North American News
US Equity Close: Late Buying Boosts Market Performance
US equities closed the day with a positive note, driven by a surge in buying activity late in the session. Despite initial concerns following comments from Federal Reserve Chair Jerome Powell, the market rebounded, closing higher.
Closing Numbers:
- S&P 500: +0.4%
- Nasdaq Composite: +0.4%
- Dow Jones Industrial Average: Flat
- Russell 2000: +0.2%
Market Sentiment
While Powell’s remarks initially weighed on market sentiment, late-quarter buying effectively countered the negative impact, leading to a favorable finish for major indices. The robust buying activity highlights the resilience of the market as investors positioned themselves ahead of upcoming economic data releases.
Dallas Fed September manufacturing index -9.0 vs -9.7 prior
- The manufacturing survey from the Dallas Fed
- Prior was -9.7
- Output (production) -3.2 vs +1.6 prior
- New orders -5.2 vs -4.2 prior
- Employment +2.9 vs -0.7 prior
- Outlook -6.4 vs -9.6 prior
- Prices paid for raw materials +18.2 vs +28.2 prior
- Prices received +8.4 vs +8.5 prior
- Wages +18.5 vs +22.0 prior
All the sub-indexes are within recent ranges except this one:
Comments in the report:
Chemical manufacturing
- Increased imports [is an issue affecting our business].
- Regulation [is an issue affecting our business].
Computer and electronic product manufacturing
- We are seeing signals of the market inflecting up, but near-term, things remain muted.
- We look at the possibility of a [Kamala] Harris administration with great concern. It will almost certainly lead to a reduction in our general business activity. We sell into many industries, so while “green” industries will be favored, we expect others (e.g., oil and gas) to be politically disfavored, leading to reduced investment.
Fabricated metal product manufacturing
- Our system business has slowed, while our shop work is very strong. We usually see large system work hold or decline in an election year.
Food manufacturing
- Now that the Federal Reserve has started to lower interest rates, I feel better about the overall direction of the economy. After the presidential election, we will have a clearer perspective of what to expect in the next six to 18 months. Now, what will happen with oil and the Middle East?
- Interest rates coming down is having a positive impact on capital expenditure and interest payments.
Machinery manufacturing
- Business remains slow, which will hopefully change after the election.
- The reality of a Democrat victory is disconcerting for our customer base who have a legitimate fear of declining business conditions going forward. That jeopardizes our forecast and opportunities for success. It’s been quite a while since our customers’ sentiment has been this negative.
Nonmetallic mineral product manufacturing
- Improvements are only due to a new product line introduced. We have not seen any business or industry improvements.
Paper manufacturing
- We saw a slight uptick in activity from last month. This was before the interest rate movement.
Primary metal manufacturing
- We are using capital expenditures to add new product offerings to offset dwindling legacy product. Oil and gas product demand is shrinking.
- All of the major markets we sell into continue to trend downward. That includes transportation and building/construction.
Printing and related support activities
- September will be slower with less billing than August, which is a drag as it’s the last month of this fiscal year. We have been feeling the slowness in estimating for a couple of months, and now we are seeing the results. We are optimistic that six months from now we will see better times, especially after the election.
Transportation equipment manufacturing
- The outlook is totally controlled by the November election.
- We are seeing constraint from large customers being practiced, [with them] only ordering what’s needed immediately, not providing forecasts and not sharing insight. Major customers have been impacted by cyberattacks and ransomware incidents, shutting down operations in August and September.
- We are tied to the trucking/transportation industry. The market continues to soften, with fleets holding onto cash. All other suppliers to the market are seeing the same thing. Overall, the market is down 50 percent year over year.
Powell Q&A: A downside risk in GDP was a revision to GDI, but GDI was revised higher
- Comments from the Fed chair in Nashville
- Notes that a downside risk in GDP was a revision to GDI
- Instead, GDI was revised higher
- Fed not in a hurry to cut rates quickly, will be guided by data
- Rate cut process will play out ‘over some time’ with no need to go fast
- Fed will take everything into account at Nov meeting
- If economy evolves as expected, it will mean two more cuts this year, totalling 50 bps
- As long as inflation in new leases is relatively low, it will eventually show up but it looks like it will take longer than we thought
- The half-point cut in Sept was a reflection in inflation’s return to 2%
Powell: Policy will move over time to neutral if economy meets forecasts
- Powell speaks at the National Association for Business Economics’ meeting
The title of the speech is “Finding Harmony in the Noise: Transitioning to a New Normal”. These are his first comments since the Sept 18 FOMC press conference.
- Risks are two-sided, decisions will come meeting by meeting
- We do not need to see further cooling in the labor market to achieve target
- Economy is in solid shape, we intend to use our tools to keep it there
- Labor market conditions are solid, labor market roughly in balance
- Colleagues and I have greater confidence inflation is on a sustainable path to 2%
- Disinflation is broad based; recent data indicate further progress toward sustained return to 2%
- Housing services inflation will continue to decline as long as growth rate in rents for new tenants remains low
- 50 bps cut reflects growing confidence that appropriate policy re calibration can maintain labor market strength
Fed Goolsbee: There will be a lot of rate cuts
- Speaking on FOXBusiness news
- He is worried about the possible continued port shutdown
- The Fed is cutting rates because the economy has normalize
- The jobs market is sustainable
- Interest rates coming down is the order the day.
- Cautionary indicators on the job market
- The most important thing about rate cuts is the process of easing
- There will be a lot of rate cuts.
- Inflation is coming in close to target.
- Case on cutting rates is clear. Nothing to do with politics.
Fed Pres. Bostic: Is open to another 50 bp cut if labor market shows continued weakness
- Atlanta Fed Pres. Bostic speaking
- Bostic Is open to another 50 basis point cut of labor market shows continued weakness.
- Baseline cases for an orderly easing with inflation and expected to continue slowing and job market to hold up.
- He does not want to get overconfident on inflation given core personal consumption expenditures price index remains at 2.7%.
- He will be watching incoming jobs stated closely if employment growth slows much below 100 K jobs it would warrant closer questioning of what is happening.
- Business contacts continue to say they do not expect layoffs.
- Recent PCE data shows disinflation still on track.
- Baseline outlook involves gradual Fed easing over 15 months, targeting a policy rate of 3.00%-3.25% by the end of 2025.
- He currently supports one additional 0.25% rate cut this year, pending upcoming inflation and labor market data.
Commodities
Gold Declines as Strong Dollar and Powell’s Speech Weigh on Prices
Gold prices slipped for the second consecutive day, falling by 0.6% to settle at $2,639. Despite a backdrop of declining US Treasury yields and rising geopolitical tensions, the precious metal struggled to maintain momentum as the US Dollar Index rose in response to Federal Reserve Chair Jerome Powell’s remarks.
Market Overview
Powell’s speech at the 66th NABE Annual Meeting indicated the possibility of two additional 25 basis point rate cuts in 2024, which dampened gold’s appeal. The US Dollar Index increased by 0.15% to 100.56, further pressuring gold prices. However, September remains a strong month for gold, with gains exceeding 5.40%, marking its best performance since March 2024.
Key Highlights
- Mixed Market Response: Wall Street displayed a mixed reaction to Powell’s speech, as he ruled out a potential 50-basis-point cut in the Fed’s upcoming meetings, reiterating a cautious approach toward monetary easing.
- Geopolitical Tensions: Heightened geopolitical risks following Israel’s attack on Hezbollah’s headquarters in Lebanon failed to provide the anticipated support for gold prices, with analysts noting a lack of traction despite these tensions.
- Economic Data: The Chicago Fed National Activity Index, or Chicago PMI, improved for the third month in a row, rising to 46.6, which, although still in contraction territory, surpassed previous estimates. In contrast, the latest PCE Price Index report showed mixed results, with headline inflation dropping to 2.2% YoY in August.
Summary
Gold’s recent decline reflects the interplay between a strengthening dollar and cautious market sentiment in response to Powell’s comments. While the geopolitical landscape remains turbulent, gold’s inability to capitalize on these factors indicates a challenging environment ahead. Nevertheless, the metal’s robust performance in September suggests potential resilience, contingent on broader economic developments and continued investor interest.
WTI crude oil futures settled $68.17
- Down one cent on the day
Crude oil settled today just one cent lower at $68.17. The low price today reached $67.60. The high price reached $69.18. At session lows, the price stayed above a swing area going back to 2023 between $66.76 and $67.51. On both Thursday and Friday of last week, the price stalled within that area and bounced higher.
On the fundamental side, Oil prices dropped due to China’s slowing manufacturing sector and rising supply from Libya and OPEC+ countries.
Silver Slides Toward $31.50 Amid Rising Dollar
Silver prices have sharply declined, trading near $31.50 as the US Dollar strengthens. Investor focus is now on a significant amount of economic data anticipated this week.
Market Overview
The white metal saw notable selling pressure during Monday’s European session, reflecting the broader market sentiment ahead of key economic indicators. According to the CME FedWatch tool, market participants are divided almost evenly on expectations for a 25 or 50 basis point rate cut in November, anticipating a total reduction of 75 basis points by year-end.
Key Highlights
- Interest Rate Speculation: Traders were closely monitoring Powell’s speech for fresh guidance on interest rate adjustments, which heavily influence’s silver’s price trajectory.
- Upcoming Economic Data: This week, critical US labor market reports are set to be released, including JOLTS Job Openings for August, the ADP Employment Change, and Nonfarm Payrolls (NFP) for September. These data points will be pivotal in shaping market expectations regarding the Fed’s monetary policy.
Summary
Silver’s decline to near $31.50 underscores the impact of a rising dollar and heightened uncertainty surrounding interest rate decisions. As investors await crucial economic data and Powell’s insights, the metal’s trajectory will likely be influenced by evolving market conditions and labor market performance in the coming days.
EU News
Germany September preliminary CPI +1.6% vs +1.7% y/y expected
- Latest data released by Destatis – 30 September 2024
- Prior +1.9%
- HICP +1.8% vs +1.9% y/y expected
- Prior +2.0%
Bavaria September CPI +1.9% vs +2.1% y/y prior
- Latest data released by Destatis – 30 September 2024
- Brandenburg CPI +1.4% vs +1.7% y/y prior
- North Rhine Westphalia CPI +1.5% vs +1.7% y/y prior
- Saxony CPI +2.4% vs +2.6% y/y prior
- Baden Wuerttemberg CPI +1.4% vs +1.5% y/y prior
Germany August import price index -0.4% vs -0.3% m/m expected
- Latest data release by Destatis – 30 September 2024
- Prior -0.4%
Looking at the details, the main drag was from energy prices which were down 4.8% compared to July. If you strip that out, import prices were only down by 0.2% on the month with the main drag being from prices for intermediate goods (-0.6%). Comparing to a year ago though, import prices were seen up 0.2% compared to August 2023.
Italy September preliminary CPI +0.7% vs +0.8% y/y expected
- Latest data released by Istat – 30 September 2024
- Prior +1.1%
- HICP +0.8% vs +1.0% y/y expected
- Prior +1.2%
UK Q2 final GDP +0.5% vs +0.6% q/q prelim
- Latest data released by ONS – 30 September 2024
- Prior +0.7%
- GDP +0.7% vs +0.9% y/y prelim
- Prior +0.3%
It’s a slight revision lower with the quarterly breakdown as per the following compared to the preliminary estimate:
- Household consumption +0.11% (previously +0.12%)
- Government consumption +0.23% (previously +0.30%)
- Gross fixed capital formation +0.10% (previously +0.08%)
- Gross capital formation: other +2.25% (previously +2.30%)
- Net trade -2.20% (unchanged)
UK September Nationwide house prices +0.7% vs +0.2% m/m expected
- Latest data released by Nationwide Building Society – 30 September 2024
- Prior -0.2%
In annual terms, house prices grew by 3.2% year-on-year and that’s the fastest growth in two years. The average price of a typical dwelling in the UK is at £266,094 as of the month. Nationwide notes that:
“Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters. These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historic standards.”
UK August mortgage approvals 64.86k vs 64.00k expected
- Latest data released by the BOE – 30 September 2024
- Prior 61.99k; revised to 62.50k
- Net consumer credit £1.3 billion vs £1.4 billion expected
- Prior £1.2 billion
Switzerland September KOF leading indicator index 105.5 vs 101.0 expected
- Latest data released by KOF – 30 September 2024
- Prior 101.6; revised to 105.0
SNB total sight deposits w.e. 27 September CHF 472.2 bn vs CHF 465.3 bn prior
- Latest data released by the SNB – 30 September 2024
- Domestic sight deposits CHF 463.6 bn vs CHF 457.2 bn prior
ECB’s Lagarde: Some survey indicators suggests the recovery is facing headwinds
- Comments from ECB’s Lagarde:
- Latest developments strengthen our confidence that inflation will return to target in a timely manner, we will take that into account at meeting in October
- Employment growth slowed to just 0.2% in the second quarter and recent indicators point to a further deceleration in the coming quarters
- The labor market remains resilient
- We expect the recovery to strengthen over time
- Any attempt to enlarge and strength banks is welcome, bearing in mind liabilities
- Cross border mergers have a lot of benefits but aren’t without risks
- It’s up to undertakers of mergers to decide if they are worth it
Asia-Pacific-World News
China will make all-out efforts to complete annual deliver tasks -state media
- More on upbeat China
- Will increase loan placement for ‘white list’ projects, met reasonable financing needs of real estate projects
China delivers on pledge to lower down payments for homes
- Down payments to be lowered to 15%
As promised last week, China has lowered the down payment ratio for first-time home buyers to 15% while the ratio for second homes has been lowered to 20%.
PBOC sets USD/ CNY reference rate for today at 7.0074 (vs. estimate at 7.0098)
- PBOC CNY reference rate setting for the trading session ahead
In open market operations (OMOs):
- PBOC injects 212bn via 7-day RR, sets rate at 1.5% (this was lowered on Friday)
China Caixin September Manufacturing PMI 49.3 (prior 50.4) Services 50.3 (prior 51.6)
- S&P / Caixin September 2024 PMIs from China
China official PMI data: Manufacturing 49.8 (expected 49.5)
- China National Bureau of Statistics (NBS) data – September 2024 PMIs
September PMIs
Manufacturing 49.8
- expected 49.5, prior 49.1
Non manufacturing 50.0
- expected 50.4, prior 50.3
Chinese stocks continue to surge
- Beijing 50 Index is up more than 14% on the day, its biggest rise on a day ever
- ChiNext is up 11%
- Beijing 50 i sup 14%
- Shanghai Composite +4%
- Hong Kong’s Hang Seng +1%
More stimulus from China over the weekend – banks instructed to cut mortgage rates
- PBOC tells banks to cut mortgage rates by October 31
On Sunday the People’s Bank of China announced it’d be instructing banks to lower mortgage rates for existing home loans before October 31.
- The PBOC said banks should reduce interest rates on existing mortgages to no less than 30 basis points (bps) below the Loan Prime Rate (LPR)
The 5-year Loan Prime Rate (LPR) was left unchanged at 3.85% this month. The five-year rate is used as a reference for long-term credit including mortgages. While it was left stable it is expected be lowered. In effect, mortgage rates should drop by circa 50bp. China’s property sector has been, and continues to be, a huge black-hole drag on the economy. Mortgage rate deduction should help, at the margin.
In other news from China over the weekend;
- Guangzhou city announced it’d be lifting of all restrictions on home purchases
- Shanghai and Shenzhen said they would ease restrictions on housing purchases by non-local buyers and lower the minimum down payment ratio for first homebuyers to no less than 15%
Hedge funds caught short China shares, huge losses exacerbated by Shanghai exchange glitch
- The Shanghai Stock Exchange had issues processing transaction on Friday
Info comes via a (gated) Bloomberg report. It reports that the Shanghai Stock Exchange conducted weekend stress tests, requesting brokerages take part in these tests after its systems faced difficulties handling a surge in trading activity on Friday.
Weekend simulations included processing 270 million transactions according to a statement from the exchange. This is twice the previous record and three times the orders placed on Friday said the statement. The report goes on to describe how some hedge funds, which held short positions in stock-index futures and long positions in equities, struggled to sell their shares quickly enough on Friday to meet margin calls for their futures, owing to exchange-related delays in order processing.
Australian August 2024 Private Sector Credit +0.5% m/m (expected +0.5%)
- Data from the Reserve Bank of Australia
Credit growth steady on the month both m/m and y/y. Business credit expanding.
Australia’s budget surplus is AUD15.8bn, way better than the 9.8bn expected
- Australia’s federal government has delivered two consecutive surpluses, the first in nearly two decades.
In May the Australian Treasury forecast a budget suplus of A$9.8bn.
The final outcome though is way above, at A$15.8bn, which is more than A$6bn better than forecast.
New Zealand September business confidence 60.9 (prior 50.6)
- ANZ Business Outlook survey September 2024
ANZ Business Outlook survey September 2024
Business Confidence 60.9%
- prior 50.6%
Activity 45.3%
- prior 37.1%
ANZ comment:
- first signs of improvement in current activity
- A sharper rebound in economic activity than generally anticipated would of course be great news – as long as inflation still returns sustainably to target.
- The proportion of firms intending to raise their prices in the next three months lifted for a third consecutive month. It’s the highest since April and well above pre-COVID levels.
- But in good news from the RBNZ’s point of view, reported wage growth has dropped from 4% in April to 3% six months later, and no doubt relatedly, cost expectations have dropped steadily from 3.2% in April to 2.4% now.
Japan August Retail Sales 2.8% y/y (expected 2.3%)
- Japan data
Japan data – August Industrial production -3.3% m/m (expected -0.9%)
Japan Industrial Production forecast 1m ahead (MoM) (Sep)
- Actual: 2.0%
- Previous: 2.2%
Japan Industrial Production forecast 2m ahead (MoM) (Oct)
- Actual: 6.1%
- Previous: -3.3%
Japan chief cabinet secretary Hayashi says no comment on daily share moves
- Japanese shares have been smashed lower today, the higher yen not helping
Hayashi:
- No comment on daily share moves
- Continue to monitor economic and financial situation in Japan and overseas with sense of urgency
- Continue to work closely with BOJ
Japanese government official says industrial output will bounce back in September on autos
- Blames August weather for the slump (typhoon) – says output will get better ahead:
- Fall in motor vehicle production contributed to the decline in August
- Chip-making equipment output also decreased due to weaker overseas demand
- Chip-making machinery exports to Taiwan dropped significantly in August
- September output to get a lift from automakers’ making up production suspension during the typhoon in August
Cryptocurrency News
Ethereum Faces Pressure as Foundation Sells While ETFs Record Inflows
Ethereum (ETH) is encountering headwinds, currently trading around $2,595 and down 2% on Monday. The recent selling activity by the Ethereum Foundation, which has offloaded a total of 3,766 ETH valued at approximately $10.46 million this year, raises concerns about the coin’s stability. Should ETH sustain a prolonged drop below the critical support level of $2,595, it risks a further decline to around $2,395.
Market Overview
Despite the pressures from the Ethereum Foundation’s selling, US spot Ethereum ETFs have seen a turnaround with net inflows of $85 million last week, ending a streak of six weeks of outflows. This development suggests renewed investor interest, countering the bearish sentiment from the foundation’s sales.
Key Highlights
- ETFs Reverse Outflows: US spot Ethereum ETFs recorded their first positive inflows in over a month, led by substantial contributions from BlackRock’s ETHA and Fidelity’s FETH, totaling $95.5 million and $64.8 million, respectively. This shift indicates a potential resurgence in interest from institutional investors.
- Foundation’s Selling Activity: On Monday, the Ethereum Foundation sold 100 ETH for 263,000 DAI, continuing a pattern of selling that has raised alarms within the community. Vitalik Buterin, co-founder of Ethereum, clarified that the sales are meant to fund research and projects aimed at enhancing the Ethereum ecosystem.
- Community Sentiment: While concerns over the Foundation’s selling persist, many in the crypto community remain optimistic about continued inflows into Ethereum ETFs in October, historically a favorable month for Ethereum and the broader crypto market.
Summary
Ethereum’s current struggle around the $2,595 support level is compounded by the Ethereum Foundation’s ongoing selling spree. However, the positive momentum from ETF inflows signals a potential rebound in investor interest. Should Ethereum fail to hold above this critical level, it may be poised for a decline to $2,395. As the market watches these dynamics closely, the potential for future growth in Ethereum ETFs could play a crucial role in shaping the altcoin’s outlook.
XRP Stumbles Below $0.65 While Ripple’s CEO Eyes $5 Trillion Crypto Market Cap
XRP struggled to maintain momentum, failing to close above the critical $0.65 threshold, a significant psychological level for its holders. The altcoin slipped to $0.6274, marking a 2% correction on Monday. Despite this setback, Ripple CEO Brad Garlinghouse expressed a bullish outlook on the broader cryptocurrency market, projecting a market cap expansion to $5 trillion by the end of 2024.
Market Overview
Ripple (XRP) faced challenges in sustaining its position above the $0.6500 level, a pivotal point for many investors. The cryptocurrency’s decline highlights ongoing volatility within the altcoin market, even as bullish sentiments emerge from Ripple’s leadership.
Key Highlights
- XRP Price Movement: XRP attempted to hold above $0.6500 but eventually fell to $0.6274, reflecting market pressures and profit-taking among traders.
- CEO’s Optimistic Forecast: At the Consensus 2024 event, Garlinghouse shared his positive outlook on the cryptocurrency market, suggesting that reaching a $5 trillion market cap is not just possible but inevitable. He later indicated that his previous estimates might have been conservative.
- Upcoming Events: Garlinghouse and co-founder Chris Larsen are set to participate in an annual fintech conference hosted by the Federal Reserve Bank of Philadelphia on October 22-23. The event will also feature prominent figures like Coinbase’s Chief Legal Officer, Paul Grewal.
- Ripple Lawsuit: The ongoing legal battle with the Securities and Exchange Commission (SEC) continues to be a significant factor influencing XRP’s price dynamics, particularly regarding any potential appeals following the recent ruling.
Summary
XRP’s failure to close above the $0.65 mark underscores the challenges it faces amid market volatility. However, Ripple CEO Brad Garlinghouse’s ambitious prediction for a $5 trillion cryptocurrency market cap by the end of 2024 injects a sense of optimism into the sector. As key events approach and the regulatory landscape remains in focus, traders will be watching closely for developments that could impact XRP and the broader cryptocurrency market.
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