North American News
US stocks rally late to finish at the highs of the day
- Strong day despite recession worries
The argument that rates matter more than economic growth is increasingly compelling for US equities. The terminal Fed rate has come down to 3.5% this week from +4% last week and it’s coincided with a bounce.
Today we got more news suggesting an economic slowdown as the S&P Global US PMIs sank but it didn’t matter to stocks.
- S&P 500 up 36 points, or 0.95%, to 3795
- Nasdaq +1.6%
- Russell 2000 +1.2%
- DJIA +0.6%
US weekly initial jobless claims 229K vs 227K expected
- Weekly US initial claims for jobless benefits
- Prior was 229K (revised to 231k)
- Four-week moving average vs 218.5K
- Continuing claims 1.315m vs 1.315m expected
US sells 5-year TIPS at +0.362% vs +0.392% WI
- Results of the 5-year TIPS sale
- Prior was -0.340% (in April)
US S&P Global manufacturing flash PMI 52.4 vs 56.0 expected
- The flash readings on manufacturing and services
- Prior was 57.5
- Services 51.6 vs 53.5 expected
- Prior services 53.5
- Composite 51.2 vs 53.8 prior
- Services rate of input price inflation was the softest for five months and eased notably from May
- The rise in manufacturing input prices was the slowest since April 2021
Powell: Intention is a soft landing but path has gotten more and more challenging
- Comments from Powell in the House
It’s the second day of testimony for the Fed chair. He’s so far repeated much of what he said yesterday but I wanted to highlight the headline comment because it fits in with the price action in the market today as the focus shifts to growth.
More:
- There is a problem with longer-term housing supply
- Housing market is slowing down to some extent now due to higher mortgage rates
Commodities
Silver Price Forecast: XAG/USD plummets towards the $21.00 on broad US dollar strength
- The white metal remains on the defensive and dives more than 2% on Thursday.
- Fed officials backed further rate hikes, though Fed chair Powell acknowledged that the US might get into a recession.
- Silver Price Forecast (XAG/USD): Stays downward biased, and a break below $21.00 might pave the way for fresh YTD lows.
Silver (XAG/USD) plunges in the mid-North American session, falling from daily highs around $21.50 below the $21.00, weighed by a buoyant greenback amidst a mixed market mood, portrayed by US equities advancing, while European bourses closed in the red. At the time of writing, XAG/USD is trading at $20.99.
Recession fears and robust greenback drag metals prices down
The US and global recession fears struck the white metal price and Gold also. On Wednesday, US Federal Reserve chief Jerome Powell admitted that achieving a “soft landing” would be challenging while accepting that the US economy might tip into a recession. Nevertheless, he reiterated Fed’s compromise to tame inflation, and Powell stated that he is not taking any size of rate increases off the table.
Today at the US House of Representatives, Powell reiterated his and the commitment of the Fed to tame inflation, and his narrative stuck around Wednesday’s speech. Meanwhile, one of his colleagues at the Fed, Governor Michelle Bowman, said that she supported a 75 bps in July and commented that inflation is unacceptably high, showing no signs of moderating.
Therefore, the greenback advanced as Fed officials laid the ground for another rate hike. The US Dollar Index, a measure of the buck’s value vs. a basket of currencies, climbs 0.15% to 104.339, contrarily to the US 10-year Treasury yield, which is sliding seven basis points, yielding 3.085%.
Elsewhere US 10-year TIPS (Treasury Inflation-Protected Securities), a proxy for US Real yields, slumps nine bps and is back below 0.60%. Usually, lower Real yields would mean that appetite for precious metals augments, but a strong US dollar puts a lid on precious metals prices.
Meanwhile, the US 10s-2s yield spread remains positive at 0.078%, though it remains to push towards 0%. A reading below 0% would imply that traders forecast a recession in the US.
OPEC+ seen reconfirming August plans at next week’s meeting – report
- Sources report from Reuters
Last month, OPEC+ pre-annonced an output boost for July and August of 648K bpd for July and August. They will rubber-stamp that at next week’s meeting, according to five sources cited by Reuters.
That said, things can change quickly. Last month, we heard the same reports and then they upped output in a late shift.
US energy secretary downplayed banning fuel exports to tame prices – report
- Reuters source
I don’t know what kind of probability we were pricing in of the US banning product exports but it would have been catastrophic for parts of the world and the US standing as a reliable supplier.
I think the Democrats are desperate for relief on gasoline prices, but not that desperate.
EU News
European equity close: Another day of declines
- Closing changes for the main European bourses
- Stoxx 600 -0.6%
- German DAX -1.5%
- UK FTSE 100 -0.9%
- Italy MIB -0.4%
- French CAC -0.4%
- Spain IBEX -0.%
Other News
Germany triggering phase two of emergency gas plan not a solution – Uniper
- Germany’s gas crisis looks set to only get worse in the months ahead
The German government is triggering phase two of its emergency gas plan, in which theoretically higher prices can be passed down to customers – in order to lower demand and prevent longer-term shortages. This is likely to help gear up for the winter months, which will just exacerbate the shortage in supply.
Uniper says that phase two isn’t exactly a solution if the situation remains as it is or deteriorates further. I don’t think they are wrong. In any case, the announcement of phase two is also in part a necessary one as it it a prerequisite for the government to start firing up coal power plants again.
Cryptocurrency News
Is ETH heading below $1,000?
- Ethereum collateral position set a new record as 71,863.47 ETH were liquidated on June 18.
- Independent market analyst told his followers that latest Ethereum price rally would make for a clean fakeout.
- Analysts believe Ethereum price could plummet to $750 in the bear market, an 85% drop from all-time high.