North American News
Some weakness creeping back in stocks
- Dow is back below the 100 day MA
The major stock indices are creeping lower with the Dow leading the way to the downside. A snapshot of the market currently shows
- Dow industrial average at 33309
- S&P index at 4117.10
- NASDAQ at 13387
US treasury auctions off $21 billion of 30 year bonds at a high yield of 3.741%
- WI level at the time of the auction 3.756%
- High yield of 3.741%
- WI level at the time of the auction 3.756%
- Bid to cover 2.43X times ersus 2.35X six-month average
- Tail -1.5 basis points versus six-month average of +0.2 basis points
- Directs 17.36% versus six-month average of 19.7%
- Indirects 72.43% versus six-month average of 68.5%
- Dealers 10.21% versus six-month average of 11.7%
Atlanta Fed April wage growth tracker dips to 6.1% from 6.4% in March
- Atlanta fed wages see a dip in April. Equals the lowest level since April 2022
The Atlanta Fed is out with a wage growth tracker which has dipped to 6.1% from 6.4% in March.
Economist Jason Furman said that the levels consistent with inflation above 4%, and is higher than other measures of wages.
US initial jobless claims 264K versus 245K estimate
- US initial jobless claims in continuing claims for their current weeks
- Prior report 242K
- Initial jobless claims 264K versus 245K estimate
- 4-week moving average of initial jobless claims 245.25K vs 239.25K last week. This is the highest average since November 20, 2021 (249.25K)
- Continuing claims 1.813 versus 1.820M estimate
- 4-week moving average of continuing claims 1.830M versus 1.827M last week.
- The largest increases in initial claims for the week ending April 29 were in Massachusetts (+3,801), Kentucky (+3,659), Pennsylvania (+992), Virginia (+896), and Colorado (+726),
- The largest decreases were in New York (-9,456), Illinois (-2,693), Georgia (-1,278), New Jersey (-783), and Ohio (-505).
US PPI final demand April 2.3% versus 2.4% expected
- US Producer price index for April 2023
- Prior month 2.7% YoY
- PPI final demand YoY 2.3% versus 2.4% expected. This is the 11th month in a row lower
- PPI final demand ex food and energy YoY 3.2% vs 3.3% expected. Prior month 3.4%. This is the 13th decline in row.
- PPI MoM 0.2% versus 0.3% estimate
- PPI ex food and energy MoM is 0.2% vs 0.2% expected
Feds Kashkari: Inflation has come down but is still above target
- Minneapolis Fed Pres. Kashkari speaking
- Inflation is come down but it is still above target
- Wage growth has softened somewhat
- Bank turmoil can be a source of slowing for the economy
- Wage growth deceleration is mixed depending on income
- Housing is a key issue for hiring new workers from other regions
- Feds 2% inflation target is permanent for the near future.
- It’s conceivable that once we get inflation down to 2% we could have a conversation about changing the target
- Fed is united in commitment to getting inflation to 2%
- I am not convinced we are at Max employment
- Inflation is too high
- If markets are right and that inflation will fall quickly, one would imagine rates could normalize
- If high inflation is a more embedded, rates will need to stay high for longer
- Data is driving my policy expectations
- I am now on the more hawkish and of Fed policy spectrum
- Not seeing evidence of a crash in consumer spending or slower in services side of economy
- Once this period of high inflation ends, we will be back in a low inflation, low rate environment
- Inflation is coming down, but it’s pretty darn persistent.
- That means we will have to keep at it for an extended period
- Inverted yield curve put real pressure on banks
Nvidia has reportedly placed additional orders for AI chips
- Nvidia shares are trading lower on the day by -0.98%
- Nvidia has placed additional orders for AI chips that require TSMC’s CoWoS (chip on wafer on substrate) packaging, securing a commitment for an extra 10,000 wafers in 2023.
- This increased demand may lead to tight supply for TSMC’s CoWoS capacity, which currently stands at 8,000 to 9,000 wafers monthly.
- Nvidia relies on TSMC for both chip manufacturing and advanced packaging.
FDIC proposes to set annual special assessment rate of 12.5 basis points
- FDIC proposal to pay for banking failures
- FDIC propose a special fee to pay for banking failures
- Special fees will be based on amount of uninsured deposits at each bank
- Proposal would set annual special assessment rate of 12.5 basis points on a bank’s uninsured deposits as of December 2022
- Proposes a special assessment fee on larger banks to recoup losses to insurance fund incurred by recent bank failures
- Estimates 113 banks would be subject to special assessment
- 1st 5 billion of uninsured deposits at each firm would be exempt from the
- Says it would collect a fee over 8/4 beginning in June 2024, which could be extended or shortened as needed
- Estimates banks with over 50 billion in assets would pay over 95% of the fees, no banks under 5 billion would pay
- New fee estimated to roughly equal losses incurred, it currently estimated at $15.8 billion
Commodities
Silver tanks as the US Dollar stages a comeback, despite poor US data
- XAG/USD drops from around $25.40s to $24.10s as US inflation cools and the labor market eases.
- The RSI indicator and 3-day RoC portray a bearish outlook for Silver, with the 200-DMA on sight.
Silver price plummets across the board, as data from the United States (US) showed that inflation is cooling down, while the labor market commences easing amidst US Federal Reserve (Fed) officials complaining about its tightness. US Treasury bond yields drop, but the US Dollar (USD) rises to new weekly highs, a headwind for XAG/USD prices. At the time of writing, the XAG/USD is trading at around $24.20, slides 4.50%.
XAG/USD Price Analysis: Technical outlook
The XAG/USD collapse dragged prices into testing the 50-day Exponential Moving Average (EMA), breaking on its way south two crucial support levels: firstly, the 20-day EMA gave way around $25.08, secondly the break of the two-week support trendline at around $24.63, which, accelerated the white metal downtrend, towards testing additional key support levels.
Gold dips on inflation cooling, Initial Jobless Claims surge
- Gold prices drop amid slowed inflation and increased unemployment claims.
- US economic data to impact Federal Reserve’s June decisions.
- US debt ceiling concerns loom; potential government default possible said the US Treasury Secretary Yellen.
Gold price struggles to crack resistance around $2040, slumps after a round of US economic data showed that inflation in the United States (US) is somewhat decelerating while the labor market cools down, as unemployment claims exceeded estimates. That said, data proved to be US Dollar (USD) positive, as shown by the Gold price, printing back-to-back days of losses. The XAU/USD is trading at $2020.15, down 0.47%.
WTI crude futures to settle at $70.87
- Down $1.69 or 2.33%
The price of WTI crude oil is closing down $1.69 or -2.33% at $70.87. The high price reached $73.50. The low price extended to $70.63. The settle prices near the lows for the day.
OPEC projections for oil demand and other forecasts
- OPEC projections little changed
- OPEC says world oil demand to rise by 2.33 million barrels per day in 2023 (near unchanged from 2.32M previously)
- China’s oil demand to rise by 800,000 barrels per day in 2023 which is up from 760,000 previously forecast
- Leaves 2023 world economic growth forecast at 2.6%
- Says US debt ceiling issue has been so far not been resolved. A matter that could have economic consequences
EU News
A mixed close for European stock indices
- France’s CAC and Spain’s Ibex marginally higher
The European major indices close with mixed results today led higher by France’s CAC and Spain’s Ibex. German, UK and Italy indices are lower.
The final numbers are showing:
- German DAX -0.39%
- France’s CAC +0.28%
- UK’s FTSE 100 -0.14%
- Spain’s Ibex +0.16%
- Italy’s FTSE MIB -0.16%
ECB’s de Cos: We are now closer to the final cycle of rate hikes
- Remarks by ECB policymaker, Pablo Hernandez de Cos
It’s been a consistent message from ECB speakers all through the week. It seems like this was the agreed communique after last week’s policy meeting decision.
BOE raises bank rate by 25 bps to 4.50%, as expected
- The BOE announces its May monetary policy decision – 11 May 2023
- Prior 4.25%
- Bank rate vote 7-2 vs 7-2 expected (Dhingra, Tenreyro voted to keep rates unchanged)
- If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required
- Risks to inflation forecasts skewed significantly to the upside
- Pay growth could plateau at rates inconsistent with inflation target
- Estimates “flat” GDP for Q1 and Q2 (March forecast was -0.1% q/q for Q1)
BOE’s Bailey: We are approaching the point when we should be able to pause
- Speaking in a Bloomberg interview
Fed’s Bailey speaking to Bloomberg it says:
- We are approaching the point when we should be able to let level of rates rest
- We have not yet seen evidence that allows us to be sure rates can stay on hold
Other News
Elon Musk has a new CEO for X/Twitter
- She will take in 6 weeks
Musk will be Exec Chair and CTO overseeing product, software and sysops (system operations).
US Energy Sec. Granholm: US will seek to purchase well for the SPR after mandate ends
- Says will start buying in June
US Energy Sec. Granholm said that the US will seek to purchase oil for the SPR after congressionally mandated sale ends in June.
Biden’s meeting with Congressional leaders on debt ceiling has been postponed
Was scheduled for Friday 12 May 2023, has been shuffled off to next week instead.
Via White House statement.
Cryptocurrency News
Ethereum scaling solution Optimism price gears for recovery with this bullish catalyst from Worldcoin
- OpenAI CEO Sam Altman announces plans to migrate World App from Polygon to Optimism mainnet.
- The cryptocurrency wallet by OpenAI was launched on May 8 and has more than 500,000 active users.
- Optimism (OP) price dropped 50% below its all-time high of $3.22, a bullish catalyst is likely to trigger a recovery in the layer 2 token.
Sam Altman, the CEO of an American Artificial Intelligence Research Laboratory (OpenAI), launched an encryption startup Worldcoin. One of the key products of Worldcoin is a cryptocurrency wallet, known as the World App.
The application was launched as a Polygon-network based wallet to facilitate purchase, sale, and storage of cryptocurrencies for World ID users, and is now ready to migrate to Optimism’s mainnet. Both Polygon and Optimism are Ethereum scaling solutions and competitors in the crypto ecosystem.
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