North American News
US equities close on the lows in sluggish day
- S&P 500 down 0.4%
US equities opened soft and then there was some modest buying to bring them back to unchanged, then late they slumped again to just below the opening lows.
- S&P 500 down 0.4%
- DJIA -0.6%
- Russell 2000 -2.0%
- Nasdaq Comp -0.1%
US July factory orders -2.1% vs -2.5% expected
- Factory orders for July 2023
- Prior was +2.3% (unrevised)
- First decline after four consecutive increases
- Factory order ex transport +0.8% vs +0.3% prior
Revisions to durable goods – a component of factory orders showed:
- Durable goods orders -5.2% vs -5.2% preliminary.
- Durable goods ex defense -5.5% versus -5.4% preliminary
- Durable goods ex transport +0.4% versus +0.5% preliminary
- Nondefense capital goods orders ex air +0.1% versus +0.1% preliminary (proxy for capital investments by businesses)
- Shipments of durable goods -0.1%
- Inventories unchanged
US August employment trends 113.02 vs 115.45 prior
- Employment trends from the Conference Board
- Prior was 115.45 (revised to 114.71)
“The ETI ticked down in August and has been on an overall declining trend since March 2022,” said Selcuk Eren, Senior Economist at The Conference Board.“The index is still elevated, so job gains may continue over the coming months, but the rate of growth may lessen and eventually will switch to job losses”.
“As anticipated, some industries are already shedding jobs, including information services and transportation and warehousing. The ETI suggests thatweakness in the job market will eventually broaden to the rest of thelabor market. The number of employees working in temporary help services, an important early indicator for hiring in other industries, has declined steadily since it peaked in March 2022. While still elevated compared to prepandemic levels, Job openings – an indicator of opportunities available to workers – are declining rapidly. Furthermore,workers have changed their sentiments regarding the labor markets asthose saying jobs are “hard to get” rose to a two-year high in August 2023.
Fed’s Mester: We might have to go a bit higher
- Mester spoke with Börsen-Zeitung
- The labour market has also come more into balance
- from what I see so far, that we might have to go a bit higher, that we might have to raise the policy rate a bit more.
- there is still a lot of time before our next decision in September and we will get a lot of data and information by then.
- Notes that gasoline prices are rising again. We have to be very attentive to that.
- The longer inflation stays above 2%, the more likely it is that the risks will materialise
- If we end up raising interest rates too much and the economy loses momentum more than necessary, we can lower interest rates
- we will certainly not continue to raise interest rates until inflation has already fallen to 2%. Nor will we wait to lower interest rates until inflation is at 2%.
- there are upside risks to our inflation forecasts, in my view
United Airlines asks FAA to pause its departures throughout the US
- Move from United is related to computer issue
United Airlines has issued a nationwide ground stop for all flights due to a computer issue, according to the FAA.
You have to wonder if there’s some incompetence here in the systems or if hackers are exploiting something for ransom. In either case, these computer issues are growing in frequency and are undoubtedly frustrating for passengers.
Update: Some good news here as the ground stop has already been cancelled.
Goldman Sachs have revised the probability of a US recession even lower, to 15%
Goldman Sachs have been consistently revising their probability of a US recession in 12 months lower and lower.They have been consistently under consensus too .
Have it at 15% now, from most recent forecast at 20%.
Goldman Sachs chief economist Jan Hatzius:
- “We have further reduced our 12-month US recession probability back to 15%, from 20%” in July”
- “This change reflects continued encouraging inflation news, a favourable real income outlook, and the decline in the jobs-workers gap.”
US First Lady Jill Biden tested positive for COVID-19, experiencing mild symptoms
US President Biden tested negative.
White House with the statement.
Commodities
Gold price drops further as labor market remains resilient
- Gold price hits a four-day low as the US Dollar strengthens.
- US wage growth slows as workers become more reluctant to switch jobs frequently.
- Hopes for a soft landing are boosted as the US Unemployment Rate rose sharply to 3.8%.
Gold extends its downward trend as the US Dollar remains resilient due to bearish market sentiment and steady employment growth in the US. The yellow metal faces pressure as the Federal Reserve will likely keep interest rates higher for a longer period. The appeal for the US Dollar improves significantly as the US economy is expected to avoid a recession due to easing inflation and a stable job market.
Oil legs higher again. Brent tops $91
- A second wave of buying boosts crude
WTI crude oil has extended higher by $2.36 to $87.88 while brent has edged above $91 for the first time since November 2022.
Before today’s Saudi/Russian announcements, Goldman Sachs backed off a call that they would taper cuts in October and had this to say:
Our analysis and elevated OPEC+ pricing power also suggest that the risks around our OPEC + path, and our assumption that OPEC+ countries reverse half of the May 2023 cut in January 2024, are skewed towards lower supply for longer. We still see a potentially more aggressive OPEC+ price target as the key moderately bullish risk to our 12-month ahead Brent forecast of $93/bbl.
Another thing that points to fundamental tighteness is the blowout in backwardation with front-month crude now trading $8 above December 2024 oil. That’s a sign that buyers are pulling crude from inventories because they can’t wait until later and is a classic sign of a bull market.
Oil jumps after Saudi Arabia and Russia extend oil production cuts in ninth day of gains
- Brent rises above $90 for the first time since November 2022
The oil market is going to be in a significant deficit through year end, pulling and global inventories and pushing up prices.
Saudi Arabia announced today that it would extend a voluntary 1 million barrels per day output cut through December and Russia quickly followed by saying it was cutting exports by 300k bpd through year end.Both added that caveat that the decision would be reviewed monthly but it’s safe to say that it won’t be ‘reviewed’ until oil prices hit at least $100 per barrel.
Brent jumped above $90 on the news from a low of $88.06 earlier. It’s the ninth straight day of gains, with much of that coming last week after Russia’s Novak hinted that a deal extension was coming.
Goldman Sachs – more aggressive OPEC+ price target is a risk to its Brent oil $93 forecast
Goldman Sachs have a USD93 / barrel as a 12-month forecast
- Goldman Sachs still sees a potentially more aggressive OPECc+ price target as key moderately bullish risk to this forecast
- GS says “We no longer expect a Saudi announcement this week of a partial October unwind of its 1mb/d production cut”
Brent oil – US Treasury official says price cap on Russian oil continues to work
Bloomberg convey remarks from a senior US Treasury official on the price cap imposed on Russian oil exports by the US and its allies:
- the US is judging the policy’s performance by whether it’s allowing buyers across the world to negotiate bigger discounts for Russian supplies. “We don’t measure its success just by how many molecules of oil travel under the cap specifically,” Van Nostrand said.“We view it as a market mechanism for changing the oil market’s incentives.”
- US is happy to see Russia keeping the market well-supplied, and it doesn’t want to “disrupt the global oil market in a way that could lead to instability,”
- “Nine months into implementation, the cap is working,”
- the policy has reduced Russia’s revenue
Australian union plans full 2 week strike at Chevron’s LNG facilities if demands not met
The union says now its planning a full strike at Chevron’s Wheatstone and Gorgon LNG facilities for two weeks if demand are not met. From September 14.
Info via Reuters.
Heads up for more work stoppages at Australian LNG projects
Headlines via Reuters on further disruptions ahead:
- Australia union: serves further notice of protected industrialaction at Chevron’s Gorgon and Wheatstone LNG projects in Australia
- Australia union:new protected industrial action notice will escalate work bans, will have rolling 24 x 1 hour stoppages each day for 14 days from Sept 14
- Australia’s offshore alliance union says lawyers have served Chevron with further notice of protected industrial action which will commence after first 7 days of PIA kicks off on 7th September
- Offshore allianceunion says new protected industrial action notice will escalate workbans and the OA will have rolling 24 x 1 hour stoppages, each day for 14 days from Thursday 14th September
EU News
European equity close: The lack of conviction continues
- Closing changes in Europe
- Stoxx 600 -0.2%
- German DAX -0.3%
- UK FTSE 100 -0.2%
- French CAC -0.4%
- Italy MIB flat
- Spain IBEX -0.2%
Eurozone July PPI -0.5% vs -0.6% m/m expected
- Latest data released by Eurostat – 5 September 2023
- Prior -0.4%
- PPI -7.6% vs -7.6% y/y expected
- Prior -3.4%
Eurozone August final services PMI 47.9 vs 48.3 prelim
- Latest data released by HCOB – 5 September 2023
- Prior 50.9
- Composite PMI 46.7 vs 47.0 prelim
- Prior 48.6
UK data for August showed BRC sales higher than July but Barclay consumer spending lower
Conflicting headlines out of the UK:
- British retail consortium August total sales +4.1% y/y vs July +1.5%
- British retail consortium August like-for-like sales +4.3% y/y vs July +1.8%
- Barclay UK August consumer spending +2.8% y/y vs July +4.0%
- the bank blamed on a continuation of the previous month’s rainy weather
- Barclays: spending on essentials grew at slowest pace since April 2020, due to lower fuel spending
BRC comment:
- “As the rate of price rises falls, so will the extra spending needed by consumers. As a result, sales growth may fall in the coming months, even if volume growth does not,”
Barclays:
- “Muted spending growthh in August is in line with other data sources, such as soft PMIs and stalling consumer confidence, suggesting that the bite from monetary tightening is starting to be felt more acutely,”
UK August final services PMI 49.5 vs 48.7 prelim
- Latest data released by S&P Global – 5 September 2023
- Prior 51.5
- Composite PMI 48.6 vs 47.9 prelim
- Prior 50.8
Germany August final services PMI 47.3 vs 47.3 prelim
- Latest data released by HCOB – 5 September 2023
- Prior 52.3
- Composite PMI 44.6 vs 44.7 prelim
- Prior 48.5
France August final services PMI 46.0 vs 46.7 prelim
- Latest data released by HCOB – 5 September 2023
- Prior 47.1
- Composite PMI 46.0 vs 46.6 prelim
- Prior 46.6
Italy August services PMI 49.8 vs 50.5 expected
- Latest data released by HCOB – 5 September 2023
- Prior 51.5
- Composite PMI 48.2
- Prior 48.9
Spain August services PMI 49.3 vs 51.5 expected
- Latest data released by HCOB – 5 September 2023
- Prior 52.8
ECB’s Lane: August inflation data is welcome but we need to see that continue
- Remarks by ECB chief economist, Philip Lane
- We do expect bumpiness in easing of energy, food inflation
- Easing in services inflation helps limit narrative that tourism is keeping services inflation high
ECB consumer survey shows rising inflation expectations
- It’s just a marginal rise though but still, not a good reflection of consumer expectations
The median expectations for inflation over the next 12 months remain unchanged at 3.4%, similar to June, though breaking the declining trend since spring. Meanwhile, inflation expectations for the three years ahead rose to 2.4% from 2.3% previously and is still keeping above the ECB’s 2% target.
Think tank: UK should boost capital markets with pensions
UK think-tank New Financial says higher minimum contributions to pension schemes and regulatory reforms to bolster London’s capital market and boost the flow of money from pensions into investments is a good start, but more is needed to avoid pensioners having too little to live on.
Reuters reports:
- “This isn’t something that we can keep kicking down the road,”
- The report, written in partnership with Citi bank and ABRDN Asset Management, said there is a “parallel crisis” in Britain’s pensions and capital market as too little investment flows into UK-based companies and asset managers play safe with government bonds.
Other News
Morgan Stanley shifts to a bearish stance on emerging market currencies
- Morgan Stanley worries that China will drag down emerging market growth
Morgan Stanley is warning of declines in emerging markets.
“We expect more CNH (yuan) weakness, and China macro risks add to existing pressure from weak global growth and EM central bank easing cycles. We maintain a neutral stance on EM rates and credit.”
Chinese Caixin Services PMI for August 51.8 (expected 53.6, prior 54.1)
Composite 51.7
- prior 51.9
From the Caixin report:
Latest PMI data signalled a softer expansion in service sector output in China during August.
- Business activity increased at the slowest pace in eight months amid a softer rise in overall new work.
- Notably, new business from abroad fell for the first time in 2023 so far.
- Nevertheless, companies remained optimistic around the 12-month outlook, and planned company expansions supported a further increase in employment across the sector.
On the prices front, the rate of input cost inflation cooled to a six-month low, while selling prices increased at the slowest rate since April.
While service sector output has now risen in each of the past eight months, the latest upturn was the slowest recorded over this period.
- The slowdown in business activity coincided with a weaker increase in overall new business.
- New orders increased modestly, and at a pace that was below the average seen for 2023 to date.
- Data suggested thatthis was partly due to weaker foreign demand for Chinese services.
- New export business fell for the first time since December 2022, albeit marginally, amid reports of sluggish overseas market conditions.
Although growth momentum slowed, companies continued to add to their staffing levels during August.
- The rate of job creation was little-changed from July and modest, amid reports of higher business requirements and plans to expand capacity.
Business confidence around the 12-month outlook remained positive in August.
Companies often linked growth forecasts to projections of stronger global economic conditions and improved customer numbers. That said, overall optimism edged down slightly from July, reaching a nine-month low.
China reportedly set to launch new state-backed fund to boost chip industry
- Reuters reports on the matter
The fund will aim to raise around $40 billion to bolster the chip industry and will focus on areas including equipment for chip manufacturing. It is being reported that the fund was approved by Beijing in recent months and that the finance ministry itself plans to contribute roughly ¥60 billion to the fund.
China’s Country Garden has paid coupons of USD22.5mn – avoids default
Country Garden was due to make the payments today, otherwise the ‘grace peiod’ would have expired leaving the firm open to default demands from creditors.
News crossing now that the payments have been made.
China’s Country Garden seeking to extend payments of another 7 onshore bonds by 3 years
Info crossing now that the firm is reportedly seeking to extend payments of another 7 onshore bonds by 3 years.
RBA leaves the cash rate unchanged at 4.10%
- The latest monetary policy decision by the RBA – 5 September 2023
- Prior 4.10%
- Inflation in Australia has passed its peak
- But inflation is still too high and will remain so for some time yet
- The Australian economy is experiencing a period of below-trend growth
- Returning inflation to target within a reasonable timeframe remains the priority
- There are significant uncertainties around the outlook
- Services price inflation has been surprisingly persistent overseas and the same could occur in Australia
- Some further tightening of monetary policy may be required
- Will continue to pay close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market
Australian data, Q2 Current Account +7.7bn AUD (vs. expected +8.1bn AUD)
Q2 Current Account +7.7bn AUD
- expected +8.1bn AUD, prior +12.3bn AUD
Australia’s net exports will add 0.8% to Q2 GDP (this data point is due Wednesday at 11.30 am Sydney time)
- expected +0.3%
Australian final PMIs for August: Services 47.8 (prior 47.9) Composite 48.0 (prior 48.2)
Judo Bank / S&P Global Australian PMIs for August, the final results:
- Services 47.8 vs. prior 47.9
- Composite 48.0 vs. prior 48.2
Australia data – ANZ Roy Morgan weekly consumer confidence 78.7 (prior 78.1)
Australian Weekly ANZ Roy Morgan Consumer Confidence survey.
ANZ comment:
July monthly CPI, which showed falling annual inflation, likely supported the lift, as did the start of what we think will be an extended pause from the RBA.
New Zealand GDT price index +2.7% vs -7.4% prior
- The latest dairy auction results
- GDT index +2.7%
- Whole milk powder +5.3%
New Zealand data – ANZ Commodity Price Index for August -2.9% m/m (prior -2.6%)
The index tracks the prices of 17 of New Zealand’s major commodity exports, including dairy products, meat, wool, forestry products, and seafood.
ANZ World Commodity Price Index fell for the third consecutive month. ANZ citing especially weak dairy prices as one of the causes of the drop.
As part of the report ANZ discuss shipping prices.
- Global shipping prices continue to ease. During August the Baltic Dry Index fell 3.6% and the Harper Peterson Global Index fell 5%. Shipping prices are closely linked to the volume of goods being shipped which is driven by economic activity. If economic activity remains weak then we may see more older ships scrapped as tightening environmental regulations prohibit their use.
Japan Jibun Bank August Services PMI 54.3 (prior 53.8)
Services: 54.3
- prior 53.8
Composite: 52.6
- prior 52.2
Japan data – July Household spending -2.7% m/m (expected +0.7%)
Japan July Household spending -2.7% m/m
- expected +0.7%, prior +0.9%
For the y/y -5.0%
- expected -2.5%, prior -4.2%
South Korean August CPI has risen at its fastest m/m rate since January 2017
Inflation data from South Korea for August 2023:
- +1% m/m (expected +0.3%)
- +3.4% y/y (expected +2.7%)
- August core CPI +3.3% y/y (was 3.3% in July)
Cryptocurrency News
Solana price jumps 7% as Visa outlines plan to use SOL blockchain for USDC payments
- Solana price is up almost 7% in the last 24 hours, with the mean threshold of $19.15 providing support.
- The surge follows a recent announcement indicating Visa’s move to pilot stablecoin-transaction merchants via Solana blockchain.
- SOL could rise 10% to confront the $22.09 resistance level, with TVL rising over $2 million, hours following the news.
- Invalidation of this bullish outlook would occur upon a decisive daily candlestick close below the $18.41 level.
Solana (SOL) price has stayed glued to monthly lows over the past week despite an influx of funds from institutional players reaching up to $700,000.This capital inflow and a steady rise in Total Value Locked (TVL) failed to catalyze an uptrend for SOL, but things seem to have changed following a recent announcement.
Solana price rises on Visa announcement
Solana (SOL) price is up 7%, with indications of a continued rally, coming on the back of a recent announcement from digital payments company Visa. Based on the announcement, Visa has outlined a plan to leverage the Solana blockchain for its payments services. Specifically, it will scale its USDC stablecoin settlement capabilities to merchant acquirers launching pilots with select firms.
Visa to leverage Solana blockchain for stablecoin settlement on its cross-border payments
Two weeks after Shopify integrated Solana to its platform for crypto payments, Visa has also joined in, expanding its “stablecoin settlement capabilities to merchant acquirers launching pilots with Worldpay Global and Nuvei.Citing Head of Crypto Visa Cuy Sheffield on Businesswire:
By leveraging stablecoins like USDC and global blockchain networks like Solana and Ethereum, we’re helping to improve the speed of cross-border settlement and providing a modern option for our clients to send or receive funds from Visa’s treasury easily.
XRP price uptrend supported by bulls as attorneys explore likely settlement with the SEC
- XRP price printed three consecutive green candles on its daily chart as the altcoin climbed past resistance at $0.50.
- Lawyers are exploring the possibility of a potential settlement and resolution between the SEC in light of new developments in the Coinbase lawsuit.
- Attorney John Deaton says if Coinbase’s motion to dismiss is granted, it would indicate that token sales are not subject to US securities laws.
XRP price has tackled resistance at $0.50 as bulls take charge of pushing the altcoin higher.Currently, there are two catalysts likely influencing the altcoin: the possibility of a settlement in the US Securities & Exchange Commission v. Ripple lawsuit and Coinbase’s separate motion to dismiss the lawsuit brought by the financial regulator.
The two catalysts strengthen the bullish thesis for XRP, as analysts set a $0.81 target for the altcoin.
XRP price prints steady gains amidst SEC v. Ripple lawsuit developments
Recent developments in the SEC v. Ripple lawsuit are the payment firm’s filing against the regulator, where Ripple argues that the grounds for appeal was “dissatisfaction” with Judge Torres’ ruling.
Lawyers representing the payment firm believe that the regulator’s request for an appeal does not meet the requirements for the same.In their September 1 filing with the US District Court for the Southern District of New York, lawyers said that the appeal lacks “exceptional circumstances required for interlocutory appeal.”
Amid these developments, lawyers explored the likely settlement between the regulator and payment giant Ripple. Settlement, however, depends on the outcome of a motion filed by one of the largest cryptocurrency exchanges, Coinbase, in a lawsuit brought against the platform by the US SEC.
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