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North American News

North American equity close: The worst first half ever for the Nasdaq

  • Closing changes for the main North American equity markets
  • S&P 500 -38 points or -1.0% to 3782
  • Nasdaq -1.3%
  • Russell 2000 -0.9%
  • DJIA -0.8%
  • S&P/TSX Comp (closed on Friday):-1.4%

The first half ended with the S&P 500 down 20.6%, which is narrowly better than the 1970 decline of 21.0%. For the Nasdaq, it was the worst ever

H1:

  • DJIA -15.3%
  • Nasdaq -29.5% (worst ever)

Q2:

  • S&P 500 -16.4%
  • DJIA -11.2%
  • Nasdaq -22.4%

Micron reported earnings after the close and shares are down 5.2% after hours. That’s not a great start for H2.

Atlanta Fed Q2 GDPNow falls to -1.0% from +0.3%

  • The latest tracking number

This is the first dip into negative territory and it’s a big dip. You could see this coming after yesterday’s Q1 GDP revisions. The consumption numbers in today’s PCE report were also poor.

The release:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2022 is -1.0 percent on June 30, down from 0.3 percent on June 27. After recent releases from the US Bureau of Economic Analysis and the US Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and real gross private domestic investment growth decreased from 2.7 percent and -8.1 percent, respectively, to 1.7 percent and -13.2 percent, respectively, while the nowcast of the contribution of the change in real net exports to second-quarter GDP growth increased from -0.11 percentage points to 0.35 percentage points.

This report normally isn’t a market mover but with all eyes on growth suddenly, it could be. A negative reading in Q2 GDP would be a technical recession after -1.5% in Q1.

US May core PCE 4.7% y/y vs 4.8% expected

  • The highlights of the PCE report for May 2022
  • Prior was +4.9% y/y
  • Core m/m +0.3% vs +0.4% expected
  • PCE price index +0.6% vs +0.2% prior
  • Price index y/y +6.3% vs +6.3% prior

Consumption:

  • Personal income +0.5% vs +0.5% exp
  • Real personal consumption -0.4% vs +0.7% prior (prior revised to +0.3%)
  • Consumption adjusted +0.2% vs +0.4% expected
  • Prior adj +0.9% (revised to +0.6%)

Commodities

Gold Price Forecast: XAU/USD bears take on the bulls at a critical juncture

  • Gold bears are putting pressure on the bulls at a critical area on the daily chart.
  • Gold prices are under pressure despite rising recession odds.

At $1,806, the gold price is lower by some 0.66% after falling from a high of $ $1,825.21 to a session low of $1,802.77, breaking out of its consolidation range. Traders have moved out of the yellow metal even as stocks, the dollar and bond yields fell.

The drop came even as investors moved out of equities, with the S&P 500 Index last seen down 1.25% on what has been a mixed week in sentiment and data. The highlights of Thursday’s data schedule were a faster monthly pace of growth in the PCE price index, steady personal income expansion, and slower spending growth. Personal income was up 0.5% in May, right on expectations after a 0.5% gain in the previous month. 

After an adjustment for a 0.6% increase in the PCE price index, real personal consumption was down 0.4% in May after a 0.3% increase in April. Core PCE prices rose by 0.3% for the fourth straight month, slowing the year-over-year rate to 4.7% from 4.9% in the previous month. Gold briefly bounced after the US data but quickly moved back into the tight range it has been in for the past few sessions.

In other data, the Chicago PMI fell to 56.4 in June from 60.3 in May. Other manufacturing data already released have suggested slower growth or outright contraction. The ISM’s national index will be released on Friday. Initial jobless claims decreased by 2,000 to 231,000 in the week ended June 25, but the four-week moving average rose by 7,250 to 231,750, continuing the string of gains.

Meanwhile, the US dollar also fell, making gold more affordable for international buyers, with the DXY dropping to 104.645 the low of the day so far. US bond yields fell sharply, which is offering a lifeline to the precious metal since it pays no interest. The yield on the US 10-year note was last seen down at 2.980%, near its three-week low made earlier at 2.97%

”Gold prices are under pressure despite rising recession odds, in contrast to recent price action pointing to safe-haven flows supporting the yellow metal,” analysts at TD Securities said.

”In fact, gold prices have disconnected altogether from market pricing for Fed hikes over the past month, and have instead grown their relationship with the USD, pointing to a smaller magnitude of idiosyncratic flows for the yellow metal.

”While the bias remains to the downside in gold, participants will need a catalyst to shake out the complacent longs in precious metals.”

Silver Price Analysis: XAG/USD bounces off two-year low/ascending channel support

  • Silver lost ground for the fourth straight day and dropped to a nearly two-year low on Thursday.
  • Spot prices managed to find some support near the lower end of a downward sloping channel.
  • The set-up still favours bearish traders and supports prospects for a further depreciating move.

Silver witnessed selling for the fourth successive day on Thursday and dived to a nearly two-year low, around the $20.30 region during the early North American session.

The downward trajectory, however, stalled near the lower boundary of a downward sloping trend channel extending from the beginning of this month. The XAG/USD did attempt a minor recovery from the said support, though lacked any follow-through beyond the $20.70-$20.75 region.

Given the recent repeated failures to find acceptance above the 200-period SMA on the 4-hour chart, the descending channel supports prospects for further losses. The negative outlook is reinforced by bearish oscillators, which are still far from being in the oversold territory.

That said, bearish traders are likely to wait for a convincing break through the trend-channel support before placing fresh bets. The XAG/USD might then turn vulnerable to weaken further below the $20.00 psychological mark and test the next relevant support near the $19.60-$19.55 area.

On the flip side, any meaningful bounce could be seen as a selling opportunity and remain capped near the $21.00 mark. The said handle should act as a key pivotal point, which if cleared decisively might trigger a short-covering rally and lift the XAG/USD towards the $21.50 supply zone.

The latter marks a confluence barrier, comprising the top end of the ascending channel and the 200-period SMA on the 4-hour chart. Sustained strength beyond would negate any near-term negative bias and pave the way for some meaningful near-term upside for the XAG/USD.

Oil falls to $107.00 as OPEC+ stands pat

  • Oil down nearly $3

OPEC+ today was a non-factor as it endorsed the August production hike that was already announced and didn’t offer anything on September and beyond.

Comments from Biden may have hurt oil as he urged Gulf states to produce more but also said that he won’t be talking directly with Saudi Arabia about increasing production. I’m not sure that’s believable but it is what it is.

The main driver right now is worries about growth. Today’s Japanese manufacturing data was terrible and US overall consumption data was soft (with fears of more consumer weakness).


EU News

European equity close: Another bruising day

  • Closing changes for the main European bourses

It was another rough one in Europe with most markets now approaching (and the MIB breaking) the June lows.

  • Stoxx 600 -1.6%
  • UK FTSE 100 -1.9%
  • German DAX -1.7%
  • Italy MIB -2.4%
  • French CAC -2.0%
  • Spain IBEX -1.8%

Other News

OPEC+ will stick to plan on August production increases, makes no decisions beyond

  • OPEC+ sources report from Reuters
  • OPEC+ to hold next meeting on August 3
  • No decisions made on policy beyond August
  • OPEC+ meeting over

Cryptocurrency News

FTX closing in on deal buy BlockFi for $25 million. Was last valued at $4.8 billion

  • FTX gets the crypto lender for just $25

CNBC citing three sources said FTX is closing in a deal for BlockFi. They warned the price could shift before tomorrow, when it’s expected to close.

BlockFi’s last private valuation was $4.8 billion and had raised almost $1 billion in venture capital funding. The company received an emergency $250m line of credit from FTX. This basically wipes out all of BlockFi’s investors but at least it will save the clients. Meanwhile, earlier today it was reported that FTX walked away from Celsius after finding a huge hole in its balance sheet.

FTX walked away from deal with Celsius after finding $2 billion hole in its balance sheet

  • Report from The Block

Two people with knowledge of the situation cited by The Block say FTX was interested in a deal to take control of Celsius but walked away after examining the finances. One of the sources said Celsius “had a $2 billion hole in its balance sheet”.

Celsius claimed 1.7 million customers and around $12 billion in assets under management in May but has frozen withdrawals since June 12 and has been silent since June 19.