North American News
Dow Jones’ Record 13-Week Winning Streak Comes to a Close in US Equity Market
- Dow Jones Industrial Average closes lower after 13 straight gains
Dow Jones’ Unprecedented Performance: A Near Miss at Tying an All-Time Record from 1897 with 14 Consecutive Days of Soaring Highs, Dashed by an Intraday Reversal Triggered by an Apparent Hawkish Bank of Japan Leak.
Alas, the index close 0.6% lower.
- S&P 500 don 29 points or 0.6%
- Nasdaq -0.5%
- Russell 2000 -1.4%
U.S. Treasury auctions off 7 year note at a high yield of 4.087%
- WI level at the time of the auction was 4.074%
- High-yield 4.087%
- WI level 4.064%
- Tail 1.3 basis points versus 6-month average of 0.0 basis points
- Bid to cover 2.48X versus 6 month average of 2.54X
- Directs 15.9% versus 6 month average of 19.0%
- Indirects 69.8% versus 6 month average of 69.6%
- Dealers 14.3% versus 6 month average of 11.4%
US initial jobless claims 221K vs 235K estimate. Continuing claims 1.690M vs 1.750M est.
- US initial jobless claims and continuing claims for the current week
Initial jobless claims data
- Prior week 228K
- Initial jobless claims 221K versus 235K estimate
- 4 week moving average of initial jobless claims 233.75K versus 237.5K last week
Continuing claims data
- Prior week continuing claims 1.754M revised it to 1.749M
- Continuing claims 1.690M versus 1.750M estimate
- 4 week moving average of continuing claims 1.7195M vs 1.7303M last week
US Q2 advance GDP +2.4% vs +1.8% expected
- The final Atlanta Fed GDPNow estimate was +2.4%
- Final Q1 reading was +2.0% annualized
- Q4 was +2.6% annualized
Details:
- Consumer spending +1.6% vs +4.2% prior
- Consumer spending on durables % vs +16.3% prior
- GDP final sales +2.3% vs +1.4% expected
- GDP deflator +2.2% vs +3.0% expected
- Core PCE +3.8% vs +4.0% expected (4.9% prior)
- Exports -10.8%
- Imports-7.8%
- Business investment +4.9%
US June pending home sales +0.3% vs -0.5% expected
- US June pending home sales data
- Prior was -2.7%
- Index 76.8 vs 76.5 prior
US June durable goods orders +4.7% vs +1.0% expected
- US June 2023 durable goods orders data
- Prior was +1.8
- Non-defense capital goods orders ex-air +0.2% vs -0.1% expected
- Prior non-defense capital goods orders ex-air +0.7%
- Ex transport +0.6% vs 0.0% expected
- Ex defense +6.2% vs +3.0% prior
US June wholesale inventories -0.3% vs 0.0% prior
- June US wholesale and retail inventories
- Prior was -0.1% (revised to -0.3%)
- Retail inventories +0.4% vs -0.1% prior (revised to 0.0%)
US advanced goods trade balance for June -87.84 B versus $-91.8 billion expected
- US advanced good trade balance for June 2023
- Prior month -91.13 billion
- Advanced goods trade balance for June $-87.84 billion versus $-91.8 billion expected
- Exports came in at $162.5 billion which was $0.4 billion more than May
- Imports came in at $250.3 billion which is $3.6 billion less than May imports
Commodities
Silver tumbles 1.5% after upbeat US economic data
- Metals under pressure following stronger-than-expected US data.
- Rising US yields and an appreciation of the Greenback weigh on silver.
- XAG/USD has erased daily and weekly gains in a few minutes.
Silver has reversed sharply following the release of US economic data that came in above expectations. XAG/USD dropped from weekly highs above $25.00 to the $24.50 area in a few minutes, falling 1.50% on a daily basis. The metal also erased weekly gains.
WTI crude futures settle at $80.09
- Up $1.31 or 1.66%
The price of WTI crude futures are settling at $80.09 that’s up $1.31 or 1.66%.
The next big question is whether Saudi Arabia will prolong its 500,000 barrels per day voluntary production cut that’s on top of mandatory OPEC+ cuts. A Bloomberg poll today found that 15 of 22 analysts expect it to be extended to September.
That’s a solid majority but the remaining 7 of 22 analysts is a significant majority and that indicates there is some uncertainty. The previous extension came early in July so we will probably have to wait until next week to find out or until after the JCPOA meeting on August 4.
Gold price plunges amid economic resilience and tight labor market
- Gold price tumbled quickly as the United States turned out more resilient in the second quarter than expected.
- The US Dollar Index discovers strength as US GDP expanded by 2.4% vs. expectations of 1.8%.
- US Durable Goods Orders expanded at a pace of 4.7% against the consensus of 1.0%.
Gold fell like a house of cards as the United States Gross Domestic Product (GDP) turned out more resilient in the second quarter than expected. Earlier, the precious metal remains on the buying list on Wednesday after the Fed raised interest rates by 25 basis points (bps) to 5.25%-5.50%, as expected by market participants. Also, the Fed delivered less-hawkish guidance for the September meeting and passed on responsibility for any further action on economic data.
EU News
European close: Dovish ECB sparks a big rally
- Closing changes in Europe
The ECB appears to have gotten the message that the economy is slowing and has now pledged data dependency towards hiking in September. Market pricing puts September hike odds at 38%.
European equities like what they heard. Closing changes today:
- Stoxx 600 +1.4%
- German DAX +1.7%
- FTSE 100 +0.3%
- French CAC +2.2%
- Italy MIB +2.1%
- Spain IBEX +1.0%
ECB raises key rates by 25 bps in July monetary policy meeting, as expected
- ECB announces their latest monetary policy decision – 27 July 2023
- Main refinancing rate 4.25% vs 4.25% expected
- Prior 4.00%
- Deposit facility rate 3.75% vs 3.75% expected
- Prior 3.50%
- Marginal lending facility 4.50%
- Prior 4.25%
- Inflation continues to decline but is still expected to remain too high for too long
- Expectation is that inflation will drop further over the remainder of the year
- But it will stay above target for an extended period
- ECB decides to set the remuneration of minimum reserves at 0%
- This is to preserve the effectiveness of monetary policy transmission
- ECB stands ready to adjust all of its instruments within its mandate to ensure that inflation returns to its 2% target over the medium term
- To follow a data-dependent approach to determining the appropriate level of interest rates
UK July CBI retailing reported sales -25 vs -9 prior
- Latest data released by CBI – 27 July 2023
- Prior -9
Germany August GfK consumer confidence -24.4 vs -24.7 expected
- Latest data released by GfK – 27 July 2023
- Prior -25.4; revised to -25.2
Lagarde: Near-term economic outlook for the eurozone has deteriorated
- Comments in the opening statement from ECB President Christine Lagarde
- Near-term economic outlook for the eurozone has deteriorated owing largely to weaker domestic demand
- We will continue to follow a data-dependent path
- Momentum is slowing in the service sector, though it remains a sign of strength
- Housing and business investment are showing signs of weakness
- Over time, improving supply conditions and falling inflation should support recovery
- Many new jobs are being created, especially in services sector
- Jobs may turn negative for manufacturing
- As energy crisis fades, governments should roll back supports
- Domestic price pressures, including from wages and profit margins, are becoming an increasing source of inflation
- The outlook for economic growth and inflation remains highly uncertain
- Upside risks to inflation include possible pressures on energy and food
- Demand for mortgages has fallen for a fifth quarter in a row
- We stand ready to adjust all instruments
Lagarde Q&A: Slight change of a verb was not random or irrelevant
- Comments in response to questions from the press – “Do we have more ground to cover? At this point I wouldn’t say so”
The verb that was removed from the statement was that ‘be brought’ was taken out of this:
“The Governing Council’s future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and will be kept at those levels for as long as necessary.”
Now it’s:
“The Governing Council’s future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to the 2% medium-term target.”
- This is the ninth decision to hike in 1 year
- Decision was unanimous
- Slight change of a verb was not random or irrelevant
- We are deliberately data dependent
- We may hike, we may hold
There’s still a hawkish bias here but if the European numbers continue to disappoint and inflation starts to fall quicker, it sounds like they could be done.
- We are not in the domain of forward guidance but we are very strongly rooted in our desire to break the back of inflation
- Notes that there will be two readings of inflation before Sept meeting, we have an opening mind on Sept and beyond
- We have not discussed the reduction of our balance sheet
- Declines to repeat that they’re not even thinking about stopping hiking
- We know we are getting closer but the options of continuing to hike or hold are available
- We only know that we won’t be cutting rates
- Do we have more ground to cover? At this point I wouldn’t say so
Other News
China tries to play down ‘malicious’ hype on Qin Gang’s removal from minister post
- The foreign ministry says it will release information in a timely manner on Qin Gang’s dismissal
Political purgings are not uncommon in China but this definitely isn’t the end of the latest saga surely. The fact that Wang Yi is called back in to reclaim his old post makes it even more peculiar.
Protection being sought against a BOJ tweak surprise
FX options pricing is showing a market that is growing wary that the Bank of Japan will tweak policy on Friday. Higher option prices shows the market is paying up for options that would hedge that risk.
Implied volatility for JPY-related options expiring after the BoJ decision eased marginally after last week’s dovish comments from the BoJ governor. But, they bounced back this week and spurred further after an FT article (link here, FT is gated) cited warnings from several big banks about the increased risk of BoJ action.
There won’t be a Trump indictment today
- Not a market mover anyway
Earlier there were reports that a Trump indictment for the Jan 6 events could come as soon as today. A court spokesman now says there won’t be any indictments today.
Supposedly the charges would be: conspiracy to commit offense or to defraud the United States,
deprivation of rights under a civil rights statute, and tampering with a witness, victim or an informant.
Cryptocurrency News
Chainlink price struggles to recover despite $77 million worth of LINK accumulated by whales
- Chainlink network’s large wallet investors have scooped up 11 million LINK over the past month.
- Chainlink is likely to see a recovery in its adoption and utility among developers and projects with mainnet early access to CCIP.
- LINK price is $8.056 on Binance at the time of writing, the altcoin has sustained below resistance at $9 throughout 2023.
Ethereum Community Conference (EthCC) in Paris in mid-July 2023 was an opportunity for Chainlink to launch the Cross-Chain Interoperability Protocol (CCIP) into the early access phase. Chainlink founder Sergey Nazarov informed the community that the CCIP can be viewed as a fragmented space for developers to build applications on top of it.
The launch of CCIP is expected to act as a catalyst for higher adoption of Chainlink as more developers and projects are incentivized to join the ecosystem.
LINK’s bullish on-chain metrics have failed to catalyze a recovery in the altcoin.
Cardano price flaunts 40% in sustained uptrend on the back of active development activity
- Cardano price is up 40% since the June 10 low of $0.22, sustaining above an uptrend line with prospects for more gains.
- Santiment analytics attributes the rally to growing development activity on the network, with ADA beating Ethereum in third place.
- As the token fills a triangle, a breakout with the directional bias pending confirmation is imminent.
Cardano (ADA) price has managed to sustain along an ascending trendline for almost two months, recording higher highs and higher lows. The positive outlook remains pronounced despite traders cashing in from the July 13 rally when overflows from the Ripple’s partial victory in the XRP versus SEC lawsuit boded well for tokens the financial regulator had labeled securities.
Cardano price shows off with ADA ranking in top three on development activity metrics
Cardano (ADA) price is showing off with 40% gains since June 10 as it continues to consolidate along an uptrend line. To the upside, profit-taking has capped ADA from reaching higher as investors quickly book profits from brief rallies. Case in point, most of the gains from the 30% surge on July 13 have already been booked. With buyers and sellers making counteracting traffic, ADA price action is now filling up a pennant.
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