North American News
Snapback Day: Major Indices Climb Higher After Earlier Declines
Market Recap:
US stock indices experienced a dramatic reversal on Wednesday, recovering from significant early losses to close higher. The day’s trading highlighted the volatility and resilience in the markets.
Key Moves:
- Dow Industrial Average: The Dow initially plummeted by 743.89 points but ended the day up 124.75 points, or 0.31%, at 40,861.71. At its lowest, all Dow components were trading in the red.
- S&P 500: The S&P 500 was down 88.56 points but closed with a gain of 58.60 points, or 1.07%, at 5,554.12.
- NASDAQ: The NASDAQ index, which had fallen by 238.04 points, surged by 369.65 points, or 2.17%, ending at 17,395.53.
- Russell 2000: The Russell 2000 also bounced back, closing up 6.41 points, or 0.31%, at 2,103.84 after a session low of down over 38.75 points.
Notable Stock Movements:
- Nvidia: Shares surged by $8.68, or 8.03%, closing at $116.78 following positive comments from CEO Jensen Huang at a conference.
- SMCI: The stock rebounded sharply, rising $32.44, or 7.86%, to $445.16 after recent issues.
- IBM: Achieved a decade-high, up 2.13% on the day at $209.
- Broadcom: Gained $10, or 6.75%, closing at $158.21.
- Micron: Rose $3.80, or 4.38%, to $90.65.
- AMD: Increased by $7, or 4.90%, ending at $149.84.
- Intel: Up $0.68, or 3.56%, closing at $19.66.
- Arm Holdings: Saw a significant rise of $13.10, or 10.30%, closing at $140.32.
Summary:
Wednesday’s trading session showcased a strong recovery across major indices and notable stocks. The sharp reversals highlight the market’s volatility and resilience, with key tech and semiconductor stocks leading the gains.
US treasury auctions of $39 billion of 10 year notes at a high yield of 3.648%
- WI level at the time of the auction: 3.662%
High Yield: 3.648%
- Previous: 3.96%
- Six-auction average: 4.314%
WI level at the time of the Auction: 3.662%
Tail: -1.4 basis points
- Previous: 3.1bps
- Six-auction average: 0.8bps
Bid-to-Cover: 2.64X
- Previous: 2.32x
- Six-auction average: 2.48x
Dealers: 10.25%
- Previous: 17.9%
- Six-auction average: 16.3%
Directs: 13.7%
- Previous: 16.0%
- Six-auction average: 17.0%
Indirects: 76.1%
- Previous: 66.2%
- Six-auction average: 66.7%
US August CPI 2.5% YoY versus 2.6% expected
- US August 2024 consumer price index
- Prior month 2.9%
- CPI YoY rose 2.5%. That was the smallest 12 month increase since February 2021.
- CPI MoM 0.2% versus 0.2% expected
- Month over Month unrounded 0.187%
Core measures:
- Core CPI YoY 3.2% vs 3.2% expected.
- Core CPI MoM 0.3% vs 0.2% expected
- Core unrounded 0.281%
- Real weekly earnings +0.5% versus -0.2% last month
- Shelter inflation rose by 0.5%
- Food increase by 0.1% after rising 0.2% in July
- The index for food away from home rose 0.3% for the month with food at home was unchanged
- energy prices fell -0.8% versus unchanged last month.
- The energy index decreased 4.0 percent for the 12 months ending August. The food index increased 2.1 percent over the last year.
Summary of line items:
- Index for all items less food and energy rose 0.3% in August (up from 0.2% in July).
- Shelter index increased 0.5% in August; owners’ equivalent rent rose 0.5%, rent index up 0.4%.
- Lodging away from home index rose 1.8% in August (up from 0.2% in July).
- Airline fares index increased 3.9% in August, reversing declines from the previous 5 months.
- Motor vehicle insurance index rose 0.6% in August; education and apparel indexes also increased.
- Used cars and trucks index fell 1.0% in August (following a 2.3% decrease in July).
- Household furnishings and operations index decreased 0.3% in August.
- Medical care index fell 0.1% in August (after a 0.2% decline in July).
- Communication, recreation, and personal care indexes each decreased 0.1% in August.
- New vehicles index remained unchanged in August.
- Over the past 12 months, the index for all items less food and energy rose 3.2%.
- Shelter index increased 5.2% over the last year, contributing over 70% to the total 12-month increase for items less food and energy.
- Notable 12-month increases: motor vehicle insurance (+16.5%), medical care (+3.0%), recreation (+1.6%), and education (+3.1%).
US is closer to allowing Nvidia chips to Saudi Arabia
- Nvidia shares are currently up $4.72 or 4.3%
There is a report that the US is closer to allowing Nvidia chips to Saudi Arabia. Nvidia shares are trading up $4.72 or 4.3% at $112.80.
US MBA mortgage applications w.e. 6 September +1.4% vs +1.6% prior
- Latest data from the Mortgage Bankers Association for the week ending 6 September 2024
- Prior +1.6%
- Market index 233.7 vs 230.5 prior
- Purchase index 138.6 vs 136.1 prior
- Refinance index 757.8 vs 751.4 prior
- 30-year mortgage rate 6.29% vs 6.43% prior
Fed IG said Atlanta Fed Pres. Bostick violated Fed rules on trading
Fed IG releases a report on 11 Fed Pres. Bostick and his financial disclosure:
- Says Bostick violated federal rules on trading
- Bostick created appearance of acting on confidential information
- Bostick created appearance of a conflict of interest
- The report didn’t find evidence that Bostick traded on confidential information
US 30 year mortgage rates lowest in 20 months at 6.11%
US mortgage rates have moved to their lowest level in 20 months.
The rate today moved to 6.11%. That is down from a high of 7.8% back on October 25, 2023.
Goldman Sachs Solomon on CNBC. Sees 2 maybe 3 cuts. Could see possibility of 50 BP cut
- But his base case is for a cut of 25 basis points
Goldman CEO David Solomon on CNBC says:
- Environment is actually okay for bank activity
- there are places where it’s exhilarating
- the economy is still in great shape
- The likely scenario is that the Fed navigates with a soft landing
- Consumer is still healthy especially in the service sector.
- I found the CEO sect at consumer seminar is quite positive on the economy
- See 2 maybe 3 cuts into the fall
- My view has always been very data dependent.
- The consensus is in the soft landing camp
- There is a case to be made for 50 basis points based on softer labor market
- My expectation is for 25 basis point cut.
- We have made real progress on inflation
- There is a risk of slow growth on inflation but not his base case scenario.
- Going to see material improvement and investment banking activity. A bigger Improvement in capital markets activity and less improvement in M&A. Recovery has been a little slower in the recovery.
- I don’t think unwinding the credit card business has proven to be messier then we thought, and going to see that there is a material improvement in investment banking activity.
- Nvidia’s Jenson’ optimism on the pace of innovation is quite optimistic and compelling.
- Nvidia is a super company, but don’t call “balls and strikes” on the valuation of the company.
- The report on policy issues from Trump and Harris and projected its impact on growth impact. The impact was only 0.2%.
Citigroup sees a 25 bp rate cut in September down from 50 bps prior to CPI
- The CPI is not doing it for 50 bps
Citigroup now sees a 25 basis point rate cut in September down from 50 basis points prior to the CPI (and post the US jobs report last Friday). The CPI data did not do it.
Although their expectations for September have been tempered, they still expect 50 basis point cuts in November and December.
Fitch says the coming Federal Reserve easing cycle will be mild and slow
- Fitch Ratings says there is still work to be done in reducing services inflation
On what to expect from the Federal Open Market Committee (FOMC):
- “The long-awaited Fed easing cycle is upon us, but the FOMC will be cautious after the inflation challenges of the past few years. The pace of rate cuts will be gentle and monetary easing won’t do much to boost growth next year”
- We expect 25bp cuts at the September and December meetings and further cuts of 125bp in 2025 and 75bp in 2026.
- These interest rate forecasts represent a much less aggressive easing cycle than most prior Fed easing episodes. There is still work to be done in reducing services inflation and the challenges of the past few years will engender caution at the FOMC.
Goldman Sachs says US stock market may decline by year-end, but no bear market
- GS also say that the chance of a recession is low
Goldman Sachs says that the US stock market may fall by the end of the year, citing the drag from:
- high valuations
- mixed growth prospects
- policy uncertainty
Commodities
Gold Retreats to $2,500 Following US CPI Data Release
Market Overview:
Gold prices fell back to $2,500 after peaking around $2,520 following the release of the latest US inflation data. The movement reflects ongoing uncertainty about the Federal Reserve’s upcoming interest rate decision.
Key Developments:
- US CPI Data: The US Consumer Price Index (CPI) for August rose 2.5% annually, below July’s 2.9% and the forecasted 2.6%. Monthly CPI increased by 0.2%, aligning with expectations. Core CPI remained steady at 3.2% annually, with a 0.3% monthly increase, surpassing the anticipated 0.2%.
- Market Reaction: The release of CPI data led to a stronger US Dollar, which inversely impacted Gold prices. The metal fell from its earlier highs to around $2,500. As Gold is negatively correlated with the US Dollar, gains in the latter typically result in declines in the former.
- Fed Rate Cut Speculation: Investors are weighing the potential size of the Federal Reserve’s interest rate cut at the September 17-18 meeting. While a 25 basis points (bps) cut is expected, some market participants speculate a 50 bps reduction could be on the table. A larger cut would enhance Gold’s appeal as a non-interest-bearing asset.
- Political and Dollar Influence: Gold initially benefited from a weaker US Dollar following the Trump-Harris presidential debate. Analysts largely view Vice President Kamala Harris as having a stronger performance, which led to market speculation about a shift in dollar policy. However, this effect might be mitigated by the historical context of Trump’s advocacy for a weaker dollar to benefit US exports.
Daily Market Moves:
- Gold Price Movement: Gold oscillated within a range of approximately $2,480 to $2,530, reflecting investor indecision ahead of the Fed’s meeting. The potential for a significant rate cut remains a key factor influencing Gold prices.
- US Dollar Impact: The strengthening of the US Dollar post-CPI release contributed to Gold’s decline, highlighting the ongoing inverse relationship between the two.
As market participants await the Federal Reserve’s decision, Gold’s movement will likely continue to reflect broader economic indicators and political developments.
Crude oil futures settled at $67.31
- Up $1.56 or 2.37%
Crude oil prices have been very volatile today with the price first moving higher to a high of $67.58, then moving lower to a low at $65.63 before rotating back to the upside and making new high price up to $67.97. The high price today got within $0.16 of the falling 100 hour moving average.
Despite a smaller-than-expected inventory build and the rebound, oil prices remain near their lowest point since May 2023 due to concerns over weakening demand, particularly in China. OPEC’s decision to lower its demand growth forecast and slowing crude oil imports from China contributed to the decline.
The EIA has reduced its oil price projections for Q4 and 2025, and the threat of Hurricane Francine in the Gulf of Mexico poses a risk to refinery operations.
Weekly US EIA crude inventories 0.833M build vs build of 0.987M estimate
- Weekly oil inventory data from the EIA
The weekly oil inventories data shows:
- Crude oil 0.833M vs 0.987M estimate
- Gasoline + 2.310M vs -0.109M estimate
- Distillates 2.308M vs 0.313M estimate
Other details:
- Cushing -1.704M vs -1.142M last week
- refining utilization w/e -0.5% versus expected -0.7%.
- Crude production 13.3M vs 13.3M previous week
ICYMI – Saudi Aramco cut its Arab Light crude oil price to Asia, Europe and the US
- Saudi Aramco is Saudi Arabia’s state-run oil company
Saudi Arabia’s state-run oil company Saudi Aramco cut prices to Asia, Europe and the US.
October pricing for Arab Light crude oil to Asia cut by 70cents / barrel
- Saudi Aramco also lowered the price of Arab Light to Northwest Europe (lowered around 80 cents)
- and to the United States (by 10 cents)
ICYMI – OPEC has cut its forecasts for global oil demand
- Call on OPEC+ crude slashed further
OPEC’s monthly oil market report was published on September 10.
- oil demand will grow by 2 million b/d in 2024
- this is down 80,000 b/d from the forecast in August
- for 2025, demand will rise a further 1.7 million b/d, a 40,000 b/d downward revision
OPEC has lowered its “call on OPEC+ crude” for 2024 by 360,000 b/d over the past five months
- and for 2025 by 530,000 b/d over that period
EU News
Mixed results for the European indices
- German DAX higher France’s CAC and UK FTSE lower
A snapshot of the closing levels shows:
- German DAX, +0.34%
- France’s CAC, -0.14%
- UK’s FTSE 100 -0.15%
- Spain’s Ibex +0.67%
- Italy’s FTSE MIB -0.12%
UK July monthly GDP 0.0% vs +0.2% m/m expected
- Latest data released by ONS – 11 September 2024
- Prior 0.0%
- Services +0.1% vs +0.2% m/m expected
- Prior -0.1%
- Industrial output -0.8% vs +0.3% m/m expected
- Prior +0.8%
- Manufacturing output -1.0% vs +0.2% m/m expected
- Prior +1.1%
- Construction output -0.4% vs +0.4% m/m expected
- Prior +0.5%
Reuters Poll: BOE to cut bank rate by 25 basis points one more time this year
- 49 of 65 economists expect one cut. 16 expected two
A Reuters poll is out and the survey of 65 economist show:
- 49 of 65 see one more cut between now and year-end.
- 16 of 65 see 2 rate cuts
- UK inflation to average 2.6% in 2024
- inflation to average 2.3% in 2025 (same as August poll).
- For this month, the expectations is that the central bank will keep rates unchanged at 5%
Asia-Pacific-World News
PBOC sets USD/ CNY mid-rate at 7.1182 (vs. estimate at 7.1198)
- PBOC CNY reference rate setting for the trading session ahead.
In open market operations (OMOs):
- PBOC injects 210bn via 7-day RR, sets rate at 1.7%
- 1bn mature today
- thus a net injection of 209bn yuan
China deflation showing signs of worsening spiral, calls for for immediate policy action
- Beijing has shown little inclination for another round of stimulus flooding.
Chief China economist at Morgan Stanley, Robin Xing, says the country is definitely in deflation, probably going through the second stage of deflation.
- “Experience from Japan suggests that the longer deflation drags on, the more stimulus China will eventually need to break the debt-deflation challenge.”
Xing citing falling wages.
Honda to reduce staff at China plants. And suspend production at 3 China plants for 2 week
- Further China woes
Nikkei with the info:
- Honda Motor will reduce the number of employees at its joint venture with Chinese automaker Dongfeng Motor Group
- focusing in particular on workers at its three factories that produce gasoline-powered cars.
And, via Bloomberg:
- Honda will suspend production at 3 plants for 2 weeks
- Inventory adjustment
RBA’s Hunter says the Australian labour market is still tight relative to full employment
- Reserve Bank of Australia
Sarah Hunter, Assistant Governor (Economic) at the Reserve Bank of Australia
- Labour market still tight relative to full employment
- Labour market has moved towards better balance since late 2022
- Easing in labour market similar to past mild downturns
- Some slowing in labour demand to occur via drop in average hours
- Expect employment to continue to rise but at slower pace than population
- Space for vacancies to fall further without sharp rise in unemployment
- Surprised by strength in participation rate, including vs peer economies
- Outlook is highly uncertain, our forecasts likely to be wrong in some way
- high rates are slowing demand in what should a mild economic downturn
- there were signs that the easing in the labour market had started to flow through to wage growth, which was likely past its peak and set to slow further
Japan – Reuters Tankan report for September: Manufacturing sentiment hits a 7 month low
- Manufacturing sentiment 4, from 10 in August
The monthly Reuters Tankan survey, a guide to the Bank of Japan’s quarterly tankan survey:
- September manufacturers sentiment +4, August was +10
- September non-manufacturers sentiment +23 vs +24 in August
- December manufacturers index seen at +3, non-manufacturers at +27
- Business confidence at big Japanese manufacturers sank to a seven-month low in September (February was -1)
Soft Chinese demand was cited as a concern, as were global electric vehicle slowdown and raw material inflation.
Comment from the report:
- “Our clients’ investments were falling behind schedule since they haven’t recovered yet from the impact of the weak Chinese economy,” a machinery maker manager wrote in the survey.
Bank of Japan Nakagawa says ready to raise rates if inflation on track
- Comments from Nakagawa sent the yen higher
Main points, in summary:
- Bank of Japan will continue to raise interest rates if inflation moves in line with its forecast
- last month’s market rout has not derailed its plan to hike steadily
- the BOJ must take into account the impact that such market moves could have on the outlook for the economy and prices when considering whether to hike rates further
- real interest rates are currently very low, we will adjust the degree of monetary support, from the standpoint of sustainably and stably achieving our 2% inflation target, if our economic and price forecasts are met
- One-sided yen falls subsided somewhat but rising import prices could affect consumer inflation with a lag
- Prolonged inflation overseas could put upward pressure on Japan’s import prices
- Must be mindful of impact of overseas, domestic market moves on Japan’s inflation
- Japan’s exports, output likely to resume uptrend as overseas economies sustain moderate growth
- Wage growth likely to accelerate as a trend reflecting rising prices
- Consumption likely to increase moderately reflecting higher wages, albeit being affected by rising prices for time being
- Expect inflation to gradually accelerate as a trend
- Achievement of wage-inflation cycle is in sight
- Must be mindful of upside risk to inflation, downside risks surrounding overseas economies
there is a risk delay in recovering of consumer sentiment could prevent rising income from translating into higher spending - Even after July rate hike, real interest rates remain deeply negative, accommodative monetary conditions maintained
- If long-term rates spike, BOJ could review its taper plan at its policy meeting as needed
- BOJ likely to adjust degree of monetary easing if economy, prices move in line with its projection
- There is no big change to Japan’s economic fundamentals including record profits at Japan firms
- When considering adjusting degree of monetary easing further, we will scrutinise market developments after July rate hike and how that affects economy, prices
- real interest rates remain deeply negative, accommodative monetary conditions maintained
- BOJ likely to adjust degree of monetary easing if economy, prices move in line with its projection
BOJ’s Nakagawa: Hard to comment on timing of next rate hike
- Further remarks on the day by BOJ policymaker, Junko Nakagawa
- Markets remain unstable and likely to stay that way for now
- Need to look at what is behind such volatility in markets
- Japan economic progress is on track based on recent data as set out in July
- Important to look at how economy, prices react to changes in short-term rates
Cryptocurrency News
Ethereum ETFs and Exchange Investors Increase Buying Pressure Amid Key Metric Spike
Market Overview:
Ethereum (ETH) has seen a resurgence in buying pressure as investors step up their activity in both exchange-traded funds (ETFs) and on exchanges, signaling potential for a price rally. This comes after a period of consecutive outflows and market lethargy typical of Q3.
Key Developments:
- ETF Inflows: Ethereum ETFs recorded $11.4 million in inflows on Tuesday, reversing a five-day streak of outflows. This increase was driven by BlackRock’s ETHA and Fidelity’s FETH, which saw inflows of $4.3 million and $7.1 million, respectively. The shift suggests renewed investor confidence and potential anticipation of a price move.
- Exchange Net Flows: Ethereum exchange net flows indicate a high buying pressure, with over 177,000 ETH (approximately $416 million) flowing out of exchanges in the past two days. This suggests strong buying interest from investors, as high outflows from exchanges typically signify increased accumulation.
- Historical Trends: ETH’s recent sideways movement and the historical Q3 lull might be setting the stage for a significant price move. Investors may be positioning themselves ahead of a potential rally as the market exits its typical Q3 slow period.
- Whale Activity: Despite increased buying pressure, large Ethereum whale transactions (over $1 million) have decreased in recent weeks. Analysts suggest that whales might be waiting for more favorable prices to either buy in or distribute their holdings, which could influence ETH’s price trajectory.
Daily Market Movers: The recent uptick in ETF inflows and substantial exchange outflows indicate a potentially bullish outlook for Ethereum. The shift in buying behavior, coupled with the end of the Q3 market lull, may signal the beginning of a significant price movement. However, the cautious approach of large whale investors suggests that the market could be awaiting clearer signals before making substantial moves.
Artificial Superintelligence Alliance Proposes Cudos Integration: Community Vote Ahead
Market Overview:
The Artificial Superintelligence Alliance (ASI) has proposed adding Cudos as its fourth member, subject to a community vote scheduled for September 19. This potential merger aims to enhance the alliance’s capabilities in decentralized AI and blockchain technology.
Key Developments:
- Proposed Integration: The ASI Alliance, which currently includes Fetch.ai, Singularity.Net, and Ocean Protocol, plans to integrate Cudos. This merger would combine Cudos’s decentralized AI computing resources with the existing alliance members, potentially boosting the ecosystem’s computing power and security.
- Voting Process: Both the Cudos and ASI communities will vote on the proposal from September 19 to September 24. If approved, Cudos’s native token, CUDOS, will be merged with the ASI token, FET, at a rate of 112.427 CUDOS to 1 FET. The merged tokens will undergo a 3-month public vesting and a 10-month treasury vesting period.
- Strategic Goals: The integration aims to foster innovation in AI and blockchain, moving towards the alliance’s goals of achieving Artificial General Intelligence (AGI) and Artificial Superintelligence (ASI). The partnership is also expected to enhance the alliance’s competitive edge in the decentralized AI market.
- Market Reaction: Following the announcement, ASI (FET) and CUDOS tokens have seen increases of over 2% and 4%, respectively, reflecting positive market sentiment towards the proposed merger.
Daily Market Movers: The addition of Cudos could significantly impact the ASI ecosystem, aligning with the alliance’s mission to advance decentralized AI technology and compete effectively in the evolving AI industry.
XRP Ledger Lacks Smart-Contract Functionality; Altcoin Dips 3%
Market Overview:
Ripple’s XRP experienced a 3% decline on Wednesday, trading at $0.5260, as news surfaced about the XRP Ledger’s current lack of smart-contract functionality.
Key Developments:
- Smart-Contract Functionality: Ripple CTO David Schwartz addressed a query on X (formerly Twitter), confirming that the XRP Ledger does not yet support smart contracts. He described the current ledger as a “fixed-function ledger.” Ripple plans to introduce smart contract capabilities by 2025, according to a recent press release.
- Market Reaction: The announcement and the absence of smart contract functionality on the XRP Ledger led to a 3% drop in XRP’s value.
- Future Prospects: Ripple’s roadmap includes adding smart contract functionality via utility functions like hooks, which could enhance the Ledger’s capabilities and potentially drive higher demand for XRP once implemented.
Daily Market Movers:
The lack of smart contract features and the delay in their introduction has contributed to the altcoin’s current dip, reflecting investor concerns over the Ripple platform’s development timeline and its impact on XRP’s utility and demand.
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