North American News
Higher closer for the major indices for the 2nd consecutive day
- The Nasdaq leads the way with a gain of 1.58%
There is a higher closer for the major indices for the 2nd consecutive day with the Nasdaq leading the way also for the 2nd day in a row.
The Dow which moved over 700 points yesterday but only rose by 48 points today. The S&P also had a modest rise relative to the 105.84 rise yesterday.
The final numbers are showing:
- Dow industrial average rose up 47.79 points or 0.05% at 31874.85
- S&P index rose 23.19 points or 0.59% at 3959.89
- NASDAQ index rose 184.51 points or 1.58% at 11897.66
- Russell 2000 a rose 28.62 points or 1.59% at 1827.94
The best performer in the S&P sectors that showed:
- communications, +1.6%
- consumer discretionary, +1.6%
- technology, +1.5%
The worst performers were:
- utilities -1.3%
- healthcare -0.9%
- consumer staples -0.7%
After the close, Tesla reported higher than expected earnings, but revenues came up short of expectations
- earnings-per-share $2.27 adjusted vs. $1.81 estimate
- revenues $16.93 billion vs. $17.10 billion estimate
Tesla shares are trading up around $30 or 4.11%
US treasury auctions off $14 billion of 20 year bonds at a high yield of 3.42%
- WI level at 3.447%
- High yield 3.420%
- WI level 3.447%
- Tail -2.7 basis points
- Bid to cover 2.65Xvs. six-month average of 2.64X
- Dealers 8% vs. six-month average of 12.4%
- Directs 14.1% vs. six-month average of 19.9%
- Indirects 78% vs. six-month average of 67.8%
Commodities
Gold falls below $1700 amidst a buoyant US dollar
- Gold price is stationary amidst the lack of a catalyst ahead of Fed’s July meeting.
- The US Dollar Index bounces off weekly lows, a headwind for precious metals.
- US housing data begins to show the impact of higher interest rates.
- XAUUSD to remain sideways, eyeing a YTD low around $1680, and to the upside $1750.
Gold price seesaws around the $1700 area, failing to break upwards/downwards as traders prepare for the Federal Reserve July meeting in the next week, amidst a mixed sentiment on Wednesday trading session. Ahead in the week, two central banks’ monetary policy meetings loom, namely the ECB and the BoJ, with the former to follow suit with other banks, with its first hike in 11 years, while the latter is the outlier, pledged to its dovish stance. At the time of writing, XAUUSD is trading at $1708.61.
Gold remains subdued, weighed by a buoyant US dollar
Global equities are mixed, augmenting demand for safe-haven assets. The greenback finally showed signs of life, a headwind for gold prices, with the US Dollar Index barely recovering some ground, up 0.11% at 106.788. Contrarily are US Treasury yields, tumbling across the curve. The US 10-year benchmark note rate is at 3.004%, drops two and a half bps, as traders seek safety towards cash and US Treasuries.
US housing data weighed by higher rates
Since Wednesday, the US housing market has begun to feel the pain of higher rates. On Wednesday, Housing starts shrank 2% in June, to their lowest level since September, while Building Permits decreased by 0.6%, both readings on monthly figures. That reflects the aggressive path the Fed has taken, as they have expressed their commitment to tame inflation, even if it means slower economic growth than expected. Of late, US Existing home sales contracted to a two-year low, by 5.4%, exceeding the expectations of a 5.4% growth. That said, recessionary signals are beginning to show in the US, which could increase the appetite for XAUUSD, meaning higher gold prices lie ahead.
US Inflation grabbed the attention, but Retail Sales and Consumer Sentiment tempered Fed intentions of going 100 bps
Elsewhere, during the last week, US Retail Sales and the UoM Consumer sentiment exceeded estimations and tempered worries of a Federal Reserve hiking 100 bps at its July meeting, sparked by CPI topping above 9% YoY, further exacerbated by PPI above the 11% YoY threshold. Nevertheless, the University of Michigan Consumer Sentiment illustrated that consumer inflation expectations for a 5-year horizon fell from 3.1% to 2.8%, easing investors’ fears of a higher hike, which capped the ongoing gold downfall.
Last Wednesday, expectations of a 100 bps hike stood around 80%, but the CME FedWatch tool portrays a decrement to 30% chances while fully pricing in a 75 bps rate hike.
Silver trapped in a $0.10 range, around $18.60
- Silver prices are on the defensive, on broad US dollar strength.
- The US housing market crumbles as the Fed continues hiking rates aggressively.
- Silver Price Forecast (XAGUSD): Range-bound but tilted to the downside.
Silver price remains subdued, registering minimal losses late during the New York session. Factors like improved market sentiment, a buoyant US dollar, and elevated US Treasury yields keep the while metal pressured. At the time of writing, XAGUSD is trading at $18.65, down 0.19%.
The US Dollar Index, a measure of the buck’s value against six currencies, snaps three days of losses, rising 0.36% above the 107.000 threshold. US Treasuries remain under selling pressure, as the US 10-year benchmark note rate sits at 3.038%, almost flat, putting a lid on higher silver prices.
US housing data flash a faster economic deceleration
The US housing market is beginning to show flashes of further deterioration, as data reported during the week missed expectations, meaning a recession looms. On Tuesday, Housing Starts contracted to its lowest level since September 2021, declining 2% in June, while Building Permits, also known as building applications, shrank 0.6%, respectively.
In the meantime, Existing Home Sales for June, unveiled on Wednesday, followed suit Tuesday’s data, plunging to -5.4%, well below the 5.4% growth estimations. Sources cited by Bloomberg said that “both mortgage rates and home prices have risen too sharply in a short span of time.”
That said, the first signs of an impending US recession lie ahead. The US 2s-10s yield curve remains inverted for twelve straight days, at -0.220%, indicating investors’ worries of further economic deterioration. However, elevated inflationary pressures, with the US CPI above 9% and PPI at 11%, might not deter the Federal Reserve from hiking 75 bps in the next week.
Therefore, XAGUSD will remain on the defensive due to the greenback’s strength, which would also keep the commodity complex under pressure.
What to watch
The US economic docket will feature the Philly Fed Manufacturing Index, Initial Jobless Claims, and the CB Leading Index.
US weekly crude oil inventories -446K vs +1357K expected
- Weekly US petroleum inventories
- Prior was 3254K
- Gasoline stocks +3498K vs +71K exp
- Distillates stocks -1295K vs +1169K
- Refinery utilization -1.2% vs +0.2% exp
EU News
European stocks stumble but worries focused on Italy
- Closing changes for the main European bourses
- Stoxx 600 -0.2%
- FTSE 100-0.4%
- German DAX -0.2%
- French CAC -0.3%
- Italy MIB -1.6%
- Spain IBEX -1.3%
Other News
Germany gas transportation company says it assumes Nord Stream will return at 40%
- Notice on Gascade’s website
A statement on Gascade’s website says they ‘assume’ that gas transport via Nord Stream 1 will be resumed at the pre-maintenance level of 40% of transport capacity.
That’s in line with what others have been estimating in the past two days
The tapered levels were in place for a short time before the scheduled maintenance.That’s a true in-between level in that it will keep prices high and inventories low but won’t create a full-on crisis. It makes sense from Russia’s perspective because it allows them to keep Europe guessing.
Cryptocurrency News
Bitcoin lower after Tesla reveals they converted most of theirs to fiat currency
Tesla says they’ve bailed out of 75% of their BTC holdings, and converted to fiat currency:
“As of the end of Q2, we have converted approximately 75% of our Bitcoin purchases into fiat currency. Conversions in Q2 added $936M of cash to our balance sheet.”