North American News
Dow and S&P snap 4 day losing streak. Nasdaq not so lucky
- The Nasdaq down 5 days in a row
The Dow and the S&P snapped a 4 day losing streak with late day buying ahead of the jobs report tomorrow . The Nasdaq index was still down on the day and closed lower for the 5th consecutive. The good news is the market opened lower, the prices moved even lower before rotating higher and closing neare the highs for the day.
Looking at the S&P on the daily chart, the low today stalled just above the 61.8% of the move up from the June low at 3899.84. The low reached 3903.65 and bounced into the close (closed at 3966.86 today).
A snapshot of the closing levels is showing:
- Dow is up 145.97 points or +0.46% at 31656.41
- S&P is up 11.87 points or 0.30% at 3966.86
- Nasdaq is down -31.07 points ro -0.26% at 11785.14
- Russell 2000 is down -21.29 points or -1.15% at 1822.81
uS initial jobless claims 232K vs 248K estimate
- US initial jobless claims and continuing claims for the current week
- prior week 243K revised to 237K
- Initial jobless claims 232K vs 248K est.
- 4 week moving average of initial claims 241.5K vs 245.5K last week. The MA is moving to the downside..
- Continuing claims 1.438M vs 1.438M estimate. Prior revised to 1.412M vs 1.415M previously reported.
- 4 week moving average of continuing claims 1.4285M vs 1.424M last week
- The largest increases in initial claims for the week ending August 20 were in Arkansas (+451), Illinois (+428), Connecticut (+390), New York (+336), and Rhode Island (+219),
- The largest decreases were in California (-2,130), New Jersey (-1,400), Indiana (-1,263), Oklahoma (-1,174), and Michigan (-714)
US August ISM manufacturing PMI 52.8 vs 52.0 expected
- US August 2022 manufacturing PMI from ISM
- Prior was 52.8
- Prices paid 52.5 vs 55.5 expected (prior 60.0)
- Production 50.4 vs 53.5 prior
- Employment 54.2 vs 49.9 prior
- New orders 51.3 vs 48.0 prior
Atlanta Fed GDPNow estimate for 3Q growth rises to 2.6% from 1.6% on August 26
- Atlanta Fed GDPNow estimate for 3Q sees a big jump
The Atlanta Fed GDPNow estimate for 3Q growth rose to 2.6% from 1.6% on August 26. Construction spending and the Manufacturing ISM report contribute to the gains. In their own words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 2.6 percent on September 1, up from 1.6 percent on August 26. After this morning’s construction spending release from the US Census Bureau and this morning’s Manufacturing ISM Report On Business from the Institute for Supply Management, the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real gross private domestic investment growth increased from 2.0 percent and -5.4 percent, respectively, to 3.1 percent and -3.5 percent, respectively.
Commodities
Gold plummets to new two-month lows below $1690
- Gold price is plunging during the week by almost 2.50%.
- The US Dollar Index rises to 2-decade highs, 109.977, underpinned by higher US Treasury yields.
- Robust US data justifies a super-size 75 bps rate hike by the Fed.
Gold price drops sharply to two-month lows, under the $1700 figure, after upbeat US economic data justifies the Federal Reserve’s intentions to hike rates 75 bps in the September meeting. At the time of writing, the XAU/USD fluctuates around the $1688-$1690s area, below its opening price.
Global equities remain under pressure while the US dollar rises to 20-year highs, per the US Dollar Index. Positive US economic data, led by S&P Global and ISM Manufacturing PMIs for August, reinforced what Fed officials expressed: the US economy remained strong. The Institute for Supply Management (ISM) reported that the PMI was unchanged at 52.8, above 51.9 expectations. Meanwhile, the S&P Global PMI was at 51.5, above forecasts and the previous reading of 51.3.
Earlier, the US Department of Labor revealed that unemployment claims for the week that ended on August 27 increased by 232K, less than the 248K estimated.
Gold traders should be aware that US employment data released during the week support the idea of the Fed going for a 75 bps rate hike for the third straight meeting. JOLTs data, reporting 11 million vacancies, unemployment claims dropping, and US ISM manufacturing PMI comments about hiring increments the Fed’s soft landing possibilities.
Elsewhere, the US Dollar Index, a gauge of the buck’s value against a basket of peers, climbs 0.94%, refreshing 2-decade highs at 109.716, underpinned by high US T-bond yields. Also, a headwind for the yellow metal is the US 10-year Treasury Inflation-Protected Securities (TIPS), a proxy for real yields, which is rising eight bps, to 0.796%, after hitting a daily high at 0.823%.
Copper Sinks almost 3%, eyeing a fall towards $3.2505 ahead of YTD lows
- Copper futures are nosediving due to fears of a worldwide economic slowdown, weighed by China’s PMI and other lockdowns in a 21.1 million city.
- Negative divergence in Copper’s daily chart, alongside fundamental, sent prices below the 20 and 50-DMA.
Copper futures are dropping to two-month lows at $3.4165, down almost 3%, on fears that China’s manufacturing activity contracted for the first time in three months, alongside expectations of a US economic deceleration prompted by the US Federal Reserve tightening monetary policy conditions.
Additionally, broad US dollar strength, alongside newswires that China’s Chengdu announced a lockdown of its 21.2 million residents, is a headwind for the red metal.
Also read: Copper drops from two-month highs due to global economic slowdown, speculators’ shorts
Copper Price Analysis: Technical outlook
The Copper daily chart depicts the pair as neutral-to-downward biased. It’s worth noting that the last copper article that I wrote noted that “the Relative Strength Index (RSI) recorded a successive series of lower highs, contrary to price action, meaning that prices are about to edge lower.” Since then, Copper tumbled below the 20 and 50-day EMAs, from around $3.6970. to $3.4105.
If Copper achieves a daily close below the August 4 daily low at 3.4160, it could send the red metal towards the July 21 swing low at $3.2505, followed by the YTD low at $3.1315. On the flip side, if Copper buyers reclaim the 50-day EMA at $3.6340, a re-test of the 20-day EMA at $3.6175 is on the cards.
Oil sinks to the bottom of the range in a new test of the post-war lows
- Not much breathing room for oil bulls
The bearish mood descending on markets and the prospects for an Iran nuclear deal have hit the oil market hard in the past three trading days.
WTI crude is at the lows of the day at $86.93. The low August 16 was $85.87. There’s some support down the the October 2021 highs but below that it could get ugly in a hurry.
EU News
EU Commission to propose electricity price limits on generators that don’t use gas
- The EU Commission is trying to break the link between natural gas prices and electricity
A document seen by Reuters outllines an EU Commission proposal to break the link between natural gas and electricity prices. It would introduce a price limit on electricity generation prices from operators that don’t use gas generation. The proposals also include measures to reduce demand.
This is a dangerous game they’re playing. There’s no doubt that anyone selling hydro, wind, solar or coal-fired electricity in Europe right now is getting a windfall. But does this kind of thing diminish incentives to add or invest in supply?
Other News
German economy minister: We should not rely on gas arriving via Nord Stream 1 this winter
- I’d say that’s a fair assumption
Germany will have about 2 months of winter natural gas usage in storage by October 1. Before the three-day maintenance that’s ongoing, the 20% of flows coming via Nord Stream 1 would give Germany just enough gas to get through the winter (assuming LNG and other sources continue), assuming some rationing. If it’s cut off completely, it gets very difficult but it’s still possible with a 20% decline in use, but it will depend on how cold the winter is.
Cryptocurrency News
Federal prosecutors dig dirt on Changpeng Zhao, Binance Coin nosedives
- Federal prosecutors asked for access to CEO Changpeng Zhao’s communication investigating the exchange’s anti-money laundering.
- Binance is currently under investigation over potential violations of the Bank Secrecy Act, according to Reuters.
- Binance Coin price nosedived, observing a 3% decline overnight.
US Prosecutors are investigating the world’s largest crypto exchange and CEO Changpeng Zhao. The US Justice Department’s money laundering division is digging CZ’s communication for illegal transactions and information on the recruitment of US Customers.