Round up of today’s market news

North American News

U.S. Stocks End Mixed: Dow Rises While S&P 500 and Nasdaq Falter

Dow Jones Industrial Average Ends Higher Amid Broader Market Declines

U.S. stock indices experienced a mixed session today, with the Dow Jones Industrial Average closing in positive territory, while the S&P 500 and Nasdaq Composite ended lower for the second consecutive day.

Final Numbers:

• Dow Jones Industrial Average: +38.04 points (+0.09%) at 40,974.98
• S&P 500: -8.84 points (-0.16%) at 5,520.08
• Nasdaq Composite: -52.00 points (-0.30%) at 17,084.30
• Russell 2000: -3.99 points (-0.19%) at 2,145.21

Market Movers:

• Nvidia fell 1.66% today, following a significant 9% drop in the previous session. The semiconductor sector showed mixed results after yesterday’s declines.
• Intel faced a notable decline of 3.3%, closing below $20 at $19.43, as it contends with its own set of challenges.
• Micron experienced a modest gain of 0.80%.
• AMD rose 2.87%, while Broadcom increased by 0.87%.

The day’s trading saw a divergence in performance among major indices, reflecting a volatile market environment influenced by sector-specific developments and broader economic sentiment.

Atlanta Fed GDPNow growth estimate for Q3 2.1% versus 2.0% prior

• Modest change in the Atlanta Fed GDPNow growth estimate for Q3

In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 2.1 percent on September 4, up from 2.0 percent on September 3. After this morning’s releases from the US Census Bureau, an increase in the nowcast of third-quarter real gross private domestic investment growth from -0.6 percent to 0.0 percent was slightly offset by a decrease in the nowcast of third-quarter real personal consumption expenditures growth from 3.3 percent to 3.2 percent.

JOLTs job openings 7.673M vs 8.100M estimate

• JOLTs job openings for July 2024

• Prior month 8.184M (was expecting 8.000M) revised lower 7.910M
• Job openings 7.673M
• vacancy rate 4.6% versus 4.8% last month revised from 4.9%
• Quits rate 2.1% versus 2.0% last month (revised from 2.1%).
• Separations rate 3.2% versus 3.2% last month

Details:

JOLT Job Report Summary for July

• Hires:
  • Total hires: 5.5 million, rate 3.5%
  • Increased in accommodation and food services: +156,000
  • Decreased in federal government: -8,000
• Total Separations: Separations are increasing
  • Total separations increased to 5.4 million (+336,000), rate 3.4%
  • Increased in health care and social assistance: +108,000
• Quits: People are not quitting
  • Total quits unchanged at 3.3 million, rate 2.1% vs 2.0% last month
  • Down by 338,000 year-over-year
  • Increased in information: +16,000
• Layoffs and Discharges:
  • Total layoffs and discharges: 1.8 million, rate 1.1%
  • Increased in accommodation and food services: +75,000
  • Increased in finance and insurance: +21,000
• Other Separations:
  • Increased to 381,000 (+71,000)

US international trade balance for July $-78.8 billion versus – $-79.0 billion estimate

• Trade balance for July 2024

• Prior month $-73.1 billion revised to $-73.0 billion
• Goods trade balance $-102.84 billion versus $-96.56 billion
• Services surplus $24.3 billion versus $24.2 billion last month

Other details:

• Exports +0.5% versus +1.7% last month.
• Imports +2.1% versus +0.6% last month.
• Total exports $266.6 billion versus $265.279 last month. Higher
• Total imports $345.39 billion versus $338.28 billion last month. Higher.
• Capital goods imports $83.45 billion versus $80.188 last month. Higher.
• Trade deficit with China -$30.12 billion versus deficit of $-22.18 last month.
• July oil import price $75.96 versus $74.113 last month. +11.5% from last year’s $68.11

US July factory orders +5.0% vs +4.7% expected

• US factory orders for July 2024 and revisions to durable goods orders

• Prior was -3.3%
• Factory orders ex transportation +0.4 vs +0.1% prior

US MBA mortgage applications w.e. 30 August +1.6% vs +0.5% prior

• Latest data from the Mortgage Bankers Association for the week ending 30 August 2024

• Prior +0.5%
• Market index 230.5 vs 226.9 prior
• Purchase index 136.1 vs 131.8 prior
• Refinance index 751.4 vs 753.8 prior
• 30-year mortgage rate 6.43% vs 6.44% prior

Beige Book: Economic Activity Stalls as Mixed Signals Emerge Across Districts

Federal Reserve’s Beige Book Highlights a Stabilizing Economy with Regional Discrepancies and Modest Wage Growth

The Federal Reserve’s latest Beige Book, released on September 4, 2024, reveals an economy characterized by a mix of stagnation and slight growth. While some areas experienced modest increases in economic activity, most Districts reported either flat or declining trends, painting a picture of a market that is stabilizing but not expanding robustly.

Key Highlights:

• Economic Activity: Economic activity showed slight growth in three Districts, but nine reported either flat or declining conditions. This divergence underscores a broader trend of economic stagnation across the country.
• Employment Trends: Employment levels were generally stable, with some Districts reporting modest increases. However, firms have become more selective in hiring, with a notable trend towards reducing shifts, leaving positions unfilled, or attrition. Layoffs were uncommon, but the competition for jobs has intensified, leading to longer job searches.
• Wage and Price Trends: Wage growth remained modest, consistent with recent trends. Price increases were reported as ranging from slight to moderate, indicating ongoing inflationary pressures but not at an accelerated pace.

Sector-Specific Insights:

• Consumer Spending: Consumer spending experienced a slight downturn in most Districts, with auto sales showing mixed results.
• Manufacturing: Manufacturing activity continued its contraction trend, with most areas reporting declines.
• Housing and Real Estate: The housing market showed mixed results, with many regions experiencing softened home sales. Commercial real estate also exhibited varied activity levels.

Outlook: Looking ahead, contacts expect economic activity to either stabilize or improve slightly in the coming months. However, three Districts anticipate slight declines, suggesting a cautiously optimistic but uncertain economic outlook.

Some points:

• The number of Districts that reported flat or declining activity rose from five in the prior period to nine in the current period
• Employment levels were steady overall, though there were isolated reports that firms filled only necessary positions, reduced hours and shifts, or lowered overall employment levels through attrition
• Reports of layoffs remained rare
• Manufacturing activity declined in most Districts
• Most Districts’ reports indicated softer home sales

Labor Market Commentary:

• Employment: The labor market showed overall stability, with some increases in headcounts in five Districts. Nonetheless, firms have become more cautious about hiring, and candidates are facing longer job search periods. Despite easing competition for workers and reduced staff turnover, firms are under less pressure to raise wages.
• Wage Growth: Wage increases were modest overall, with stronger gains for skilled tradespeople, specialized workers, and union members.

The Beige Book reflects an economy that, while holding steady, faces challenges and uneven performance across different regions and sectors.

Biden prepares to block Nippon Steel acquisition of U.S. Steel – report

• Washington Post report

US President Joe Biden is preparing to block the Nippon Steel acquisition of U.S. Steel, sources tell the Washington Post.

Shares of US Steel (X) fell about 6% before being halted.

President Joe Biden is preparing to announce that he will formally block Nippon Steel’s proposed $14.9 billion acquisition of U.S. Steel, according to three people with knowledge of the matter, who spoke on the condition of anonymity to describe a matter not yet made public.

Fed’s Bostic sees potential for soft landing as labor market loosens gradually

• Comments from Fed’s Bostic:

• Wage growth pulling back to level more conducive to price stability
• Business contacts point to a loosening but still broadly stably labor market
• Labor market conditions to weaken, but not weak
• Am now giving equal attention to maximum employment objective as inflation
• Fed must stay vigilant to ensure inflation risks continue to wane
• Am not quite prepared to declare victory over inflation as risks remain
• Price pressures are diminishing quickly and broadly
• No panic among my business contacts but describe an economy and labor market losing momentum
• Most recent inflation reports bolster my confidence inflation likely on sustainable path to 2%
• Soft landing for economy may be within reach
• Fed is in a generally favorable position
• We must not maintain a restrictive policy stance for too long

Macklem press conference: There was a strong consensus for a 25 bps cut

• Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers answer reporters’ questions following the policy rate decision.

• There was a strong consensus for a 25 bps cut
• We did discuss scenarios where it would be appropriate to cut at a slower pace or by 50 basis points
• If the economy was significantly weaker or inflation was significantly weaker, it could be appropriate to take a bigger step
• We’re going to be taking decisions one at a time
• Inflation is still above our target
• We are expecting some pickup in growth but there are some downside risks

Bank of Canada interest rate decision: Rates lowered by 25 basis points

• Highlights of the Bank of Canada interest rate decision on September 4, 2024

• Bank of Canada overnight rate was 4.50% before the decision
• Markets were pricing in a 76% chance of a 25 bps cut and 24% chance of 50 bps
• In the United States, economic growth was stronger than expected, led by consumption, but the labour market has slowed.
• Inflation in US and European regions continues to moderate
• Preliminary indicators suggest that economic activity was soft through June and July
• The labour market continues to slow
• Wage growth remains elevated relative to productivity
• High shelter price inflation is still the biggest contributor to total inflation but is starting to slow
• Macklem will hold a press conference at 10:30 am ET, but the opening statement was released with the BOC statement

Key line:

Excess supply in the economy continues to put downward pressure on inflation, while price increases in shelter and some other services are holding inflation up. Governing Council is carefully assessing these opposing forces on inflation.

The opening statement from Macklem highlighted a meeting-by-meeting approach:

• Headline and core inflation have continued to ease as expected
• As inflation gets closer to target, we want to see economic growth pick up to absorb the slack in the economy so inflation returns sustainably to the 2% target
• Overall weakness in the economy continues to pull inflation down. But price pressures in shelter and some other services are holding inflation up.
• If inflation continues to ease broadly in line with our July forecast, it is reasonable to expect further cuts in our policy rate
• We will continue to assess the opposing forces on inflation, and take our monetary policy decisions one at a time
• Our July projection has growth strengthening further in the second half of this year. Recent indicators suggest there is some downside risk to this pickup
• Business layoffs remain moderate, but hiring has been weak
• With inflation getting closer to the target, we need to increasingly guard against the risk that the economy is too weak and inflation falls too much

Canada July trade balance +0.68B vs +0.80B expected

• Canadian July 2024 trade balance data

• Prior was +0.64B (revised to -0.18B)
• Exports $65.66 billion vs $66.65 billion prior
• Imports $64.97 billion vs $66.01 billion prior
• Trade surplus with US widened to $11.3 billion from $9.0 billion in June
• Deficit with rest of world increased to $10.6 billion from $9.2 billion
• Motor vehicles and parts drove declines in both imports (-10.8%) and exports (-5.4%)
• Excluding autos, imports rose 0.5% and exports gained 0.3%
• Energy exports increased 1.2%, consumer goods exports up 3.1%
• In volume terms, imports fell 2.0%, exports down 1.5%

Chile’s central bank has cut its benchmark rate to 5.5%, from 5.75%

Banco Central de Chile rate cut

• Bank says the decision was unanimous
• says cut to neutral level will be faster than projected
• lower risk of more medium-term inflation persistency

The Chilean central bank has a 3% inflation target

Commodities

Gold Ticks Higher on Soft U.S. JOLTS Data

Gold Rebounds Slightly as Rate Cut Speculation Rises

Gold prices edged up 0.05% to $2,493 today, recovering from a low of $2,471 as the market reacted to weaker-than-expected U.S. job openings data.

Market Overview:

• Gold Price: $2,493 (+0.05%)
• Daily Low: $2,471
• Influencing Factors: Weaker JOLTS data, falling U.S. Treasury yields, and a softer U.S. Dollar

Key Drivers:

• Weaker JOLTS Report: The U.S. Bureau of Labor Statistics reported a drop in job vacancies to their lowest level since January 2021. This has fueled speculation that the Federal Reserve might implement a 50-basis point rate cut in its upcoming meeting.
• U.S. Treasury Yields: A decrease in Treasury yields has supported gold prices, as lower yields generally boost the appeal of non-yielding assets like gold.
• U.S. Dollar: The U.S. Dollar Index (DXY) fell 0.37% to 101.38, which also supported gold prices due to the inverse correlation between the dollar and gold.

Market Sentiment:

• Profit-Taking: Gold prices experienced volatility throughout the session, driven by traders booking profits.
• Economic Data: Upcoming U.S. jobs data, including the ADP National Employment Change, Initial Jobless Claims, and Nonfarm Payrolls (NFP) report, are expected to further influence gold prices.
• Geopolitical Climate: The situation remains calm with ongoing talks of a ceasefire in the Israel-Hamas conflict and continued concerns over Russia’s invasion of Ukraine.

Daily Market Movers:

• JOLTS Report: Job openings fell from 7.910 million in June to 7.673 million in July.
• Factory Orders: July’s orders increased by 5%, surpassing estimates and previous contractions.
• Manufacturing Sector: Business activity improved but stayed in contractionary territory.
• Future Jobs Data: ADP report forecasts an increase in private hiring, while NFP figures are expected to rise with a slight drop in the unemployment rate.

Oil private survey of inventory shows a headline crude oil draw much larger than expected

• This is from the privately surveyed oil stock data ahead of official government data tomorrow morning out of the US.

• API Inventory
• Crude -7.4 million
• Gasoline -300,000
• Distillates -400,000
• Cushing -800,000
• SPR +1.8 million

Crude oil price dips despite OPEC+ considering supply hike delay

• Despite rumors of OPEC+ delaying supply hike, crude oil price drops to $69.85.

The price of crude oil is trading lower despite rumors that OPEC+ is close to delaying the planned supply hike. That comes after report on Friday that they would bring back barrels in October. The price has dropped from a high on Friday of $76.59. The current price is trading at $69.85

Goldman Sachs: Three reasons to buy gold

• Gold is down $4 to $2488 today

Goldman Sachs maintains a bullish outlook on gold, targeting $2,700 per ounce for early 2025. The firm recommends going long on gold due to increasing central bank purchases, anticipated Fed rate cuts, and gold’s role as a hedge against geopolitical risks.

Key Points:

1. Central Bank Purchases:
   • Central bank gold purchases have tripled since mid-2022, driven by concerns about US financial sanctions and sovereign debt.
   • This trend is expected to continue, providing a structural support to gold prices.
2. Fed Rate Cuts:
   • Imminent Fed rate cuts are anticipated to attract Western capital into the gold market, which has been largely absent from the recent gold rally.
   • The influx of capital is expected to further drive up gold prices.
3. Hedging Value:
   • Gold serves as a valuable hedge against geopolitical uncertainties, including trade tariffs, risks associated with Fed policies, and concerns over national debt.
   • Its role as a safe-haven asset becomes increasingly relevant in times of instability.

Conclusion:

Goldman Sachs’ recommendation to go long on gold is underpinned by structural increases in central bank purchases, expected Fed rate cuts, and gold’s effectiveness as a hedge against various geopolitical and economic risks. The target of $2,700 per ounce by early 2025 reflects confidence in these driving factors.

Oil jumps amid report that OPEC+ is discussing a delay to planned output hike in October

• WTI crude is now up 1% on the day to $71.00

Reuters is out with the headline, citing three OPEC+ sources in saying that the bloc is discussing a delay to its planned output hike in October. It looks like they are finally not being stubborn about it but it took oil prices falling to its lowest levels this year for them to start rethinking about this. 

“Gold has been lower in 10 of the last 11 Septembers”

• And, the S&P 500 has been lower for the last four Septembers

That headline is a snippet from a Deutsche Bank report.

• “Gold has been lower in 10 of the last 11 Septembers”

UBS warns that oil prices are likely to stay volatile in the short-term

• The firm says that they are expecting prices to recover, eyeing a move higher in Brent crude to above $80 over the coming months

UBS argues that the oil market is undersupplied despite weak Chinese oil demand, with demand elsewhere making up for it. They also add that supply growth did disappoint in some non-OPEC+ states, contributing to the situation.

As such, they are retaining a positive outlook on the oil market. And that they expect oil prices to recover from current levels over the coming months. But during the near-term, they note that prices are likely to stay volatile.

UBS says that they are anticipating Brent crude to rise back above $80 in the months ahead while recommending investors to sell downside price risks in crude oil.

EU News

European equity close: A second day of selling

• Closing changes for the main European bourses

European stocks fell at the open and then skidded along the bottom for most of the day until some modest bids late. The result was a second day of declines.

Closing changes:

• Stoxx 600 -1.1%
• German DAX -0.7%
• Francis CAC -1.0%
• UK’s FTSE 100 -0.4%
• Spain’s IBEX -0.6%
• Italy’s FTSE MIB -0.5%

Eurozone August final services PMI 52.9 vs 53.3 prelim

• Latest data released by HCOB – 4 September 2024

• Prior 51.9
• Composite PMI 51.0 vs 51.2 prelim
• Prior 50.2

A slight revision lower but the readings are still better than July. It mostly owes to a jump in French business activity though, which is arguably a one-off thanks to the Paris Olympics. One major detail to be mindful of is that the employment index dipped below the 50.0 threshold for the first time since 2021. It is but a fractional decline but it does signal that the latest slowdown in the economy is starting to impact the labour market a little perhaps.

HCOB notes that:

“The Olympic Games in Paris brought plenty of victories, and the French service sector was certainly among the winners. The latter helped drive accelerated growth in the eurozone’s service sector for August. But the big question is whether this boost is sustainable. The positive vibes from the Games and the ongoing Paralympics might carry through into September in part, but we expect the slowdown in growth, which started in May, to likely resume in the coming months.

“As for the ECB, they are probably breathing a small sigh of relief thanks to the latest prices data. Although service providers nudged up their prices slightly more in August compared to July, overall cost pressures, especially those driven by wages, have eased. This will likely weigh more heavily in the ECB’s considerations. Coupled with the favourable inflation numbers Eurostat recently released for August, the ECB is likely to see this as further justification for cutting interest rates at their September 12 meeting.

“The “Olympic effect” is also set to ensure that the eurozone’s GDP will show growth in the third quarter. It’s encouraging that the service sector is showing growth across the board geographically, with the HCOB PMI above 50 points in all four major eurozone economies. However, it’s a tale of two sectors: while services are driving the growth, the manufacturing sector remains stuck in recession, with conditions worsening in several countries, including Germany and France.”

Eurozone July PPI +0.8% vs +0.3% m/m expected

• Latest data released by Eurostat – 4 September 2024

• Prior +0.5%; revised to +0.6%

It’s a beat on estimates but mostly owes to a jump in energy prices. Here’s the breakdown on the month:

Germany August final services PMI 51.2 vs 51.4 prelim

• Final data released by HCOB – 4 September 2024

• Final Services PMI 51.2 vs. 51.4 expected and 52.5 prior.
• Final Composite PMI 48.4 vs. 48.5 expected and 49.1 prior.

Key findings:

• HCOB Germany Services PMI Business Activity Index at 51.2 (Jul: 52.5). 5-month low.
• HCOB Germany Composite PMI Output Index at 48.4 (Jul: 49.1). 5-month low.
• Input cost inflation slows to three-and-a-half year low.

Comment:

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

“Without growth in the private service sector, Germany’s economic picture would be pretty grim. This sector, which accounts for just over 40% of the economy, has been a major stabilizing force, offsetting the recessions in manufacturing and construction. But that support is starting to weaken. Growth slowed again in August. Even though lower inflation and higher wages should be boosting the service sector, the growth trend has been sliding downhill for three months now.

From a business perspective, there are some positive signs. Cost pressures have eased a bit, and service providers have managed to raise their prices more than they did the month before. Companies have also sharpened their focus on efficiency lately. Despite trimming their workforces slightly, they’ve still managed to grow, though at a slower pace. If these trends keep up, we could be looking at a potential boost to profit margins. Confidence among service providers about their economic activity in a year’s time remains average, which is good news in the current circumstances.

However, it also shows that moderate growth is to be expected at best, but potentially even lower activity. This caution is reflected in the sluggish pace of new business, the continued – albeit slightly slower – decline in order backlogs, and a significant drop in export business. At first glance, Germany seems to be the worst performer in the service sector among the major eurozone countries, with France notably pulling ahead in August.

However, this gap is likely due to the “Olympic effect”, as some survey participants have pointed out. In reality, France’s services sector had been stagnant at best in previous months. When you look at Italy, Germany’s performance is only slightly weaker. You could argue that Germany is just about average, but that is hardly reassuring. If this middling performance in services continues, it could make an overall economic recession more likely.”

France August final services PMI 55.0 vs 55.0 prelim

• Latest data released by HCOB – 4 September 2024

• Prior 50.1
• Composite PMI 53.1 vs 52.7 prelim
• Prior 49.1

The boost in August is likely a one-off, owing much to increased demand from the Paris Olympics. This is evident as the upturn in terms of new business was relatively weak, coming in below the survey average. While input cost inflation eased further, French service providers actually raised their charges more aggressively during the month. The pace of increase was the sharpest since April.

HCOB notes that:

“This is no sustainable level. The French service sector saw a nearly five-point rise in its Business Activity PMI in August, reaching its highest level since May 2022. HCOB Economics thinks this is due to the Olympic Games, which was partially noted by some companies that reported greater new export business. This one-time boost is not evident in other PMI subindices, as only business activity and new orders showed significant improvement. The employment situation improved at a slower pace and outstanding business decreased at a faster rate compared to July.

“French service providers managed to boost their prices. In August, output price inflation accelerated compared to July. It was also noticeable that, despite input costs rising further, the pace of increase slowed to a 39-month low. However, wages remain the main source of cost inflation and were again cited by panellists.

“Although the employment situation is improving across the French service sector, the corresponding HCOB PMI is approaching the neutral threshold. It looks like the HCOB Employment PMI is about to cross the threshold soon, based off the index’s current trajectory, meaning unemployment might go up in the coming months.”

Italy August services PMI 51.4 vs 52.6 expected

• The latest data from HCOB – 4 September 2024

• Services PMI 51.4 vs. 52.6 expected and 51.7 prior.
• Composite PMI 50.8 vs. 50.3 prior.

Key findings:

• Fresh decreases in both total and international sales.
• Softest rise in business activity seen since January.
• Optimism in the outlook dips to ten-month low.

Comment:

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

“Italy’s services sector remains the driving force of the economy. However, it is becoming increasingly clear that the economic workhorse is losing momentum and vitality. Since the start of the second quarter, there has been a noticeable slowdown in growth, even though the services sector still signalled expansion in August, with the headline HCOB PMI at 51.4.

High prices accompany a growing sector. Input costs for Italian service providers continued to rise rapidly, with companies reporting higher expenses for labour and supporting services. On the upside, input cost inflation slowed notably compared to the previous month, reaching its lowest level in 40 months. In contrast, prices charged to end customers are rising at a much slower pace, highlighting the challenges companies face in passing on these increased costs to customers.

The outlook for Italy’s services sector is not really giving hope. Both total and international order volumes have declined compared to the previous month, and backlogs have also diminished, raising concerns about future momentum. While growth is still expected for the coming twelve months, the degree of optimism falls significantly short of the historical average.

Some service providers have expressed concerns about Italy’s economic situation, which is also reflected in employment trends. Though job creation continued, the pace noticeably slowed, pointing to a sector that, while still expanding, is losing its vitality.”

Spain August services PMI 54.6 vs 54.5 expected

• Latest data released by HCOB – 4 September 2024

• Services PMI 54.6 vs. 54.5 expected and 53.9 prior.
• Composite PMI 53.5 vs. 53.4 prior.

Key findings:

• Uplift in growth despite weaker rise in new work.
• Slowest cost inflation since March 2021.
• Sentiment down to eight-month low.

Comment:

Commenting on the PMI data, Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, said:

“While the Spanish are enjoying their summer holidays, there is little movement in the HCOB Purchasing Managers’ Indices as well. The HCOB Composite PMI continues to signal solid growth and remains nearly unchanged compared to July. As in the preceding months, growth is primarily driven by the strong services sector, while momentum in the manufacturing sector is softening.

After an impressive first half of the year with strong economic growth, our HCOB Nowcast model forecasts continued robust but slightly weaker growth of 0.3 % for the third quarter. Demand continues to boost the Spanish services sector. Activity in Spain’s services sector accelerated in August, supported by a continued solid inflow of orders from both domestic and international markets.

Although the growth rates of new orders are slightly weaker than in the previous month, service providers are still actively hiring new staff as backlog of works continue to increase. Higher wages remain the number one cost challenge for Spain’s service providers. While the related input prices index has fallen to its lowest level in three-and-a-half years, which is good news, it still remains above the historical average.

Prices charged by service providers are also continuing to rise, though at a slower pace compared to the beginning of the year. Overall, price pressures in the services sector seem to be easing over the summer. This impression was also confirmed by the most recently published inflation data for July (-0.5 % MoM) and August (0 % MoM). Accordingly, inflation for the year as a whole fell to 2.2 % in August.”

UK August final services PMI 53.7 vs 53.3 prelim

• Final data released by S&P Global – 4 September 2024

• Final Services PMI 53.7 vs. 53.3 expected and 52.5 prior.
• Final Composite PMI 53.8 vs. 53.4 expected and 52.8 prior.

Key findings:

• Business activity growth accelerates again.
• Robust rise in new work led by improving domestic demand.
• Slowest rate of prices charged inflation for three- and-a-half years.

Comment:

Tim Moore, Economics Director at S&P Global Market Intelligence

“August data highlighted a recovery in UK service sector performance as improving economic conditions and domestic political stability helped to bolster customer demand. New business again increased at a robust pace after a lull in decision-making earlier this summer.

This fuelled the fastest upturn in service sector activity since April and extended the current period of growth to ten months. Service providers responded to the upturn in business conditions by hiring additional staff in August.

Job creation remained faster than seen on average in the first half of 2024, despite headwinds from scarce candidate availability and elevated wage pressures. Higher salary payments resulted in another sharp rise in cost burdens across the service economy.

However, the overall rate of input price inflation resumed its recent descent in August and reached its lowest since January 2021. Adding to meaningful signs of softer inflationary pressures in the service sector, the latest survey indicated that average prices charged increased at the weakest pace for three-and-a-half years.

The modest post-election bounce in business activity expectations faded, however, in August. Hopes of interest rate cuts and steady improvements in broader economic conditions helped to support confidence, but some firms cited concerns about policy uncertainty in the run up to the Autumn Budget.”

German trade lobby sounds warning as recession clouds circle

• The Federation of German Wholesale, Foreign Trade and Services (BGA) says that government measures have not gone down well with the majority of businesses

The BGA trade lobby group warned that German exporters in particular are facing up against a recession in foreign trade, no thanks to the government. They said that the direction in which Berlin has leaned towards in recent years are not helping. 70% of businesses surveyed feel the government’s actions were either a deterrent or they did not go far enough to have its intended effect.

BGA said that this should be a wake up call as sentiment is darkening amid weak growth from the EU market, persistently poor figures from China, and risks from the US election outcome.

German economy expected to contract this year, says Kiel Institute

• Germany’s Kiel Institute for the World Economy now forecasts a contraction for the economy in 2024

They had previously penciled in a 0.2% growth forecast for the German economy this year. Meanwhile, they also revised lower their projection for the economy next year. That is now see at a growth of 0.5%, down from 1.1% in their previous forecast.

Asia-Pacific-World News

Bank of America cut its 2024 China GDP forecast to 4.8%

• Analysts trimmed the forecast to 4.8% from 5.0% previously

Analysts at Bank of America Global Research have cut GDP forecasts:

• for 2024 China to 4.8%, from 5.0% previously
• for 2024 global GDP to 3.1% from 3.2% previously
• the bank has also cut its projection for 2025 to 4.5% growth. The forecast for 2026 is the same, at 4.5%.

China Caixin Services PMI for August 2024 51.6 (expected 52.2)

• Lower than July but still in expansion

• Actual: 51.6
• Expected: 51.9
• Previous: 52.1

Main points from the report

• New business growth supported by a faster rise in export business inflows
• Staffing levels fall marginally amidst cost concerns
• Average charges decline for the first time since January

PBOC sets USD/ CNY mid-point today at 7.1148 (vs. estimate at 7.1167)

• PBOC CNY reference rate setting for the trading session ahead.

In open market operations (OMOs):

• PBOC injects 0.7bn via 7-day RR, sets rate at 1.7%
• 277.3bn mature today
• thus a net drain of 276.6bn yuan in OMOs

Australia August Non-manufacturing PMI 52.5 (prior 50.4)

• Australia Final non-manufacturing and composite PMIs from Judo Bank / S&P Global

In summary:

• Improvement in Activity: The Services PMI showed increased activity in August after a softer July, indicating a rebound in the services sector.
• Business Confidence: Despite higher margin pressures, services firms became more confident about future activity levels over the next 12 months.
• Business Activity Growth: August marked the seventh consecutive month of expansion in Australia’s services sector, with the PMI rebounding to 52.5 from a low of 50.4 in July.
• New Business Increase: The new business index rose to a three-month high, potentially reflecting government stimulus impacting consumer spending.
• Employment Index Stability: The employment index remained slightly above neutral, suggesting that employment growth may be concentrated in specific sectors.
• Easing of Output Price Pressures: Output price pressures eased, with the index at 53.2, the lowest since mid-2021, indicating some relief from inflation, though input prices remain high.
• Input Price Pressures: Input price pressures remained high, with levels not seen since early 2023, contributing to ongoing inflation concerns.
• Future Business Confidence: The future activity index rose to its highest level in 12 months, indicating improved business confidence, with expectations for better trading conditions through the first half of FY25.

Australian Q2 2024 GDP +0.2% q/q (expected +0.3%)

• Data for economic growth in Australia during the April to June months of 2024

Economic growth in Australia in the second quarter of 2024.

Weak growth for the Australian economy.

For the y/y its 1.5%. Major news wires are reporting 1%, but the data from the Australian Bureau of Statistics show 1.5%

The RBA forecast 0.9% so the result would seem to have minimal monetary policy implications.

• subdued household demand detracted 0.1% from GDP growth
• government consumption added 0.3%
• domestic final demand contributed 0.2%
• household consumption was weak, due to reduced discretionary spending
• investment made no contribution to growth, as net transfers of second-hand assets resulted in a detraction from total private investment (-0.1%) and was offset in public investment (+0.1%)
• net trade contributed 0.2% percentage points to GDP, with a rise in exports (0.5%) and a fall in imports (-0.2%)
• inventory change detracted 0.3% from GDP, with a smaller build-up in inventories compared to the March quarter.
• household savings rate unchanged at 0.6% of household income
• GDP Chain Price Index -0.9% (prior +0.8%)

S&P on New Zealand’s CA deficit – if it doesn’t narrow could trigger for rating downgrade

• S&P Global Ratings is “broadly comfortable” with New Zealand’s sovereign rating outlook … but

Bloomberg (gated) carries the report, in brief:

• S&P Global Ratings is “broadly comfortable” with New Zealand’s sovereign rating outlook
• closely watching NZ large current-account deficit and weak economic growth
• New Zealand’s current account deficit was 6.8% of gross domestic product in the 12 months through March … among the widest of advanced economies, reflecting subdued exports, stronger-than-expected imports and debt servicing costs … “Our base case is that it will narrow to something like 5% of GDP over the next couple of years. But if it doesn’t, that’s going to be probably a downside trigger for the rating.”

New Zealand data – ANZ Commodity Price Index, August 2024: +2.1% m/m (prior -1.7%)

• The index tracks the prices of 17 of New Zealand’s major commodity exports, including dairy products, meat, wool, forestry products, and seafood.

In New Zealand dollar terms, the index lifted 1.5% m/m as the NZD Trade Weighted Index fell 0.7%.

As part of this report ANZ cover global shipping prices:

Global shipping prices remain high as ships continue to avoid the Suez Canal due to ongoing tensions in the Middle East, and congestion occurs in the Port of Singapore. The volume of cargo travelling through the Suez Canal has dropped to about one third of normal levels. Most ships are rerouting around Cape Horn, effectively tightening the supply of ships and putting pressure on shipping prices. Most of New Zealand’s exports go to Asia, meaning we have limited direct exposure to issues in the Middle East, but we are directly impacted by the delays in getting ships into and unloaded in Singapore. The combined impact of the disruptions means there are fewer ships available to service New Zealand, and exporters are now starting to report increased costs to get product to market.

Japan Chief Cabinet Secretary Hayashi says closely watching domestic, overseas market moves

• So far he hasn’t mentioned the yen specifically

Japan Chief Cabinet Secretary Hayashi

• No comment on daily share moves
• Closely watching domestic and overseas market moves with a sense of urgency
• Will conduct fiscal and economic policy management while working closely with BOJ
• Important to make assessment of market moves calmly

Japan Jibun Services PMI for August 2024: 53.7 vs. prior 53.7

• Composite 52.9 in August, up from 52.5 in July

In summary from the report commentary:

• August saw continued positive growth in Japan’s service sector, with increases in both activity and new business.
• The growth rate in activity remained steady, while the expansion of new orders slowed.
• Employment rose for the eleventh consecutive month, though the rate of increase slowed to a seven-month low.
• Business optimism remained strong, but also eased to a 19-month low.
• The Japanese private sector showed overall improvement, with the strongest growth since May 2023.
• New orders continued to grow, but rising output was partially due to clearing backlogs, which decreased at the fastest rate in three years.
• Firms remained confident about future output, but optimism weakened to its lowest level since January 2023, with concerns about labor shortages.

On price pressures:

• The latest survey data signalled a strong increase in average cost burdens facing service sector firms. The rate of inflation was little-changed from July and often attributed to higher wage, material and transport costs. Firms opted to partially absorb some of these costs, but prices charged for Japanese services rose at the softest rate since last November.

Japan’s $1.75 trillion state pension funds may step up domestic purchases, scale back foreign

• JPY implications – an increase in foreign bonds is highly unlikely, as it would involve yen sales that may weaken the currency

Bloomberg with the results of a survey it undertook. Bloomberg is gated, but the headline summary nis:

• Japan’s $1.75 trillion state pension fund may step up purchases of domestic stocks and scale back on foreign bonds in a reallocation of assets that would ripple through global markets

Cryptocurrency News

Bitcoin Battles $57,000 Resistance as ETF Outflows Surge and Bearish Indicators Loom

Bitcoin Faces Crucial Support Test Amid Record ETF Outflows and Bearish Signals

Bitcoin (BTC) is grappling with significant headwinds as it struggles to hold above the $57,000 mark, facing a potential downtrend if key support levels are breached. The cryptocurrency’s recent performance reflects growing concerns driven by substantial ETF outflows and bearish on-chain metrics.

Market Highlights:

• Price Struggles: Bitcoin fell by 1.5% on Wednesday, struggling to maintain its footing around the crucial $57,000 resistance level. A drop below $56,000 could signal a continued downtrend.
• ETF Outflows: US spot Bitcoin ETFs experienced significant outflows, totaling $287.80 million on Tuesday. This marks a notable shift in investor sentiment and a decline in demand.
• On-Chain Data: The long-to-short ratio for Bitcoin has dropped below one, indicating a bearish outlook and suggesting that more traders expect the price to decline.

Market Dynamics:

• Correlation with Stocks: Bitcoin’s price has historically been sensitive to stock market fluctuations. On August 5, Bitcoin fell over 7% in response to a 3% drop in the S&P 500. However, with the S&P 500 down 2.16% on Tuesday, Bitcoin’s correction was limited to 2.78%, suggesting a potential decrease in its sensitivity to stock market movements.
• ETF Holdings: The total Bitcoin reserves held by the 11 US spot Bitcoin ETFs have decreased to $43.14 billion, reflecting a decline since late August.

Technical and Sentiment Indicators:

• Support Levels: Bitcoin is approaching a crucial support level at $56,000. A sustained close below this level could trigger further declines.
• Bearish Sentiment: Coinglass data reveals a long-to-short ratio of 0.95, reinforcing the bearish sentiment among traders.

As Bitcoin navigates these turbulent waters, investors will be closely monitoring support levels and ETF trends to gauge future price movements.

Ethereum ETF Outflows and Declining Futures Volume Signal Lower Investor Interest

Ethereum Faces Declining Interest Amid ETF Outflows and Reduced Trading Volume

Ethereum (ETH) saw a modest gain of 0.1% on Wednesday, but ongoing trends indicate growing disinterest from institutional investors and a challenging environment for the asset.

Market Overview:

• ETH Price Change: +0.1%
• Recent ETF Outflows: $47.4 million, the highest in the past month.
• Declining Futures Volume: August saw a 28.7% drop in ETH futures trading volume and a 37.0% decline in options volume.

Key Drivers:

• Ethereum ETF Outflows: The outflows were led by Grayscale’s ETHE, which saw $52.3 million leave its fund. Other ETFs, like Fidelity’s FETH, experienced a smaller $4.9 million inflow, but overall, the sector is seeing a lack of enthusiasm. This decline reflects low institutional interest and contributes to Ethereum’s underperformance relative to other top assets.
• CME Trading Volume: Ethereum futures and options volumes on the Chicago Mercantile Exchange (CME) fell significantly, indicating reduced investor activity and interest. The August decline to $14.8 billion in futures volume and $567 million in options volume marks the lowest levels since December 2023.
• Comparative Performance: Ethereum has underperformed relative to assets such as Nvidia, Bitcoin, Meta, Gold, and the NASDAQ-100. This is partly attributed to its risk-adjusted returns, which have lagged behind these other investment options.

Future Outlook:

• Technical Analysis: Ethereum might follow a key trendline and could decline towards $2,100 before potentially staging a rally. This technical movement reflects current investor sentiment and market conditions.
• Historical Trends: Ethereum and the broader crypto market have historically struggled in Q3, which might be contributing to current performance issues. Additionally, changes in Ethereum’s blockchain revenue, linked to the introduction of blob space in the Dencun upgrade, are also being scrutinized by the crypto community.

Daily Market Movers:

• ETF Outflows: The significant outflows from Ethereum ETFs highlight ongoing investor skepticism.
• Futures and Options Volume: The dramatic drop in trading volume suggests waning interest in Ethereum’s financial products.
• Technical Trends: Watch for ETH’s price action around key trendlines and support levels as it navigates current market conditions.

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