North American News
Market Week Kickoff: Major Indices Open Strong with Upward Momentum
- US Stock Indices Surge as New Trading Week Begins: NASDAQ Shines with 1.05% Gain
In a promising start to the trading week, major US stock indices closed higher. The standout performer was the NASDAQ index, soaring by 1.05%, showcasing robust momentum. The Dow Industrial Average followed suit, securing a modest 0.07% gain, thanks to a resilient finish.
However, not all sectors shared the enthusiasm. Regional banks faced a downturn, with the KRE index of regional banks declining significantly by -1.90% to reach $46.85. Additionally, the Russell 2000 dipped by -0.24%, shedding 4.62 points.
A snapshot of the market closes shows:
- Dow industrial average up 26.23 points or 0.07% at 35307.64
- S&P index up 25.65 points or 0.57% at 4489.71
- NASDAQ in the cup 143.47 points or 1.05% at 13788.32
Nvidia led the way with a gain of $29.08 or 7.12% at $437.63. Other winners today included:
- Micron up 6.07%
- Celsius, up 4.54%
- AMD up 4.10%
- First Solar, up 3.20%
- Broadcom up 2.93%
- PayPal up 2.81%
The biggest Dow 30 gain was Intel with a rise of 2.26%. Salesforce rose 1.61% and Merck advanced by 1.39%
This week Home Depot, Target, and Walmart will report their earnings:
- Home Depot fell -0.31%
- Target fell -1.24%
- Walmart fell -0.75%
After the close, Berkshire Hathaway filed its Q2 13 – F filing which showed. The positions are at is of the end of June. So they could be different now.
- Decreased stake in General Motors by 45%
- Capital One increased by 26%
- Took small positions in homebuilders DR Horton and Lennar
- Sold-out of McKesson and Marshall McLennan
Nasdaq Spearheads Market Rally as NVIDIA’s 6.5% Surge Garners Top Pick Status from Morgan Stanley
If you seek a stock market champion today, once again Nvidia takes the spotlight with a remarkable 6.3% surge, adding $25.73 to reach $434.21. The day’s lowest price flirted with $400, briefly touching $403.11 before embarking on an upward trajectory. The impetus behind this surge was Morgan Stanley’s renewed endorsement of Nvidia as its top stock pick, just ahead of the upcoming August 23 earnings report. These gains have not only propelled the NASDAQ index but have also fueled a 103.83-point climb, equivalent to 0.76%, bringing the index to 13,749.
- The S&P index is also up by 13.75 points or 0.31% at 4477.89.
- The Dow industrial average is not so lucky with a decline of -56 points or -0.16% at 35223.
Analyzing Nvidia’s hourly chart, its movement from its peak on July 14 to the low of $403.11 marked a corrective phase of -16.10% from its high of $480.46. Additionally, it experienced a correction of over 38.2% from the preceding day’s low, just before the last quarter’s earnings announcement. During that earnings report, the company astounded the market by projecting sales to hit $11 billion in the current quarter, significantly surpassing the market’s $7 billion expectation. As the upcoming week’s announcement approaches, Morgan Stanley foresees Nvidia not only reaching but also surpassing that level. The firm has set a target price of $500.
Looking at the upper side of the spectrum, the convergence of the 100 and 200-hour moving averages around $446.50 is noteworthy. These moving averages serve as a pivotal gauge for both buyers and sellers moving forward. A movement above this threshold would indicate a more bullish technical outlook. Conversely, if the price ascends to these levels and subsequently retreats, it would maintain seller influence and short-term control.
Goldman Sachs expect the first Federal Reserve rate cut by the end of June 2024
Bloomberg report on a Sunday note from economists at Goldman Sachs.
The GS analysts expect the Federal Open Market Committee (FOMC) will begin its rate cut cycle by the end of June next year with a 25bp cut. Further rate cuts will follow from there at a gradual pace, likely to be once per quarter. GS argues that the Fed will want to cut once inflation is closer to target so as to normalize the Fed Funds rate from its restrictive level.
Timiraos: Cleveland Fed 12 month ahead of inflation expectations fall to two-year low
WSJ Timiraos says that the Cleveland Fed measure of one-year inflation expectations fell to 4.3% in July from 5% in April. This is the lowest level in 2 years.
- Description: The Survey of Firms’ Inflation Expectations (SoFIE) is a large quarterly representative panel of firms in the manufacturing and services sectors that was created to measure inflation expectations of chief executive officers (CEOs) in the United States.
- What do we collect? Each quarter the survey captures respondents’ beliefs for expected CPI inflation over the next 12 months. Once per year it asks about beliefs for average CPI inflation over the next 5 years, CPI inflation over the last 12 months, the Federal Reserve’s inflation target, and the probability that CPI inflation over the next 12 months will exceed 5%.
Earlier today the New York Fed survey saw one-year inflation expectations fall to 3.5% which was the lowest level since April 2021
NY Fed July survey shows 1 year inflation expectations lowest since April 2021
- 1 year ahead comes in at 3.5% vs 3.8%
The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the July 2023 Survey of Consumer Expectations, which shows that inflation expectations declined at the short-, medium-, and longer-term horizons. Year-ahead price growth expectations for food, medical care, and rent declined to their lowest levels since at least early 2021. Labor market expectations strengthened, while households’ perceptions about their current financial situations and expectations for the future improved.
- Survey of consumers in July puts one-year ahead expected inflation at 3.5%, lowest since April 2021, vs. June’s 3.8%.
- July three-year ahead expected inflation at 2.9% vs. June’s 3.0%.
- July five-year ahead expected inflation at 2.9%% vs. June’s 3.0%.
- July survey finds retreating inflation expectations across a number of categories.
- July expected home price rise moves to 2.8% from June’s 2.9%.
- July expected rent price increase lowest since January 2021.
- Survey respondents report better personal financial situations in July.
- Median year-ahead expected price changes declined for all commodities: by 0.2 percentage point for gas (to 4.5%), 0.1 percentage point for food (to 5.2%), 0.9 percentage point for medical care (to 8.4%), 0.3 percentage point for the cost of a college education (to 8.0%), and 0.4 percentage point for rent (to 9.0%).The current readings for food, medical care, and rent are the lowest since September 2020, November 2020, and January 2021, respectively.
Labor market:
- Median one-year-ahead expected earnings growth dropped by 0.2 percentage point to 2.8%, fluctuating between 2.8% and 3.0% since September 2021.
- Mean unemployment expectations for the next year decreased by 1.0 percentage point to 36.7%, the lowest since April 2022.
- The average perceived chance of job loss in the upcoming year decreased by 1.1 percentage points to 11.8%.
- The mean probability of voluntarily leaving a job in the next year dropped by 1.9 percentage points to 17.0%, the lowest since March 2021.
- The decrease in the average quit probability was consistent across demographic groups.
- The perceived likelihood of finding a new job (if the current one was lost) rose from 55.3% in June to 55.8% in July.
Household finance:
- Median expected household income growth remained at 3.2% in July, below the 12-month average of 3.6%.
- Median household spending growth expectations rose from 5.2% in June to 5.4% in July, still below the 12-month average of 6.1%.
- Perceptions of current and future credit access were mostly stable, with a minor decline in current perceptions and a slight rise in future expectations.
- The perceived likelihood of missing a minimum debt payment in the next three months dropped by 0.3 percentage point to 11.7% in July.
- Median year-ahead tax change expectations (at current income) remained at 4.3%.
- Median expected growth in government debt for the next year decreased from 10.0% in June to 9.7% in July.
- The average perceived chance of a higher interest rate on saving accounts in 12 months rose by 1.1 percentage points to 30.9%.
- Positive perceptions about current household financial situations increased in July, with more feeling better off than last year and fewer feeling worse off.Optimism for the next year also increased, reaching its highest since September 2021.
- The perceived probability of U.S. stock prices being higher in 12 months increased by 1.8 percentage points to 37.1%.
ICYMI: BoA says next FOMC interest rate hike will come in November instead of September
- Federal Reserve forecast from Bank of America – see another Fed Funds rate rise
Bank of America responding after the PPI data on Friday out of the US.
ICYMI:
BoA argues that despite the unexpected jump in the PPI the Fed’s FOMC isn’t likely to raise rates at its next policy meeting on September 19-20. BoA analysts moved their forecast for what they expect to be the final rate hike to the October 31 – November 1 meeting:
- “Waiting an additional six weeks would give the Fed more time to assess the trajectory of the economy”
- Says there’s been a slowdown in the rate of price growth, even though prices overall might still be rising, pointing out that categories that have experienced three-month annualized inflation at or above 5% is now at 23.2%, the lowest reading since November 2020
Bank of Canada Q2 senior loan officer survey: Lending conditions improve slightly
- The latest survey of lending from the Bank of Canada
The Bank of Canada is out with its Q2 senior loan officer survey and results point to a slight easing through June for businesses. Pricing measures improved slightly but non-pricing measures, like availability, improved a bit more substantially.
In terms of household lending, conditions slightly tightened on both mortgage and non-mortgage measures but not nearly at the pace of Q1.
Commodities
Silver clears daily losses, limited by rising US yields
- XAG/USD dropped to a daily low of $22.35 but then settled at around $22.60.
- Risk aversion dominates the markets, strengthening the USD.
- Eyes on Wednesday’s FOMC minutes from July’s meeting.
At the start of the week, risk-off flows predominate the markets and limit the Silver’s upside. With no relevant data released, higher US Treasury yields and a stronger USD dictate the pace of the metal.
The US bond yields are edging higher after the release of inflation from July from the US data last week. The 10-year bond yields 4.19%, with 1.29 % gains on the day. The 2-year yield stands at 4.96% with 1.25 % gains, and the 5-year yield is at 4.38% with 1.29 % gains. In line with that, the USD measured by the DXY index rose to its highest level since early July, above 103.00 and limiting the precious metal’s gains.
US crude futures settle at $82.51
- Down $0.68 or -0.82%
The price of WTI crude oil futures is settling at $82.51.That’s down $0.68 or -0.82%.
The high price today reached $83.20. The low price extended to $81.76. The low price moved below the old swing area between $82.43 and $83.44. That area was breached last week but rotated into the swing area on Friday. Today’s break below is more bearish and may be a signal that the sellers are gathering against the swing area. Traders looking for more downside will likely be using the $83.44 as a risk-defining level. Stay below is more bearish. On the downside, if there is more selling, the $79.00 is a downside target level.
Weekend Brent – Iran’s oil exports have surpassed their 1.4 million barrels per day target
While the Saudi’s continue to cut and extend their cuts, Iran is pumping exports at an increasing pace.
Gulf media (Al Arabiya) reported over the weekend, citing the head of Iran’s Plan and Budget Organization:
- “ the government aims at exporting 1.4 million oil barrels per day, an objective which has now been surpassed thanks to the Oil Ministry’s efforts”
Reports Pakistan has suspended imports of crude oil from Russia, citing low quality issues
Pakistani media reports that imports of crude from Russia have been suspended
Citing unnamed sources for the info that the Pakistan Refinery had refused to process more Russian oil, as less petrol was being produced from it with 20% more furnace oil compared to the Arabian crude oil.
The implications of this would seem to be higher demand for non-Russian oil from Pakistan. At the margin this is a tailwind for Brent and WTI.
EU News
At the close: Mixed start for European equities
- Monday’s closing changes for the main European equity indexes
- Stoxx 600 flat
- German DAX +0.3%
- FTSE 100 -0.4%
- French CAC -0.1%
- Italy MIB +0.45%
- Spain IBEX -0.2%
SNB total sight deposits w.e. 11 August CHF 484.8 bn vs CHF 492.9 bn prior
- Latest data released by the SNB – 14 August 2023
- Domestic sight deposits CHF 474.7 bn vs CHF 477.4 bn prior
Germany July wholesale price index -0.2% vs -0.2% m/m prior
- Latest data released by Destatis – 14 August 2023
- Prior -0.2%
German economy ministry: Early indicators don’t yet point to sustainable economic recovery
- Remarks by the German economy ministry
- Sees reduced dynamic in labour market in the coming months
- Continues to see no growth impulse in foreign trade
- Current early indicators do not yet point to a sustainable economic recovery in the coming months
Other News
Hang Seng worry – fears a huge Chinese property company preparing for a debt restructuring
Country Garden is a pillar of the Chinese property sector. But for how much longer?
Shares in the firm hit a record low on Friday with fears rising that the company is preparing for a debt restructuring.
Country Garden had total liabilities of about $194 billion at the end of 2022.
Chinese media, Yicai, reported, citing unnamed sources, that Country Garden is expected to begin a restructuring process soon.
Hang Seng: China property developer Country Garden to suspend onshore bond trading
Over the weekend China’s Country Garden announced it’d be suspending trading of onshore bonds from Monday.
- Will suspend trading of its 11 onshore bonds from Monday
- A resumption of trading of the bonds will be determined at alater date, the company said in filings to the Shenzen stock exchange
Country Garden said on Tuesday last week it had not paid two dollar bond coupons due on August 2, totalling US$22.5 million. And added on Thursday that it could report a loss of up to $7.6 billion for H1 2023.
Country Garden is China’s top private property developer
- Had liabilities totalling about US$194 billion at the end of 2022
- Has set up a special working group led by its chairman to handle the current “difficulties”, according to the company’s filings
Tesla has cut prices in China, lower price for some Y models
Elon Musk has cut the price of his Tesla Model Y Long-range and Model Y Performance cars in China.
- Each cut by RMB 14,000
Lower price take effect from today, 14 August 2023.
Flights between the US China are set to double by the end of October
News from Friday ICYMI, an announcement from the US Biden administration.
- The number of Chinese passenger flights allowed to fly to the U.S. will rise to 18 weekly round-trips on September 1
- Will then increase to 24 per week starting October 29
- The Chinese government will agree to the same increase for American carriers
New Zealand Services PMI for July plunges into contraction to 47.8 (prior 50.1)
Business New Zealand’s Performance of Services Index for July 2023 comes in at 47.8
- June’s reading was revised from 49.6 to 50.1
- July’s 47.8 is the lowest level of activity for the sector since January 2022
- the long-term average is 53.5
BusinessNZ comment:
Reserve Bank of New Zealand ‘shadow board’ monetary policy preview – suggests on hold
- There is a ‘but’ though, some thought a +25bp rate hike would be appropriate due to sticky inflation.
The RBNZ monetary policy meeting is this week, the consensus expectation is for an on hold cash rate decision.
The statement is due on Wednesday 16 August 2023 at 0200 GMT. which is 9pm US Eastern time on Tuesday, 15 August 2023.
From the New Zealand Institute of Economic Research (NZIER) report:
- Most Shadow Board members recommend that the Reserve Bank keep the Official Cash Rate (OCR) at 5.50 percent in the upcoming August Monetary Policy Statement.
- The impacts of previous interest rate increases are still flowing through to the household sector, which should help to reduce inflation pressures in the New Zealand economy. However, two members recommended a 25 basis-point increase in the OCR in August. They were concerned about the stickiness of domestic inflation pressures and the continued increase in employment, which seems to suggest more work now is needed for the Reserve Bank to sufficiently bring inflation down.
The Reserve Bank of New Zealand ‘shadow board’ is put together by the NZIER (the New Zealand Institute of Economic Research)
- Its Monetary Policy Shadow Board is independent of the Reserve Bank of New Zealand
- the shadows do not represent what the RBNZ is going to do but rather what their view is that the RBNZ should do. That is, the Shadows do not preview what they think will happen, but what they think should happen.
- The Shadow Board aims to: encourage informed debate on each interest rate decision help inform how a Board structure might operate explore how Board members could use probabilities to express uncertainty
A Russian warship has fired warning shots on a cargo ship in Black Sea
This is the first report of a Russian warship attacking a merchant ship with ‘warning shots’ in the Black Sea. The Russian ship fired on the merchant ship beyond Ukraine in the southwestern Black Sea. In July Russia reneged on its agreement to a UN-brokered grain deal, the Black Sea grain deal that allowed Ukraine to export agricultural produce via the Black Sea.
More at Reuters
Analyst says the RBA cash rate has peaked at 4.1%, from prior forecast of 4.85%.
- The implication of no more rate hikes is the rate will be held higher for longer, rate cuts pushed back
TD analysts are forecasting the Reserve Bank of Australia have reached the peak of the cash rate.
The analysts concede there is still the possibility of a November rate hike:
- Should the labour market remain firm and there is evidence that higher labour costs are being passed through
And add further cash rate upside risks come from higher property prices supporting consumption (through the wealth channel) and higher oil prices.
TD concludes with the implications of the terminal rate having been reached:
- Given our view the RBA cash rate peaks earlier and lower than our prior 4.85% forecast, the RBA is therefore expected to keep the cash rate on hold for longer.
- We now push out rate cuts from Q2 2024 to Q3 2024.
Cryptocurrency News
Taiwan a step closer to establishing crypto regulation
- Taiwan Financial Supervisory Commission’s draft crypto policy contains 13 regulatory principles, according to ABmedia.
- According to the new regulations, the issuance of crypto assets will be allowed, however, the issuance of stablecoins has not gained approval.
- MiCA approval in the European Union is acting as a catalyst, pushing smaller nations to legitimize cryptocurrencies, such as Taiwan, which has less than a million users.
Taiwan’s Financial Supervisory Commission (FSC) has come up with a draft of guiding principles through which it hopes to provide customer protection from the “existing” perspective of money laundering prevention and supervision, according to a report.
Crypto asset providers will be allowed to issue tokens provided they fully disclose whitepapers for the assets. Service providers will not be able to issue stablecoins under any circumstances. Crypto service providers will also not be allowed to publish any advertisement in the country without registering with the authorities first. The FSC has also taken a strict stance against derivative transactions, deeming them illegal and a punishable offense, sending offenders for up to seven years in prison.
PayPal’s PYUSD is compliant with DFS NewYork, will be the only stablecoin accepted by the platform
- PayPal’s executives said in an interview that PYUSD is currently compliant with the regulations of DFS, New York.
- PYUSD will comply with other relevant regulations issued by the United States later.
- The stablecoin will become the only stable currency accepted by PayPal for remittance, B2B payments and digital goods, worldwide.
PayPal’s stablecoin is focused on promoting the transition from legal tender currencies to web3, through its bank connections and wider payment applications. In a recent interview on the podcast, PayPal’s SVP of Blockchain, José Fernández da Ponte said that PYUSD will be the only stablecoin currency accepted by PayPal.
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