Round up of today’s market news

North American News

US Stock Indices Close Mixed Ahead of Key Jobs Data

NASDAQ Edges Up; Dow and S&P Decline

Major US stock indices ended the day with mixed results as investors await the critical jobs report due tomorrow:

• NASDAQ: Up by 43.37 points or 0.25%, closing at 17,127.66.
• Dow Industrial Average: Down by 219.22 points or -0.54%, ending at 40,755.74.
• S&P 500: Fell by 16.66 points or -0.30%, settling at 5,503.42.

The day saw fluctuating trading patterns as markets prepared for the release of the US jobs data at 8:30 AM tomorrow.

Broadcom Earnings: Mixed Reactions

Broadcom reported better-than-expected Q4 earnings, yet the stock saw a decline:

• EPS: $1.24 vs. $1.20 expected (BEAT)
• Revenues: $13.07 billion vs. $12.96 billion expected (BEAT)
• Adjusted EBITDA: $8.22 billion vs. $7.89 billion expected (BEAT)
• Forward Guidance: $14 billion, slightly below the $14.1 billion estimate

Other Highlights:

• Semiconductor Solutions Revenue: $7.27 billion (MISS, expected: $7.41 billion)
• Infrastructure Software Revenue: $5.80 billion (BEAT, expected: $5.5 billion)
• Adjusted Operating Income: $7.95 billion (BEAT, expected: $7.73 billion)
• Adjusted R&D Expense: $1.47 billion (MET, expected: $1.47 billion)
• Capital Expenditure: $172 million (BEAT, expected: $140.5 million)

Despite beating earnings expectations, Broadcom’s stock fell by approximately 3.5% to $147, closing below its 100-day moving average of $149.57.

US August ISM services 51.5 vs 51.1 expected

• US August ISM services

• Business activity index 53.3 versus 54.5 prior
• Employment 50.2 versus 51.1 prior
• New orders 53.0 versus 52.4 prior
• Prices paid 57.3 versus 57.0 prior
• Supplier deliveries 49.6 versus 47.6 prior
• Inventories 52.9 versus 49.8 prior
• Backlog of orders 43.7 versus 50.6 prior
• New export orders 50.9 versus 58.5 prior
• Imports 50.3 versus 53.3 prior
• Inventory sentiment 54.9 versus 63.2 prior

Comments in the report:

• “Generally, business is good. However, there are concerns of slowing foot traffic at restaurants and other venues where our products are sold.” [Agriculture, Forestry, Fishing & Hunting]
• “Housing market continues to be dampened by higher borrowing costs. All segments of the industry are affected. Single-family homes for sale, build for rent, and multifamily units are all feeling the effects.” [Construction]
• “Activity is increasing.” [Finance & Insurance]
• “Business continues to be strong.” [Health Care & Social Assistance]
• “Overall business is improving.” [Information]
• “Hiring of employees, contractors and consultants continues to decline as companies look to control costs during a period of economic and political uncertainty. Employee layoffs continue across a broad range of companies and industries.” [Management of Companies & Support Services]
• “Business has slowed, and it is harder than ever to find talent, but less jobs available as well.” [Professional, Scientific & Technical Services]
• “Up in business and activity.” [Transportation & Warehousing]
• “Steady interest rates are impacting investment in nonregulated business silos.” [Utilities]
• “High food costs are impacting customer demand, and weak sales performance has resulted in negative growth overall. Business activity is stable, and supplier costs are generally flat.” [Wholesale Trade]

The survey says this corresponds with 0.8% GDP growth and that compares to 2-2.5% in the S&P Global services survey.

US initial jobless claims 227K vs 230K estimate

• US initial and continuing jobless claims

• Prior week 231K revised to 232K
• prior week continuing claims 1.868M
• initial jobless claims 227K versus 230K estimate
• 4-week moving average of initial jobless claims 230K vs 231.75K last week
• Continuing claims 1.838M versus 1.865M estimate
• 4-week moving average of continuing claims 1.853M vs 1.861M last week
• The largest increases in initial claims for the week ending August 24 were in New York (+2,604), Michigan (+1,322), Georgia (+1,166), North Dakota (+992), and Massachusetts (+748),
• The largest decreases were in Texas (-1,515), Florida (-1,313), California (-965), Washington (-522), and Virginia (-517).

US August final S&P Global Services PMI Aug 55.7 vs 55.2 prelim

• The August final 2024 PMI surveys from S&P Global

• Best reading since March 2022
• Prelim was 55.2
• Prior was 54.3
• Composite PMI vs 54.1 prelim
• Prior composite was 54.3
• New orders growth accelerates, supporting overall activity increase
• Employment unexpectedly declines after two months of job creation
• Input cost inflation remains sharp, but selling price increases slow to 7-month low

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

“An improvement in the headline services PMI to its highest for nearly two-and-a-half years provides further encouraging evidence that the US economy is enjoying robust economic growth in the third quarter, adding to signs of a ‘soft landing’.

“The faster service sector expansion means the PMI surveys are signalling GDP growth of 2-2.5% in the third quarter. At the same time, the August survey data signaled a further cooling of selling price inflation, notably in the service sector, which has now eased close to the average seen prior to the pandemic and a level consistent with the Fed’s 2% inflation target.

“Services growth has been buoyed in particular by the prospect of lower interest rates, but there are several headwinds which could dampen growth in the months ahead. Business optimism and investment is being subdued by uncertainty regarding the outcome of the Presidential Election. Hiring is meanwhile being constrained by labor shortages, which also continue to put upward pressure on wages.

“However, perhaps more worryingly, the recent downturn in manufacturing activity is showing some signs of spilling over to the broader economy, notably via stalled orders for industrial services.

“It will therefore be important to monitor whether the service sector succumbs to the recent weakening of factory activity or whether looser monetary policy creates a rising tide to lift all boats.”

ADP August employment +99K vs +145K expected

• ADP August 2024 data

• Prior was +122K (revised to +111K)
• Annual pay growth for job-stayers 4.8% vs 4.8% prior
• Job-changers’ pay gains 7.3% vs 7.2% prior
• Service-providing sector added 72K jobs, goods-producing sector up 27K
• Construction (+27K) and education/health services (+29K) led gains
• Professional/business services saw largest decline (-16K)

“The job market’s downward drift brought us to slower-than-normal hiring after two years of outsized growth,” said Nela Richardson, chief economist, ADP. “The next indicator to watch is wage growth, which is stabilizing after a dramatic post-pandemic slowdown.”

US Q2 unit labor costs +0.4% vs +0.8% expected

• US second quarter labor data

• Prelim was +0.9%
• Prior was +3.8%
• Productivity +2.5% vs +2.5% expected
• Prelim productivity was +2.3%

US treasury auction off 3, 10, and 30 year coupon notes next week

• The 10 and 30 year options are $3 billion last for each

The US treasury will sell

• $58 billion of 3 year notes on Tuesday,
• $39 billion up 10 year notes (9 year and 11 month actually) on Wednesday, and
• $22 billion of 30 year bonds (29 year and 11 month actually) on Thursday

Goldman Sachs: “market correction may start to get traction if payrolls are weak on Friday”

• NFP is due Friday, September 6, 2024

Via a note from Goldman Sachs’ managing director for global markets and tactical specialist Scott Rubner on Wednesday.

• “A market correction may start to get traction if payrolls are weak on Friday,”

Expects selling to pick up from September 16. GS estimates about US$6.6 billion of passive demand until company earnings buyback blackout period begins broadly on September 13

• “US corporates have been the largest buyer of the equity market, and we expect their demand to drop by -35% during the closed window,”
• “This week is peak open-window for corporates”
• also, trend-following systematic funds have little room to add equity exposure

Rubner is bearish until after the election:

• “November election becomes a clearing event for risk assets”

Fed’s Daly says need to cut rates because economy slowing, inflation falling

• Federal Reserve San Fran head Daly

• Fed needs to cut policy rate because inflation is falling and the economy is slowing
• On size of September Fed rate cut, “we don’t know yet.”
• Daly says she needs more data, including Friday’s job market report and CPI.
• Fed must calibrate policy to the evolving economy.
• Labor market has softened but is still healthy, and that “has to be sustained and protected.”
• Hard to find evidence that labor market is faltering.
• Overly tight policy could mean additional, unwelcome labor market slowing.
• We have not restored price stability; inflation is still people’s number one concern.
• Businesses are being “frugal” on hiring, but not yet “dusting off their layoff manuals.”
• We are at an inflection point in the economy, and data will be volatile.
• Fed can take aggressive action when the outlook is clear, but the current outlook is uncertain.

Canada August S&P Global Services PMI Aug 47.8 vs 47.3 prior

• Canada August 2024 services PMI from S&P Global

• S&P Global Canada Services PMI rises slightly to 47.8 in August from 47.3 in July
• Composite PMI came in at 47.8 in August, up from 47.0 but still indicating overall private sector contraction
• Third consecutive month of contraction in service sector activity
• New business volumes decline at steepest pace in six months
• Employment falls for first time in 2024
• Input cost inflation remains high, driven by wage pressures
• Business confidence slips to 7-month low

Canada Q2 labour productivity -0.2% vs -0.3% prior

• The Canadian second quarter report on labour productivity

• Prior was +0.2%
• Business output up 0.5%, hours worked up 0.6%
• Unit labour costs rose 0.8%, slowing from 1.3% in Q1
• Service sector the main drag, goods-producing businesses saw slight 0.1% productivity gain

Argentina province creates its own currency, the chaco

• The chaco has a 1-to-1 exchange rate with the official peso

Bloomberg (gated) had the report of a poor region of Argentina introducing its own currency, the chacho.

• province of La Rioja
• its governor, Ricardo Quintela, created the province’s own currency, the chacho
• given out in lumps of 50,000 to all government employees as a ‘bonus payment’
• a gas station in the provincial capital city had business jump by 10% on the morning the chacho was distributed

While Bloomberg is gated, here is the link

Commodities

Gold Soars Above $2,500 as Traders Anticipate Fed Rate Cuts

Gold Hits New Heights Amid Growing Expectations for Fed Easing

Gold prices surged past $2,500 on Thursday, reaching a peak of $2,523 before settling at $2,516, an increase of over 0.80% on the day. The rally comes as traders bet on significant Federal Reserve rate cuts, driving up demand for the yellow metal.

Key Developments:

• Rate Cut Expectations: Traders are pricing in over 104 basis points (bps) of Fed easing, with expectations that the Fed will lower rates to support the labor market. San Francisco Fed President Mary Daly emphasized the need for rate cuts to maintain economic stability.
• US Dollar Weakness: The US Dollar Index (DXY) fell by 0.21% to 101.05, adding further support to gold prices. A weaker dollar typically boosts the appeal of non-yielding assets like gold.
• Economic Data Ahead: Traders are preparing for the August Nonfarm Payrolls (NFP) report, which is expected to show an increase from 114K to 163K, with the Unemployment Rate potentially dipping from 4.3% to 4.2%.

Daily Market Movers:

• ADP National Employment Change: Private sector hiring was weaker than anticipated, with only 99K jobs added in August versus the 145K expected.
• Initial Jobless Claims: Claims fell to 227K for the week ending August 31, better than the projected 230K and previous 232K.
• ISM Services PMI: The index rose to 51.5 from 51.4 in July, surpassing the expected 51.1 and indicating slight expansion in business activity.

Outlook: Gold’s rally above $2,500 reflects growing market confidence in forthcoming Fed rate cuts and a weaker dollar. With crucial economic data on the horizon, traders will be watching closely for any signs that might influence the Fed’s monetary policy decisions.

US crude oil futures settled at $69.15

• The price closed down five cents or -0.07%

Crude oil futures is settling at $69.15 after trying to rebound for the first time in four trading days. It was not meant to be. The price is closing lower for the fourth consecutive day.

The high for the day reached $70.78. The low for the day reached $68.79. What is not logical is that the inventory data continued to show drawdowns. Today the crude oil inventories had a drawdown of -6.873 million barrels. Also OPEC took back October production cuts that were announced just last week.

Weekly US crude oil inventories -6.873M vs -0.993M estimate

• The weekly EIA oil inventory data

• Crude drawdown of -6.873 million vs expected drawdown -0.993M barrels
• Distillates drawdown of -0.371 million vs. expected build of 0.481M barrels
• Gasoline build of +0.848 million vs expected drawdown of -0.730M barrels
• Cushing drawdown of -1.142M vs last week drawdown of -0.668M

OPEC+ agrees to delay October oil output increase – report

• Reuters report

OPEC+ agrees to delay Oct output increase for two months, according to a delegate cited by Reuters. This is exactly what was rumored earlier this week.

Some market watchers are worried about a build in global inventories in H1 2025 though. So far this week, the rumors of this deal have done almost nothing for oil.

Citi says Brent crude oil could fall as low as $50 / barrel

Citi forecasts oil prices could drop to $60 per barrel next year if OPEC+ doesn’t increase production cuts.

• Then, from $60, prices could fall further to $50 before rebounding, influenced by financial flows.
• Geopolitical tensions are having minimal long-term impact on oil prices, with weaker rebounds after each spike.
• Markets now see these tensions as opportunities to sell during temporary price increases.
• Citi warns OPEC may lose market confidence in defending $70 oil if output cuts aren’t extended.
• Citi has issued similarly negative forecasts before, which have sometimes been wrong.
• In June, Citi predicted a $60 Brent crude by 2025, advising producers to hedge and investors to take short-term bearish positions.
• Oil prices fell to a nine-month low on concerns about demand and potential supply growth.
• OPEC+ is reconsidering easing production cuts due to the price drop, with Brent crude below $73 and WTI below $70.

TD see signs of hope for oil price bounce – says peak algo selling appears to have passed

• TD do note risks to the view though

In summary from a note via TD on the crude oil market.

TD argue that algorithmic trend-following strategies are unlikely to worsen the current downturn in crude markets, following a recent modest sell-off amounting to -6% of their maximum position size during the last session. TD says this marked the peak of selling activity for now.

• In fact, CTAs are expected to start buying WTI and Brent crude under all scenarios in the coming week, even in the event of a significant decline.

There is a but, though, says the report:

• While this indicates a potential short-term rebound, analysis suggests that the issues go deeper than just market positioning.
• The risk premium on energy supply is falling sharply due to concerns over OPEC+ increasing production and optimism about a potential deal that could bring Libyan oil back into the market.
• Additionally, sentiment around commodity demand is weakening again, with traders particularly worried about reduced demand from China and possible refinery cutbacks.
• Pressure is mounting on OPEC+ to postpone their planned production increases to prevent further declines in supply risk premiums.
• For now, the risks are still trending downward, and traders cannot attribute further price drops to CTA flows alone if the weakness continues.

EU News

European indices closing mixed on the day

The major European stock indices are closing mixed on the day. A snapshot of the closing levels shows:

• German DAX, +0.02%
• France’s CAC, -0.73%
• UK’s FTSE 100, -0.21%
• Spain’s Ibex, +0.53%
• Italy’s FTSE MIB, +0.17%

Eurozone July retail sales +0.1% vs +0.1% m/m expected

• Latest data released by Eurostat – 5 September 2024

• Prior -0.3%; revised to -0.4%

It’s a marginal bounce for retail sales in the euro area after the decline in June. Here’s the breakdown:

Germany August construction PMI 38.9 vs 40.0 prior

• Latest data released by HCOB – 5 September 2024

• Prior 40.0

The struggle continues for Germany’s construction sector as it continues to stay well into recession territory. 

Germany July industrial orders +2.9% vs -1.5% m/m expected

• Latest data released by Destatis – 5 September 2024

• Prior +3.9%; revised to +4.6%

Drilling into the report, new orders for vehicle construction (aircraft, ships, trains, military vehicles) were 86.5% higher on the month. And that contributed to the jump in industrial orders overall in July.

UK August construction PMI 53.6 vs 54.9 expected

• Latest data released by S&P Global – 5 September 2024

• Prior 55.3

The reading is a little softer than in July but still looking good. New order growth continues to be strong while housing activity picked up to rise by its quickest since September 2022. Commercial activity remains the best performing sector but all – including civil engineering – are posting growth, so that about sums up the broad-based strength. HCOB notes that:

“The UK construction sector appears to have turned a corner after a difficult start to 2024, with renewed vigour in the house building segment the most notable development in August. Residential work expanded at the fastest pace for almost two years as lower borrowing costs and a gradual recovery in market conditions helped to boost activity.

“Commercial building was the best-performing part of the construction sector as the improving UK economic backdrop resulted in stronger order books, but the postelection bounce in demand faded somewhat in August.

“Another robust expansion of incoming new work was recorded in August, highlighting that new project starts are set to support a broader rebound in construction activity during the months ahead.

“Improving sales pipelines and a turnaround in demand conditions led to a relatively strong degree of business optimism across the construction sector. However, some firms cited a slowdown in civil engineering activity and concerns about the outlook for infrastructure work as constraints on growth expectations.”

Switzerland August seasonally adjusted unemployment rate 2.5% vs 2.5% expected

• Latest data released by SECO – 5 September 2024
• Prior 2.5%

ECB seen cutting rates next week and then again in December – poll

• Reuters’ latest poll on economists shows majority expecting just two more 25 bps rate cuts for this year

The poll shows that 64 of 77 economists (~85%) predict the ECB will cut rates by 25 bps at next week’s meeting and then again in December. Four other respondents expect just one 25 bps rate cut for the remainder of the year while eight are seeing three rate cuts in each remaining meeting.

In the August poll, 66 of 81 economists (~81%) saw two more rate cuts for the year. So, it’s not too major a change up in views.

For some context, the ECB will meet next week and then again on 17 October before the final meeting of the year on 12 December.

Looking at market pricing, traders have more or less fully priced in a 25 bps rate cut for next week (~99%). As for the remainder of the year, they are seeing ~60 bps of rate cuts at the moment. Looking further out to the first half of next year, there is ~143 bps worth of rate cuts priced in.

German economy expected to stagnate this year, says Ifo institute

• Ifo downgrades their outlook for the German economy for this year and also the next

Ifo had previously forecast the German economy to grow by 0.4% in 2024 but is now anticipating the economy to stagnate instead. They also now expect the economy to grow by 0.9% next year, as opposed to their previous forecast of 1.5%. Looking further out to 2026, they see the economy also growing at the same pace as in 2025.

Asia-Pacific-World News

PBOC to continue to implement supportive policy, says deputy governor

• Remarks by PBOC deputy governor, Lu Lei

• Will steadily lower financing costs for firms
• To also lower credit costs for residents

China’s Xi, at China-Africa Summit: China is willing to unilaterally expand market access.

• Xi pledges over $50 billion in financing for Africa over next 3 years

China’s President Xi, speaking at the China-Africa Summit:

• China will train African governance personnel and invite 1,000 African party members to visit China for dialogue.
• China is willing to unilaterally expand market access.
• China is willing to sign a trade cooperation framework agreement with African countries to provide long-term stability to trade relations.
• China is willing to create a supply chain expansion circle with Africa and promote the ability of African SMEs to enrich themselves.
• China will establish 24 digital model projects to promote technological revolution in Africa.
• China is willing to establish 30 infrastructure connectivity projects in Africa and promote high-quality Belt and Road projects.
• China is willing to provide help towards establishing an African free trade zone.
• China is willing to release a joint statement with Africa under the Global Development Initiative, involving 1,000 projects.
• China is willing to establish the China-Africa Hospital League, establish a joint medical center, and launch 20 medical and sanitary projects with Africa.
• China is willing to give all possible help towards fighting epidemics in Africa.
• China will provide 1 billion yuan of emergency food assistance to Africa.
• China will establish 500 charitable projects in Africa.
• China will establish a China-Africa platform for the peaceful use of nuclear energy.
• China is willing to establish 30 new energy projects in Africa.
• China will provide 1 billion yuan in military aid to Africa.
• China will launch China-Africa joint military drills and patrols.
• China will jointly uphold the safety of personnel and projects in Africa.
• In the next 3 years, the Chinese government is willing to provide 360 billion yuan in financial assistance towards this.
• China will provide a new opportunity for Africa to achieve its dream of modernization, stating, “On the road to modernization, not one country can be left behind.”

The PBOC and China’s FX regulator will hold a press conference

• People’s Bank of China and China’s State Administration of Foreign Exchange (SAFE)

At 0700 GMT / 0300 US Eastern time China’s central bank and foreign exchange regulator hold a news conference

• Its on “promoting high-quality development”.

Key speakers include:

• Lu Lei, deputy governor of the People’s Bank of China
• Li Hongyan, deputy head of the State Administration of Foreign Exchange

Overlooked green shoots” for China – improving growth seen ahead

• A mix of improving consumer sentiment and fiscal stimulus points to better but still below-trend growth to come

In summary from analysts at Invesco Asia Trust on their outlook for China.

Say that factors leading to ingrained pessimism on the economy include:

• faltering demand in the property market
• weak consumer confidence
• a perception that the policy response to market weakness in late 2023 was underwhelming

But, the analysts say they are maintaining a slight overweight position in China and Hong Kong, citing:

• much of the negative investor sentiment comes from ignoring strong household savings and healthy balance sheets
• recent policy announcements point to a greater focus on boosting confidence and supporting growth
• if attitudes toward China improve, they will be rising from a low base, with heavily discounted equity valuations likely to respond quickly to signs of improving corporate fundamentals
• geopolitical tensions persist, but there are indications of economic stabilization and policy measures aimed at more determined efforts to support the property market

PBOC sets USD/ CNY central rate at 7.0989 (vs. estimate at 7.1010)

• PBOC CNY reference rate setting for the trading session ahead. CNY strongest level since April 15.

In open market operations (OMOs):

• PBOC injects 63bn via 7-day RR, sets rate at 1.7%
• 149bn mature today
• net drain of 87bn

RBA’s Bullock says as of now Board doesn’t expect to cut rates in near term

• Reserve Bank of Australia Governor Bullock

• It is premature to be thinking about rate cuts.
• As of now, the board does not expect to be in a position to cut rates in the near term.
• Our highest priority has been and remains to bring inflation down.
• The board remains vigilant to upside risks to inflation.
• Our full employment goal is not served by letting inflation stay above target indefinitely.
• There is substantial uncertainty around the central outlook, with risks on both sides.
• If circumstances change, the board will respond accordingly.
• The labour market remains relatively tight and is expected to ease gradually.
• Labour cost growth is strong, reflecting wage increases and weak productivity.
• The key drivers of elevated inflation are housing costs and market services.
• CPI rents inflation is likely to remain high for some time.
• Level of demand for goods and services higher than supply
• Need to see results on inflation before lowering rates
• Trying to manage demand down to where it is line with supply
• Trying to manage demand so unemployment does not rise too much
• Interest rate policy is clearly working
• Board is not going to focus on one inflation number
• Slightly elevated A$ is positive for inflation fight
• Will be looking closely at Q3 CPI, but there are other indicators
• Need to see inflation slowing in the actual numbers before acting

Australian July Trade Balance is a surplus of AUD 6.009bn (expected 5.15bn)

• Trade data to kick off Q3 2024

Australia’s surplus on trade goods widened in July:

• helped by a rise in exports of rural goods
• dip in liquefied natural gas shipments
• oil imports dipped

BoJ Takata says Japan’s economy is recovering moderately, though some weak signs

Bank of Japan Board Member Takata says Japan’s economy is recovering moderately:

• Japan’s economy is recovering moderately, although some weak signs are seen.
• Stock and FX markets have seen big volatility, but we still see achievement of our inflation target in sight.
• We are seeing renewed rises in import prices.
• We must be vigilant to the chance of a renewed wave of price hikes, while taking into account the impact of the yen rise in early August.
• Hard to debate at this stage to what degree BOJ can shrink its balance sheet.
• Hard to pin down the precise level of Japan’s natural rate of interest.
• Japan’s current real interest rate is below the estimated natural rate of interest, which means monetary conditions remain accommodative.
• Fallout from market turbulence in early August remains, so we must scrutinize the impact for the time being.
• We must adjust monetary conditions by ‘another gear’ if we can confirm that firms will continue to increase capital expenditure, wages, and prices.
• We won’t hike the policy rate with a pre-set level of the neutral interest rate in mind.

Further Remarks by BOJ policymaker, Hajime Takata:

• Current market moves are second round of volatility from early August
• It reflects concern over the US economic outlook
• Our basic stance is to adjust degree of monetary support if things are on track
• But that does not go without some qualifications
• If markets are volatile, we must gauge said impact on the economy and prices
• No preset idea on pace of rate hikes
• Also none on whether we will hike rates several more times
• If economy, prices move in line with forecast, then we will adjust policy in stages
• Have to scrutinise market moves at each policy meeting
• No preset idea on whether there is a ceiling on how much we could raise rates either

Japanese rising real wages data keeps the BOJ on track for a Q4 interest rate hike

• Two months in a row of rising real wages

Bank of Japan Governor Ueda has repeatedly emphasised that broad increases in pay must accompany rising prices for inflation to sustainably and stably meet the Bank’s 2% target.

A snippet from ING’s response says:

• The latest data is broadly in line with the Bank of Japan’s projections, so we continue to believe that the BoJ will deliver another rate hike in 4Q24.

Japan July wages data – Inflation adjusted wages +0.4% y/y

• The Bank of Japan is looking for higher wages to fuel inflation

Japan wages data for July 2024

Average Cash Earnings +3.6% y/y

• expected +2.9%, prior +4.5%

Overtime Pay -0.1% y/y

• prior +0.9%

Real wages +0.4% y/y

Cryptocurrency News

Why Ethereum Is Underperforming Compared to Bitcoin, Solana, Nvidia, Meta, and Others

Ethereum Faces Challenges as It Trails Behind Major Assets

Ethereum (ETH) has been struggling compared to key assets both within and outside the cryptocurrency market. It experienced a 2% decline on Thursday, following insights into its recent performance relative to other top-performing investments.

Performance Overview:

• Ethereum’s YTD Return: 9%
• Top Performers: Nvidia (+142%), Meta (+48%), Bitcoin (+38%), Apple (+22%), Gold (+19%), Google (+18%), Amazon (+18%), NASDAQ (+12%), Microsoft (+12%)

Reasons for Ethereum’s Underperformance:

1. Lack of Killer Applications: Shenyu, co-founder of F2pool, argues that Ethereum’s innovation potential remains underestimated because it lacks transformative applications. This perceived lack of “killer apps” contributes to its current undervaluation despite its revolutionary impact on blockchain technology.
2. Post-Merge Struggles: Following the transition to a proof-of-stake consensus mechanism in Ethereum’s The Merge, the asset has lagged behind Bitcoin, Solana, and BNB. Since The Merge, Ethereum has underperformed Bitcoin by 44%, Solana by 53%, and BNB by 18%.
3. Lower Transaction Count: Analysts from CryptoQuant highlight a decrease in transaction counts on Ethereum’s Mainnet, which has led to a drop in transaction fees. This reduction in activity impacts Ethereum’s overall network health and revenue.
4. Supply Dynamics: The recent Dencun upgrade, introduced in March, brought changes to Ethereum’s architecture. The rising supply of ETH and reduced transaction activity have undermined its previously deflationary status, contributing to its weakened performance.
5. ETF Outflows: Ethereum ETFs have faced significant outflows. On the latest reporting day, net outflows totaled $37.5 million, with Grayscale’s ETHE experiencing $40.6 million in outflows. In contrast, the Mini Ethereum Trust saw a modest inflow of $3.1 million.

Technical Outlook:

• Support Level: Ethereum may decline toward $2,111 if it fails to maintain the $2,400 support level, indicating a crucial threshold for its near-term performance.

Market Sentiment:

• Innovation vs. Current Valuation: Despite Ethereum’s groundbreaking role in blockchain technology, its market value is currently considered mispriced by some investors. The ongoing volatility and underperformance highlight the challenges faced in achieving widespread adoption and application.

Daily Market Movers:

• Ethereum ETFs: Continuous negative flows suggest institutional disinterest.
• Technical Levels: Watch for Ethereum’s price action around the $2,400 support level and potential decline toward $2,111.

XRP Struggles Despite SEC Consent for Postponement of $125 Million Settlement

Ripple Faces Challenges Amid Legal and Market Pressures

Ripple (XRP) saw a decline to $0.54, down 1.81% on the day, following a broader correction in cryptocurrency prices earlier this week. Despite recent legal developments, XRP is struggling to recover.

Key Developments:

• SEC Settlement Postponement: Ripple recently filed a request to stay the $125 million monetary portion of the judgment in the SEC vs. Ripple lawsuit. This request was granted with the SEC’s consent, allowing for a temporary postponement of the fine.
• Legal Ruling: The court’s final ruling was a partial victory for Ripple. Judge Analisa Torres ruled that XRP is not classified as a security in secondary market transactions on crypto exchanges. However, Ripple was still fined $125 million for securities law violations.
• Market Reaction: XRP’s price drop to $0.54 reflects ongoing market volatility and investor uncertainty. The postponement of the settlement provides temporary relief but does not address broader concerns about regulatory clarity.

Daily Market Movers:

• Regulatory Uncertainty: Traders are closely monitoring whether the SEC will appeal the final ruling. An appeal could further impact XRP’s legal standing and investor sentiment.
• Market Correction: XRP’s decline is part of a larger trend affecting cryptocurrencies, contributing to its current struggle despite legal progress.

Outlook: Ripple’s current situation highlights the challenges of navigating legal uncertainties and market dynamics. The temporary relief from the SEC consent is a positive step, but XRP’s price performance remains under pressure from broader market trends and potential regulatory developments.

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