Round up of today's market news *

North American News

PPI Sends Ripples Through the Bond Market

The conclusion of the day and the headlines fail to encapsulate the dynamic nature of the lively Friday in August. The PPI figures were released, surpassing expectations by a slight margin. While this might not typically trigger significant consequences, it unexpectedly led to a downturn in the bond market, causing yields to rise by 5-6 basis points. This, in turn, triggered a ripple effect of risk aversion and increased demand for the US dollar.

The day concluded with Treasury yields remaining close to their peak levels, not straying far from the highs witnessed last week. This movement was further propelled by the persistence of yield curve steepeners, driven by optimistic sentiments regarding a smooth economic deceleration.

US 10-year yields up 8.8 bps to 4.17%
S&P 500 flat
Gold flat at $1913

US July PPI +0.8% y/y vs +0.7% expected

PPI data

Prior was +0.1% y/y (revised to +0.2%)
PPI final demand m/m +% vs +0.2% y/y expected
Prior was +0.1% m/m (revised to 0.0%)

Ex food and energy:

+2.4% y/y vs +2.3% expected (prior +2.4%)
+0.3% m/m vs +0.2% expected (prior +0.1% revised to -0.1%)

More details:

Goods +0.1% m/m
Services +0.5% m/m
Foods +0.5% m/m

Digging through the details, distribution was a source of upside pressure on the services side.

US judge revokes Sam Bankman-Fried’s bail

Bankman-Fried to go to jail while awaiting his October trial

A US judge appears to be on the brink of revoking Sam Bankman-Fried’s bail. He’s charged with one of the largest fraud’s in history as he embezzled billions running the exchange FTX.

The judge said he there was probable cause to believe that the FTX founder attempted to tamper with witnesses at least twice, according to a Reuters report.

One of those witnesses is former CFO and love interest Caroline Ellison, who is slated to testify against him. He leaked her diary to the New York Times.

“Defendant requested access to Google Drive, he said for discovery. Then he used it to give Ms. Ellison’s documents to the New York Times,” the prosecuting attorney Sassoon said.

His lawyer said he will appeal the bail revocation and asked that detention be delayed pending that appeal but his request was denied.

US August prelim UMich consumer sentiment 71.2 vs 71.0 expected

Preliminary UMich consumer sentiment data for August 2023
Prior was 71.6
Current conditions 77.4 vs 76.9 expected (76.6 prior)
Expectations 67.3 vs 68.1 expected (68.3 prior)
1-year inflation 3.3% vs 3.4% prior
5-10 year 2.9% vs 3.0% prior

US dollar climbs and yields jump after PPI data

Outsized reaction to PPI

A slightly-hot producer price index reading has caused an outsized reaction in the FX and fixed income markets.

PPI was at +0.3% m/m compared to +0.2% expected but you wouldn’t know it was only a small miss from the market reaction.US 10-year yields have jumped to 4.15% from 4.10% and the dollar is broadly stronger.

Trump says trial on 2020 election case should wait until after 2024 election

Trump says trial on 2020 election case should wait until after 2024 election. He is saying it is an attempt to influence the election.

WSJ: Senator Joe Manchin weighs leaving the Democratic Party

The WSJ reports that Sen. Joe Manchin (D., W.Va.) is contemplating a departure from the Democratic Party to become an independent.During a West Virginia radio program, Manchin expressed his considerations, stating, “I would think very seriously about that.I’ve been thinking about that for quite some time.” He further emphasized his current dissatisfaction with both major parties, remarking, “I can’t accept either party right now.”

Feds Harker:The Fed is making progress on its inflation fight

Feds Harker comments on inflation

Harker says that the Fed is making progress on inflation.Earlier this week, Harker said that he thought it might be time that the Fed can hold rates steady.

Commodities

Silver retreats below $22.70 amid rising US yields

Silver fell below $22.70 and is poised for a 3.8% weekly loss.
July’s PPI from the US rose to 2.4%.
Rising yields don’t allow the metal to gain traction.

On Friday, Silver saw mild losses and will post its fourth consecutive weekly loss, having lost more than 7% since mid-July. At the end of the week, the US reported hot Producer Price Index (PPI) data and positive University of Michigan (UoM) Sentiment and inflation expectations, which fueled a rise in US bond yields.

Oil Supercycle may not be off, but outlook constrained by ongoing additions to global spare capacity – TDS

Is the Oil supercycle still on? Economists at TD Securities analyze crude prices outlook.

Oil markets to remain range-bound at elevated prices for some time

Recent energy supply trends are still corroborating our view that the West is losing control over commodity supply, but developments to global spare capacity have likely flattened the right tail for energy markets over the coming year. Initially, this is likely to cap the upside to long-dated Brent prices but also decreases the risks of a sustained runaway rally in spot crude prices above $100/bbl over the medium-term.

The supercycle may not be off, but the outlook is constrained by ongoing additions to global spare capacity, such that substantial price gains are likely to unleash additional supply. However, Gulf nations have managed to increase their control on global spare capacity, suggesting that the group of producers can continue to engineer a tighter market without fear of significantly losing market share to competitors.

Instead of offering structural tailwinds to prices from an evaporating pool of spare capacity, oil markets are more likely to remain range-bound at elevated prices for some time.

Baker Hughes week US oil rig count unchanged

Nat gas rigs fall by 5

525 oil rigs vs 525 previously
Natural gas rigs 123 vs 128 prior

IEA lowers forecast for oil demand growth for next year

The International Energy Agency (IEA) with its monthly report

World oil demand hit a record 103 mil bpd in June
August could yet see another peak in demand
2024 global oil demand growth forecast revised down to 1 mil bpd (previously 1.15 mil bpd)
If OPEC+ current targets are maintained, oil inventories could draw by 2.2 mil bpd in Q3 an 1.2 mil bpd in Q4
That creates a risk of driving pries higher still

EU News

European equity close: Friday selling erases weekly gains

Closing changes for the week ending August 8

Stoxx 600 -1.0%
German DAX -0.9%
UK FTSE 100 -1.2%
French CAC -1.2%
Italy MIB -1.0%
Spain IBEX -0.7%

On the week:

Stoxx 600 flat
German DAX -0.7%
UK FTSE 100 -0.5%
French CAC +0.4%
Italy MIB -1.0%
Spain IBEX +0.7%

Spain July final CPI +2.3% vs +2.3% y/y prelim

Latest data released by INE – 11 August 2023
Prior +1.9%
HICP +2.1% vs +2.1% y/y prelim
Prior +1.6%

France July final CPI +4.3% vs +4.3% y/y prelim

Latest data released by INSEE – 11 August 2023
Prior +4.5%
HICP +5.1% vs +5.0% y/y prelim
Prior +5.3%

UK June monthly GDP +0.5% vs +0.2% m/m expected

Latest data released by ONS – 11 August 2023
Prior -0.1%

UK Q2 preliminary GDP +0.2% vs 0.0% q/q expected

Latest data released by ONS – 11 August 2023

Prior +0.1%
GDP +0.4% vs +0.2% y/y expected
Prior +0.2%

Reuters poll: ECB to hold deposit rate at 3.75% on September 14 say 37 of 70 economists

A poll of 70 economists done by Reuters shows:

37 of 70 expect the ECB to hold the deposit rate at 3.75% on September 14
In addition a slim majority see ECB deposit rate of 4.0% by the year-end

Other News

China July M2 money supply +10.7% vs +11.0% y/y expected

Latest Chinese credit data for July 2023 has been released

Prior +11.3%
New yuan loans ¥345.9 billion vs ¥800.0 billion expected
Prior ¥3.05 trillion

Shipments of smart phones within China down 24.1% year on year

That’s a big fall

CAICT (China Academy of Information and Communications Technology) is reporting that shipments of smartphones within China are down 24.1% YoY to 20.86 million handsets.

RBA Lowe: Things are moving in the right direction. Too early to declare victory

RBA’s Lowe testifies

Prepared remarks from RBA Gov. Lowe

It is too early to declare victory on inflation, but things are moving in the right direction.
The board is mindful that interest rates have been increased by a large amount in a short period of time and that there are lags in the operation of policy.
The board remains resolute in its determination to return inflation to the 2-3 per cent target range.
Monetary policy is in restrictive territory and it is working to establish a better balance between supply and demand.
Our central forecast is for CPI inflation to be around 31/4 per cent by the end of next year and to be back within the 2-3 per cent target range by late 2025.
It is possible that some further tightening of monetary policy will be required to ensure that inflation returns to target within a reasonable timeframe.
Recent data indicate that there has been some easing in the labour market.
Whether or not this is the case will depend upon the data and the board’s evolving assessment of the outlook and risks.
We expect employment to continue to grow, but below the rate of growth in the labour force.
It’s encouraging that the recent data are consistent with inflation returning to target over the next couple of years.
The Australian economy is currently experiencing a period of below-trend growth and this is expected to continue for a while yet.
Data are also consistent with the Australian economy continuing to travel along that narrow path that I have spoken about.
The bank’s central scenario is that economic growth remains subdued for the rest of this year before gradually picking up to around 2 1/4 per cent by end 2025.
Dwelling investment is expected to increase again next year, after the recent difficulties in that sector.
Monetary policy is in restrictive territory.
Possible that some further tightening of monetary policy will be required.
Board is seeking to establish a credible path back to the inflation target over the next couple of years.
Board wants to have reasonable confidence that inflation will return to target over the current forecast period.
It is a complicated picture and there are scenarios in which consumption is weaker than our central case and others in which it is stronger.
Risk that services price inflation may stay high, prolonging the period of inflation being above target.
Board is seeking to establish a credible path back to the inflation target over the next couple of years to avoid a damaging shift in inflation expectations.

New Zealand manufacturing PMI for July 46.3 versus 47.5 last month

New Zealand manufacturing PMI for July 2023
Prior month 47.5New Zealand manufacturing PMI for July 46.3

Economists forecast a steady 5.50% OCR for the RBNZ’s upcoming meeting

New Zealand’s economy is on a stable path

A poll of economists in New Zealand:

Expect the RBNZ will keep the Official Cash Rate (OCR) steady at 5.50% during its upcoming meeting next week.
Additionally, the poll suggests that there will be no changes in interest rates until at least the end of March 2024.
The majority of economists anticipate a rate cut in the 2Q of 2024.

Cryptocurrency News

US SEC likely to reject BTC ETF, experts say

Bitcoin price has failed to reclaim the $30,000 psychological level and trades at $29,410.
The US CPI announcement failed to move the markets, which will lead to more sideways movement over the weekend.
A minor rally that sweeps the $30,340 hurdle would rebalance the inefficiency and allow bears an opportunity to open short positions.
The target for Bitcoin bears includes the following support levels, $28,138, $27,330 and $26,767.

Bitcoin price has been moving sideways for nearly 50 days now, with no directional bias in sight. With volatility hitting all-time lows, investors are bored out of their minds and are looking at other avenues for trading opportunities. But bears have been eye a retest of key hurdles to open short positions and bank on a mean reversion move.

Bitcoin ETF decision and its implications

Bitcoin Exchange Traded Fund (ETF) gained a newfound momentum after BlackRock’s spot ETF filing in mid-June. This development has given investors something to look forward to.The second deadline for the United States Securities and Exchange Commission (SEC) to approve or reject ARK 21Shares’ Bitcoin ETF is on August 13.

While most experts are expecting a delay.This outlook is obvious, considering the regulator’s stance on all things crypto.

On the off chance that the SEC does approve ARK’s Bitcoin ETF, Bitcoin price is likely going continue its 2023 rally and potentially tag the nearest key levels at $35,000 and $40,000, respectively.

Since the SEC is likely going to reject the filing, investors can expect Bitcoin’s dry volatile spell to continue as it slowly struts lower.

Ethereum’s low volatility and bullish on-chain metrics hint at potential ETH price rally

Ethereum volatility has declined to a record low level.
Ethereum’s on-chain metrics have flipped bullish, signaling an upcoming price rally.
ETH price holds above the $1,800 level after wiping out US CPI gains.

Some of Ethereum’s on-chain metrics have flipped bullish recently, at a moment when the volatility of the altcoin’s price has hit a record low, according to data from IntoTheBlock. This combination of factors is likely to lead to an upward rally in the short term, as periods of low volatility, which usually don’t last longer than a month, are typically followed by a price spike in either direction..

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Round up of today’s market news

ByBilals Tech