North American News
Major indices show no fear at close ahead of Powell tomorrow
The major US indices are pricing at the session highs ahead of the Fed Chairs Jackson Hole speech tomorrow at 10 AM ET, and more hawkish comments from Fed officials today.
The gains are led by the Nasdaq indice which got a boost from lower yields. After two bad auctions on Tuesday and Wednesday, buyers showed up for the 7 year note auction which helped to push yields lower and boost risk on sentiment.
The final numbers are showing:
- Dow rose 322.53 points or 0.98% at 33291.79
- S&P rose 58.35 points or 1.41% at 4199.11
- Nasdaq rose 207.75 points or 1.67% at 12639.28
- Russell 2000 rose 29.34 points or 1.52% at 1964.63
In the US debt market,
- 2 year, 3.376%, -1.7 basis points
- 5 year 3.159%, – 7.6 basis points
- 10 year 3.031%, -7.8 basis points
- 30 year 3.242%, -7.5 basis points
US initial jobless claims 243K vs 253K estimate
- The US initial and continuing claims for the current weeks
- Prior week 250K revised to 245K
- Initial jobless claims 243K vs 253K estimate
- 4- week moving average initial claims 247K vs 245.50K (revised from 246.75)
- Continueing claims 1.415M vs 1.442M estimate. Prior week 1.437M
- 4 week MA of continuing claims 1.42475M vs 1.41225M
- The largest increases in initial claims for the week ending August 13 were in Oklahoma (+1,419), Missouri (+1,014), Indiana (+691), Virginia (+404), and Michigan (+318),
- The largest decreases were in California (-3,185), Ohio (-1,659), Georgia (-946), South Carolina (-847), and Pennsylvania (-617).
US treasury auctions off $37B or 7 year note at a high yield of 3.130%
- WI level 3.158%
- High yields 3.13%
- Tail -2.8 bps
- WI level 3.158%
- Bid to cover 2.65X versus six with average of 2.46X
- Directs 15.7% versus six month average of 21.8%
- Indirects 75.72% vs 6 month average of 64.2%
- Dealers 8.85% versus six month average of 13.9%
US Q2 2022 GDP (second reading) -0.6% vs -0.8% expected
- Second quarter 2022 GDP estimate
- The advance reading on Q2 was -0.9% vs +0.5% expected
- Q1 was -1.4% annualized
- Personal consumption +1.5% vs +1.1% advance reading
- Core PCE prices +4.4% vs +4.4% expected
- PCE prices +7.1% vs +7.1% advance
- GDP final sales +1.3% vs +1.1% prelim
- Corporate profits after tax +9.1% vs -4.9% in Q1
- Consumer spending on durables -0.1%
Percentage point changes:
- Inventories cut 1.83 pp vs 2.01 pp in advance
- Goods cut 0.57 pp vs 1.08 pp in advance
- Services added 1.56 pp vs 1.78 pp in advance
- Gross private domestic investment -2.67 pp vs -2.73 pp
- Net exports +1.42 vs +1.43 pp
- Government spending -0.32 pp vs -0.33 pp
Commodities
Gold climbs above $1750 as traders expect a hawkish Powell speech
- Gold price advances almost 0.30% on Thursday, courtesy of an upbeat sentiment and overall buck’s weakness.
- Investors mulled on mixed US economic data, released ahead of Powell’s speech.
- Fed officials expect a 50 or 75 bps rate hike at the next meeting; awaiting September’s data.
- Gold Price Forecast (XAU/USD): Neutral above $1800; otherwise, a re-test of the YTD lows below $1700 is on the cards.
Gold price trades in the green, spurred by overall US dollar weakness across the board, and falling US Treasury bond yields, amidst an upbeat trading session. XAU/USD opened near the day’s lows, around $1750, and rallied towards the high of the day at $1763.71 before retracing to current price levels. At the time of writing, XAU/USD is trading at $1755.93, above its opening price.
Global equities portray an upbeat sentiment. Incoming economic data from the US revealed that growth in the country improved but is stills in contractionary territory. The Gross Domestic Product (GDP) for the second quarter dropped 0.6%, less than estimates of minus 0.8%. That said, if the final reading comes negative, it would confirm that the US is in a technical recession, though today’s figures are still susceptible to revision.
In the meantime, the US Department of Labor revealed unemployment claims for the week ending on August 20. Initial Jobless Claims rose by 243K, less than the estimated 253K. This week’s report and the previous one further confirmed the robust labor market, as mentioned by some Fed officials, which had emphasized the need for further rate hikes amidst a high inflation environment.
The US Dollar Index, a gauge of the buck’s value vs. a six currencies basket, creeps lower by 0.12%, down at 108.476, undermined by the US 10-year Treasury bond yield dip to 3.028%, losing eight bps, ahead of Fed’s Chair Powell Jackson Hole speech.
Meanwhile, some Fed officials crossing wires have opened the door for additional rate hikes, led by Kansas City’s Fed Esther George, who said that she foresees rates above 4%.
Earlier, Atlanta’s Fed President Raphael Bostic commented that he’s undecided about going 50 or 75 but added that a Fed pivot is misguided. Contrary to Esther George’s opinion, Patrick Harker of the Philadelphia Fed noted that he expects to raise and hold rates at 3.4% while supporting a 50 bps increase for September.
Later, the St, Louis Fed President James Bullard reiterated that he expects the Federal funds rate (FFR) around 3.75% to 4% for 2022, adding that risks may have to be higher for longer.
What to watch
The US economic calendar will release the Fed’s favorite measure of inflation, July’s PCE, headline, and core figures before Wall Street opens. Later, the US Federal Reserve Chair Jerome Powell will hit the stand.
US weekly natural gas inventories +60 bcf vs +58 bcf expected
- Weekly US natural gas storage data
- Prior was +18 bcf
US natural gas prices hit $10 this week but came back down after Freeport LNG delayed its planned restart.
EU News
European equity close: Small changes ahead of Jackson Hole
- Not much movement at today’s close
Closing changes:
- Stoxx 600 +0.2%
- FTSE 100 +0.2%
- German DAX +0.3%
- French CAC -0.1%
- Italy MIB +0.1%
- Spain IBEX -0.2%
Other News
Fed’s Bullard: My baseline is inflation to be more-persistent than many on Wall St think
- Comments from the St Louis Fed President
- 3.75-4.00% is my target for year end
- Current level isn’t high enough to be serious about putting downward pressure on inflation
- You need to have a 3-handle to do that
- It’s a volatile environment so I don’t want to promise anything about next year
- My baseline is that inflation will be more-persistent than many on Wall Street think
- Risk is that we have to be higher for longer
- I don’t take many signals from equities in setting policy, can be driven by silicon valley
- I don’t think recessions are all that predictable
- There will be a debate at some point about how long you want to linger above 2% before taking action but first we have to get it moving in the right direction
Cryptocurrency News
NFT KPIs are coming in: over $100mn stolen in scams, over $8mn in laundered cash
The Wall Street Journal with the report. While my headline to the post is a bit tongue-in-cheek the numbers are seriously large, reported by blockchain analytics firm Elliptic.
Says the Journal piece:
- Nonfungible tokens, or NFTs, are increasingly sought by criminals looking to either steal them or use them to launder illicit gains
- More than $100 million worth of these blockchain-based assets were reported stolen in scams over the past year
- Over 4,600 NFTs were stolen in July, the most in any month since Elliptic began tracking the data in 2017
- over $8 million in proceeds from illicit activities has been laundered through platforms that facilitate the creation, buying and selling of NFTs
- Another $328 million that went through the platforms came from so-called obfuscation services, such as mixers that enable users to exchange cryptocurrencies with relative anonymity, and may also include illegally made money