most pronounced among respondents older than age 45, those without a college degree, and those with an annual household income less than $60,000.
- Job satisfaction down across wages, benefits, and promotion opportunities
- Unemployment expectations hit series high at 4.4%
The expected wage of job seekers also fell 3.2% y/y, with workers now anticipating offers around $65,272, down from $67,416 a year ago.
Fed’s Bowman: Some recent further progress on lowering inflation. Remain cautious on cuts
- …but inflation still above 2% target
- Labor market continues to loosen, come into better balance
- Unemployment rate is up but still historically low
- Wage gains remain above pace consistent with our goal
- Should incoming data show inflation is moving sustainably toward target, it will become appropriate to gradually lower rates to avoid becoming overly restrictive
- Will remain cautious in my approach to any change in policy stance
- Still see the need to pay close attention to the price-stability side of our mandate while watching for risk of a material weakening in the labor market
- Still sees upside risks to inflation
- We need to be patient and avoid undermining continued progress on lowering inflation by overreacting
Goldman Sachs says the ‘pain trade’ for US equities is higher
- Goldman Sachs bullish
Reports on a note from Goldman Sachs on Monday (US time) on the prospects for US equities to rally over the next four weeks:
- pain trade for equities is higher
- cite trend-following rule-based systematic funds have shifted from $450 billion long in July to $250 billion long currently and are in the process of re-leveraging
- and, further, potential ‘green sweep’ for commodity trading advisers (CTAs) could result in significant stock buying activity regardless of market direction
- traders are positioned long gamma again
- and, even more, equities underpinned by corporate buybacks ($6.62 billion in daily purchasing power until the corporate blackout period ends on September 13)
JP Morgan says last week was reinforcement of bullish stance
- Cite signs of economic expansion, positive earnings growth, expectations of more accommodating Federal Reserve policy.
A bit of a rehash from a JP Morgna note on Monday, reiterating bullishness, citing recent economic data, earnings reports, the prospect of a more accommodating Federal Reserve.
- upside appears to be more muted than when we adopted this stance earlier this year
- but there remains material upside
JPM note risks:
- Japan’s inflation data
- geopolitical developments that can impact oil prices
- US election
- Federal Reserve commentary changes
- weak seasonality
Canada July CPI 2.5% versus 2.5% expected
- Canada July 2024 inflation data
- Prior was +2.7%
- CPI m/m +0.4% vs +0.4% expected
- Prior m/m -0.1%
Core measures
- CPI Bank of Canada core y/y 1.7% vs 1.9% prior
- CPI Bank of Canada core m/m +0.3% versus -0.1% prior
- Core CPI m/m SA +0.1% vs +0.1% prior
- Median 2.4% versus 2.6% prior
- Trim 2.7% versus 2.9% prior
- Common 2.2% versus 2.3% prior
The overall decline was broad based, stemming from lower prices for travel tours, passenger vehicles and electricity. A 2.4% rise in gasoline prices boosted the m/m reading but will be fleeting given the recent fall in oil prices and cracks.
- Prices for passenger vehicles fell 1.4% year over year in July
- Prices for used vehicles fell 5.7% y/y in July
- Prices for traveller accommodation (-3.7%) and air transportation (-2.7%) fell year over year in July, but both were up m/m
- Prices for shelter rose at a slower rate in July (+5.7%) compared with June (+6.2%)
- The mortgage interest cost index continued to slow year over year, up 21.0% in July compared with 22.3% in June
Canada July new housing price index +0.2% vs -0.2% prior
- Data released earlier
- The index increased by 0.1% year over year in July
- Prices were up in 10 of the 27 census metropolitan areas
- They were unchanged in 13 and declined in the remaining 4
- largest month-over-month increases in July were recorded in Calgary, Edmonton, Kelowna and Regina
- The largest monthly price declines in new home prices in July were recorded in Kitchener–Cambridge–Waterloo (-0.5%) and Ottawa (-0.2%)
Commodities
Gold Reaches New Heights on China Demand and Dollar Weakness
Gold surged to a new all-time high in the $2,520s on Tuesday, driven by increased demand from China and a weaker US Dollar. Geopolitical tensions in the Middle East also contributed to the precious metal’s rally.
Key Drivers:
- Chinese Demand: The People’s Bank of China (PBoC) has issued new gold import quotas, fueling speculation of rising demand. Safe-haven interest in gold has increased as Chinese 10-year government bond yields hit record lows, prompting investors to seek alternative assets.
- Weaker US Dollar: The decline in the US Dollar, in which gold is priced, has further bolstered gold’s appeal.
- Geopolitical Risks: Peace talks in the Middle East have stalled, with the potential for ongoing conflict adding to gold’s appeal as a safe-haven asset.
Geopolitical Context: Peace negotiations, led by US Secretary of State Antony Blinken, have encountered setbacks. Israel has expressed willingness to agree to terms, while Hamas demands a permanent ceasefire rather than the temporary one proposed. Recent tensions were heightened by a suicide bomb attack in Tel Aviv claimed by Hamas. Additionally, the risk of a broader conflict involving Iran remains a concern.
Market Optimism Contrasts with Falling Oil Prices
WTI crude oil futures dropped 33 cents to $74.04, marking their third consecutive day of losses and the fifth decline in six days. This downturn comes despite rising optimism in U.S. and global stock markets, leading to some puzzlement among analysts.
Key Points:
- Current Trends: Oil has fallen as low as $73.50, contradicting the upbeat sentiment in equity markets.
- Economic Indicators: The decline in oil prices follows reports of reduced OPEC exports and global inventory draws. Additionally, recent news about China’s consumption vouchers and increased borrowing limits aimed at boosting the economy have not halted the oil slide.
- Potential Impact: The drop in oil prices could contribute to falling yields and may influence the Consumer Price Index (CPI) in the near future. With last year’s oil prices ranging from $85 to $95, the current lower levels could exert deflationary pressures.
This discrepancy between market enthusiasm and falling oil prices suggests underlying deflationary forces at play.
Oil private survey of inventory shows a headline crude oil build vs. draw expected
- This is from the privately surveyed oil stock data ahead of official government data tomorrow morning out of the US.
- Crude +347,000 (exp. -2.9 million)
- Gasoline -1.043 million
- Distillates -2.247 million
- Cushing -648,000
- SPR +700,000
EU News
European equity close: Five-day winning streak broken
- Closing changes for the main European markets
- Stoxx 600 -0.5%
- German DAX -0.4%
- Francis CAC 40 -0.3%
- UK’s FTSE 100 -0.9%
- Spain’s IBEX -0.2%
- Italy’s FTSE MIB -0.5%
Eurozone July final CPI +2.6% vs +2.6% y/y prelim
- Latest data released by Eurostat – 20 August 2024
- Prior +2.5%
- Core CPI +2.9% vs +2.9% y/y prelim
- Prior +2.9%
Eurozone June current account balance €51.0 billion vs €36.7 billion prior
- Latest data released by the ECB – 20 August 2024
Looking at the breakdown, surpluses were recorded for goods (€39 billion), primary income (€14 billion) and services (€12 billion). These were partly offset by a deficit for secondary income (€14 billion).
Germany July PPI +0.2% vs +0.2% m/m expected
- Latest data released by Destatis – 20 August 2024
- Prior +0.2%
Looking at the breakdown, there were increases in the price for intermediate goods (+0.2%) and energy (+0.5%). Besides that, the price for capital goods and durable consumer goods were flat on the month. Meanwhile, the price for consumer goods in general fell by 0.1% in July.
Switzerland July trade balance CHF 4.89 billion vs CHF 6.18 billion prior
- Latest data released by the Federal Statistical Office – 20 August 2024
- Prior CHF 6.18 billion; revised to CHF 6.12 billion
The Swiss trade surplus narrowed in July as exports fell by 0.5% while imports expanded by 6.1% on the month.
Bundesbank says wage growth has slowed down in Q2
- That will be a welcome relief for the ECB
The German central bank noted that negotiated wage growth in Q2 was seen at 3.1%, as opposed to the 6.2% reading in Q1. However, they note that they expect a “temporary rise” in German inflation towards the end of the year due to base effects. That just means that the economic recovery will be delayed further.
ECB’s Rehn cites negative growth risk as reinforcing the case for a rate cut in September
- European Central Bank
European Central Bank Governing Council member Olli Rehn, governor of the Finnish central bank
- There are no clear signs of a pick-up in the manufacturing sector.
- Industrial production may not be as temporary as assumed.
- The recent increase in negative growth risks in the Euro area has reinforced the case for a rate cut at the next ECB monetary policy meeting in September.
Asia-Pacific-World News
People’s Bank of China leaves LPRs unchanged
- People’s Bank of China
The People’s Bank of China left its Loan Prime Rates (LPRs) unchanged, as was expected.
Both 1 year and 5 year LPRs were cut by 10 basis points in July
- 1-year LPR at 3.35%
- 5-year LPR at 3.85%
PBOC sets USD/ CNY central rate at 7.1325 (vs. estimate at 7.1317)
- PBOC CNY reference rate setting for the trading session ahead.
In open market operations:
- PBOC injects 149bn via 7-day RR, sets rate at 1.7%
- 386bn yuan mature today
- net 237bn yuan drain today
China has stopped publishing daily data on foreign fund flows into its stock market
- This came into effect on Monday after data from Friday showed YTD foreign flows turned negative as of Friday last week
China has stopped publishing daily data on foreign fund flows into its stock market
- publishing of daily data on foreign fund flows into its stock market stopped on Monday
- the move is seen as an attempt to prop up sentiment amid ongoing outflows, at at the very least an effort to reduce volatility from high-frequency data
- Year-to-date foreign flows turned negative as of Friday, could be first annual outflow since 2016 if selling persists
- Investors now limited to quarterly central bank reports on foreign-held assets
The background to this:
- China’s benchmark CSI 300 is down over 9% from May peak despite state fund purchases
- Economic data remains weak, geopolitical tensions loom ahead of US election
- Follows earlier moves to limit intraday flow data and real-time mutual fund valuations
- Only aggregate turnover and top 10 active securities data to be published daily
- Southbound flows from China to Hong Kong will still be reported in real-time
AUD – weekly survey shows inflation expectations are at a 30-month low
- Consumer sentiment decline on the week also
The ANZ-Roy Morgan Australian Consumer Confidence Index survey includes a question on inflation expectations:
For this week they dropped to a a 30-month low of 4.7%
- down from 5.1% last week
- while the 4 week moving average is down 0.1 to 5.0%
ANZ analysis:
- Notably, inflation expectations fell to 4.7 per cent, their lowest level since January 2022, before inflation picked up materially in Australia.
- It’s been a bumpy path down for inflation expectations since the peak of 6.8 per cent in November 2022, and that bumpiness has been evident in other measures like the NAB business survey’s price measures. The NAB measures are now consistent with inflation sitting around 2.5 per cent. We’ll be watching to see if inflation expectations continue to moderate over the coming weeks.
As for the headline consumer confidence this week, comes in at 83.0
- prior 83.9
RBA minutes: Possible cash rate will stay steady for an extended period
- Reserve Bank of Australia August 2024 meeting minutes
Reserve Bank of Australia August meeting minutes
- The Reserve Bank of Australia considered a case to raise rates but decided that a steady outcome better balanced the risks.
- The RBA mentioned that the cash rate might have to stay steady for an “extended period.”
- The RBA members agreed it is unlikely that rates would be cut in the short term.
- The RBA emphasized the need to be vigilant to upside risks to inflation, and that policy would need to remain restrictive.
- The RBA noted that an immediate hike in rates could be justified if risks to inflation had increased “materially.”
- The RBA suggested that keeping rates steady for a longer period than implied by markets could help restrain inflation.
- The RBA board stated that they would need to reassess this possibility at future meetings.
- The RBA board judged that the risks had increased that inflation would not return to target in a reasonable time frame.
- The RBA board indicated that they had limited tolerance for inflation remaining outside of the target band.
The minutes lean hawkish.
New Zealand GDT price index +5.5%
- Dairy prices climb
The latest New Zealand dairy auction results are out and prices rose 5.5% to $3920/MT. Whole milk powder prices rose 7.2%.
New Zealand data, July trade balance -963m (prior +585m)
- Exports 6.15bn
- Prior 6.04bn
- Imports 7.11bn
- prior 5.45bn
Cryptocurrency News
Ethereum ETFs Extend Outflow Streak Amidst Market Consolidation
Ethereum ETFs saw continued outflows, totaling $20.3 million, marking their third consecutive day of negative flows. Despite over 80% of Ethereum’s supply being in profit, the cryptocurrency remains in a consolidation phase, with weak open interest suggesting that prices may stay range-bound for now.
Daily Market Movers: Ethereum ETFs and Profitability Insights
- Ethereum ETFs: Experienced $20.3 million in outflows on Monday. Grayscale’s ETHE led with $13.5 million in outflows, while Bitwise ETHW saw inflows of $1.9 million.
- Supply in Profit: Over 80% of Ethereum’s supply is currently in profit, as the price stabilizes around $2,570.
- Market Indicators: The Market Value to Realized Value (MVRV) Ratio reveals that long-term holders (LTH) are in profit, while short-term holders face average losses. The MVRV Ratios for different time frames are -8.96% (30d), -5.41% (365d), 12.73% (2-year), and 6.67% (3-year).
Ethereum’s current price action and ETF outflows suggest ongoing consolidation until there’s a significant uptick in open interest.
XRP Surges Past $0.60 Following Ripple’s Successful XRP Ledger Testnet Reset
Ripple (XRP) has surged above $0.60, reaching $0.6053 early Tuesday, following the announcement of a successful reset of the XRP Ledger (XRPL) testnet. This reset, effective August 20, aims to enhance efficiency and reduce the operational costs for running a testnet node.
Key Points:
- XRP Price Movement: XRP has rallied back above the crucial psychological support level of $0.60, reflecting positive market sentiment.
- Testnet Reset: Ripple’s recent update involves a complete reset of the XRPL testnet, including the deletion of all accounts, balances, and settings. This change is designed to improve efficiency and reduce the cost associated with running a node.
- Ripple’s Developments: Traders are closely monitoring Ripple’s updates, including recent announcements about partnerships, such as the one with SBI Digital Asset Holdings, and news about Ripple’s USD stablecoin, which is pending regulatory approval from the SEC.
- Utility and Adoption: The improvements to the XRP Ledger are expected to enhance its utility and encourage greater adoption among entities utilizing both testnet and mainnet nodes.
The update comes as Ripple continues to focus on expanding the capabilities and efficiency of its blockchain infrastructure, potentially bolstering XRP’s position in the market.
FLOKI Rallies Nearly 7% as Binance Announces Simon’s Cat Airdrop for Holders
FLOKI has surged nearly 7%, trading at $0.00012729, following Binance’s announcement of an airdrop for Simon’s Cat (CAT) tokens to FLOKI holders. The snapshot for the airdrop will be taken on August 29, 2024, at 23:59:59 UTC.
Key Details:
- Airdrop Announcement: Binance will distribute Simon’s Cat (CAT) tokens to FLOKI holders based on the snapshot taken on August 29.
- Eligibility and Distribution: FLOKI holders with at least 400,000 FLOKI on Binance will be eligible for the airdrop. The distribution will be in a 1:1 ratio, with a total of 900 billion CAT tokens to be airdropped.
- Market Reaction: The announcement has led to a significant rally in FLOKI’s price, reflecting increased trader interest ahead of the airdrop.
This development comes as FLOKI continues to solidify its position as a major meme coin, now ranked sixth by market capitalization.
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