North American News
Dip Buyers Concede Defeat as US Equity Market Declines Today
- Dip Buyers Make Appearance, Yet Fall Short in Today’s US Equity Market
Closing changes:
- S&P 500 -07%
- DJIA -0.5%
- Nasdaq Comp -1.1%
- Russell 2000 -0.9%
US CPI Preview: Forecasts from major banks, monthly pace should hold at 0.2%
Headline and core CPI, which excludes volatile food and oil prices, are seen coming in at 0.2% month-on-month, same as in June. Annual headline CPI is expected to rebound to 3.3% vs. June’s print of 3.0% and core is seen steady at 4.8% YoY.
Commerzbank
We expect the core rate to remain at just 0.2% in July.The headline inflation rate is also likely to be 0.2%.As this would be largely in line with the Fed’s inflation target of 2%, such a result would support our view that the Fed is unlikely to raise rates again.
Credit Suisse
We expect core CPI inflation to remain at 0.2% MoM in July, maintaining a more modest run rate after stepping lower in June. The YoY reading of core inflation is likely to decline to 4.7%. On the other hand, unfavorable base effects and modestly higher gas prices are likely to lead headline inflation higher to 3.3% YoY. A reading in-line with our expectations would represent the second consecutive month that monthly core inflation has been broadly in-line with the Fed’s target.
TDS
Core-price inflation likely remained the same in July, printing a second straight 0.2% MoM gain (0.23% unrounded). Goods inflation was likely a big factor to the downside, with shelter prices remaining a key wildcard (we expect modest acceleration).Rising gas prices will also help to keep headline inflation steady.Our MoM forecasts imply 3.3%/4.8% YoY for total/core prices.
ANZ
We expect both headline and core CPI inflation to rise by 0.2% MoM in July.Falling used car prices are again expected to see a decline in core goods prices.Some one-off factors are expected to keep core services ex-rent subdued, while rent inflation should continue to cool from a heady pace. Our diffusion and dispersion indices suggest inflation pressures are abating and normalising. The Fed is wary of upside risks to elevated inflation given demand for labour remains excessive. Most policymakers think the policy rate will need to be kept restrictive for some time to get inflation back to target.The risks remain that the Fed’s work is not yet done.
NBF
The energy component is likely to have had a sizeable positive impact on the headline index given the sharp rise in gasoline prices during the month. This, combined with another healthy gain in shelter costs, should result in a 0.4% increase in headline prices. If we’re right, the year-on-year rate could move up from 3.0% to 3.4%, marking the first increase in 13 months for this indicator. The advance in core prices could have been more subdued in July thanks in part to a decline in the price of used vehicles. But a rise of 0.3% in the month will still be too large to allow a drop in the annual rate. The latter should instead remain unchanged at 4.9%.
RBC Economics
YoY growth in US consumer prices likely ticked slightly higher for the first time in a year in July – gasoline prices didn’t move much this July but a larger 8% drop in July a year ago will fall out of the 12-month growth rate. YoY growth in core (ex-food & energy) prices will still be high (we expect +4.7%) in July, but we expect a moderate 0.2% MoM increase to match the June gain. Slower growth in core CPI has come alongside a pullback in home rent inflation as earlier slowing in market asking rent growth feed through to lower rent CPI with a lag as contracts get renewed. Absent a reacceleration in core inflation, we expect the Fed to step to and stay on the sideline and maintain the Fed Funds at 5.25% – 5% range until 2024.
CIBC
After some relief in core prices in June, price pressures likely maintained a 0.2% monthly pace in July for both headline and core (ex. food/energy) CPI. Unfavorable base effects will have propped up annual CPI inflation to 3.2%, while annual core inflation likely subsided to 4.7%. Within core categories, shelter prices could have decelerated, reflecting the typical lag associated with softer rents seen last year, but the Fed will be focused on core services outside of rent of shelter, as that’s a better gauge of underlying price pressures tied to demand. That measure was flat on a monthly basis in June, but that partly reflected a sizable drop in airfares that may not have extended into July. Still, even a bounce in core services ex. shelter to 0.3% MoM would leave the three-month annualized change at a tame 2.1%.
Citi
We expect a 0.196% MoM increase in core CPI in July, a modestly stronger increase than in June but clearly a much more favorable monthly pace of inflation for the Fed than over much of the last few years.Shelter prices are likely to continue to slow overall this year, though the July data may see a somewhat stronger 0.47% MoM increase in each of primary rents and owners’ equivalent rent. More negative seasonal factors after July could mean shelter prices slow further in the fall. Meanwhile, headline CPI should rise 0.3% MoM and rebound from a near-term bottom of 3.0% YoY to 3.3% YoY.
Westpac
The June CPI report was pivotal for the current cycle as a modest 0.2% monthly print brought annual headline inflation down to 3.0%, a third of its peak level. A similar outcome is expected by Westpac, though the annual rate will lift slightly owing to an adverse base effect. The composition of US inflation remains problematic, however. Goods inflation is benign and services ex. shelter increasingly constructive for a return to target well before the medium term. But, because of its weight and scale, by itself, shelter inflation has the capacity to hold inflation above the 2.0% YoY target for the foreseeable future. It is also worth recognising that, while shelter inflation should abate to year-end and through early-2024, capacity in the sector will remain a concern for years, and with it shelter inflation.
Wells Fargo
We expect the disinflationary trend to continue in July and estimate a 0.2% bump in both the headline and core measures over the month. Looking under the hood, we expect faster deflation for vehicles and other goods in July, counteracted by slightly firmer services prices for travel and medical care. If realized, these prints would translate to a 3.3% annual headline rate and a 4.7% annual core rate. Through the monthly noise, inflation appears set on a downward path. However, progress in the coming months is likely to be slower and noisier than June’s print alone would suggest. We expect monthly gains in core inflation to pick up slightly in Q4 as the disinflationary momentum from waning goods prices fades and health insurance prices rebound toward the end of the year.
US sells 10-year notes at 3.999% vs 3.998% WI
- Results of the 10-year note auction
- Prior 3.857%
Those bid numbers show the allure of 4%.
“Treasuries chopped sideways throughout the session on lighter volumes across the curve and 10-year yields were slightly lower on the day in the runup to 1pm. Since the result, we’ve seen little change in the follow-through,” BMO writes after the release.
what’s expected for the July US CPI report
- The July consumer price index will be released on Thursday at 8:30 am ET
The highlight of the week on the US economic calendar is Thursday’s US CPI report. The market is cautiously optimistic about the state of inflation in the US but the July CPI report will go a long ways towards solidifying that or raising new questions.
The market will be watching both the headline number and the core.
Headline CPI expectations:
- m/m +0.2%
- y/y +3.3%
Drilling down deeper into the headline numbers, there may be a slight bias upwards. Of the 78 estimates tracked by Reuters, the vast majority are at +0.2% but there are just 7 that are below +0.2% while there are 21 above.
Core CPI expectations:
- m/m +0.2%
- y/y +4.8%
Similar to the headline, the bias is higher with just 5 estimates below +0.2% and 21 above.
For the m/m number, I expect that market participants will be drilling down to the second decimal and that might present a different picture with many firms in the +0.15 to +0.2% range. Here is a sampling of estimates.
US MBA mortgage applications w.e. 4 August -3.1% vs -3.0% prior
- Latest data from the Mortgage Bankers Association for the week ending 4 August 2023
- Prior -3.0%
- Market index 194.5 vs 200.7 prior
- Purchase index 149.9 vs 154.1 prior
- Refinance index 416.1 vs 433.6 prior
- 30-year mortgage rate 7.09% vs 6.93% prior
Canada June building permits +6.1% vs -3.5% expected
- Canadian June 2023 building permit data
- Prior was +10.5%
- Permits at $11.6 billion
- 67.2% monthly increase in the institutional component largely due to two hospital permits
- Non-residential permits increased 20.4%
- Residential permits declined 1.8% to $6.9 billion in June
- The total value of building permits in the second quarter declined 1.0% from the first quarter but residential up 4.9%
Commodities
Silver continues to trade vulnerable below $23.00
- Silver stands near $22.70, while bears still have the upperhand.
- The USD weakened following two consecutive sessions of strength.
- US Treasury yields stand mixed ahead of inflation data from the US from July.
In Wednesday’s session, the Silver spot price traded with mild losses, while the USD traded weaker and corrected after two days of strength. Markets remain quiet ahead of crucial CPI data from the US from July, which will impact bond and metal price dynamics.
WTI Crude Oil Futures Shatter Ceiling, Surging Higher Today
- Settles at $84.40, up $1.48 or 1.78%
The price of WTI crude oil futures broke higher today, and in the process, moved above a key swing area ceiling between $82.43 and $83.44. That ceiling was started way back in November 2022. The high price extended up to $84.65. The low today was at $82.67. The settlement was at $84.40, up $1.48 or 1.78%
EIA weekly US crude oil inventories +5851K vs +597K expected
- Weekly US oil inventory data
- Gasoline -2661K vs -8K expected
- Distillates -1706K vs +6K expected
- Refinery utilization +1.1% vs 0.4% expected
- Production estimate 12.6 mbpd vs 12.2 mbpd prior
- Impld mogas demand: 9.30 mbpd vs 8.84 mbpd prior
EU News
European equity close: Gains, but not the strong gains from earlier
- Closing changes for the main European bourses on August 9, 2023
- Stoxx 600 +0.4%
- German DAX +0.5%
- UK FTSE 100 +0.8%
- French CAC +0.8%
- Italy MIB +1.3%
- Spain IBEX +0.5%
A bare calendar day in Europe today
- The focus in markets starts to shift towards the US CPI report tomorrow
There isn’t really a lot for markets to react towards. In fact, in Europe there won’t be any major data releases at all. As such, the rangebound technicals and market mood are the only things to go on before we wait on inflation driver on Thursday.
Other News
China considering talks with Japan at ASEAN meeting after Aso visit to Taiwan – report
- Kyodo News reports on the matter
The takeaway here is that Japan’s ruling Liberal Democratic Party vice president, Taro Aso, made a visit to Taiwan and made mention that “the most important thing now is to make sure that war doesn’t break out in the Taiwan Strait”.China is upset with the whole ordeal and has urged Japan not to rock the boat on this one.
Considering Aso’s visit, China is now planning to hold leaders talks with Japan at the ASEAN meeting in Indonesia next month.That’s a meeting where the US won’t be attending, so it’s definitely an opportunity for China to get a word in.
China’s major state owned banks seen selling dollars to buy Yuan
- According to sources
China’s major state-owned banks seen selling dollars to buy yuan in the onshore spot foreign exchange market. This according to sources.
China’s CPI MoM +0.2% vs -0.1% expected. YoY -0.3% vs -0.4% last expected
- China’s CPI and PPI data for July 2023
- Prior month CPI YoY 0.0%
- Prior month CPI MoM -0.2%
- China CPI MoM for July 0.2% vs -0.1% expected
- China CPI YoY for July -0.3% vs -0.4% expected
- China PPI YoY for July -4.4% vs -4.1% expected. Prior month -5.4%
Biden administration restricts some US investment in Chinese technology
- The move was rumored and the result is narrower than feared
The Biden administration unveiled an executive order to regulate US investment in a narrow set of technologies in China, according to a Reuters report.
The order will focus on semiconductors, quantum computing and certain artificial intelligence. The White House is trying to spin it as something that’s focused on the military not economic competition but that’s ridiculous. Nearly all innovation in the future will be done by the people with the most-powerful computers.
In any case, the move was rumored and some congressmen even wanted to expand it to all US investment in China. The report says the US is contemplating exemptions for investments in publicly-traded securities, which opens up a gigantic loophole.
New Zealand inflation expectation for 1 year 4.17% versus 4.28% % last quarter
- New Zealand inflation expectation for Q3
- 1-year inflation 4.17% versus 4.28% last quarter
- 2-year inflation expectation 2.83% versus 2.79% last quarter
- 5-year inflation expectation versus
- monetary conditions current 90% versus 84.38% last quarter
- monetary conditions next quarter 90.0% versus 84.3% last quarter
- monetary conditions one year 53.33% versus 50.0% last quarter
New Zealand electronic retail sales MoM for July 0.0% vs 1.0% last month
- New Zealand electronic card retail sales for July 2023
- Prior month 1.0% MoM and 4.2% YoY
- Electronic retail sales MoM comes in at 0.0% lower than last month 0.9% (revised from 1.0%)
- Electronic retail sales YoY comes in at 2.2% lower than last month’s 4.2% reading.
By spending category, the movements were:
- Consumables, up $22 million (0.9 percent)
- Apparel, up $0.7 million (0.2 percent)
- Durables, down $8.7 million (0.5 percent)
- Motor vehicles (excluding fuel), down $11 million (5.1 percent)
- Fuel, down $30 million (5.5 percent).
Cryptocurrency News
Down but not out: Cardano price might be primed for a comeback
- Cardano price is set to witness a potential trend reversal provided it flips $0.3043 into a support floor.
- The altcoin has not lost its investors’ interest as both retail and whale holders have been constantly adding to their wallets.
- Their presence on the network, however, is concerning as active addresses hit a 12-month low this week.
Cardano price is seemingly bouncing back even though the broader market is still far from noting an alt season. The ADA holders have been both a boon and a bane in this recovery, preventing any significant decline but also keeping the altcoin from witnessing an immediate recovery.
Dogecoin begins recovery with speculation of Twitter creators being paid in DOGE
- Crypto Twitter is abuzz with speculation of creators receiving their payment in DOGE tokens.
- DOGE price started its recovery, yielding nearly 6% gains for holders this week.
- Analysts believe Dogecoin price rally is likely with the hype surrounding the meme coin.
Elon Musk, the owner of X (formerly Twitter), recently informed the crypto community that there will never be a crypto token for X. The social media platform will “never launch” a crypto token and this fueled the hopes of DOGE community members that expect Dogecoin to find utility for payments.
Dogecoin price recovers riding the speculation in the community
DOGE price suffered a steep decline from $0.078 at the beginning of August to a low of $0.071 on Monday this week. Meme coins like Shiba Inu and PEPE, witnessed a rise in their popularity and social dominance – the share of posts about them compared to posts about other top cryptos – taking the spotlight, while Dogecoin faded into the background with a decline in its relevance across social media platforms.
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