North American News
Nasdaq Soars to Close: US Equity Markets Finish on a High Note
- Closing changes for the main North American indexes
- S&P 500 up 0.6%
- DJIA +0.3%
- Russell 2000 +0.2%
- Nasdaq Comp +1.2%
The stock market started the trading session on a positive note, and investor sentiment improved progressively throughout the day. The standout feature of the day’s trading was the remarkable performance of several major tech giants, with Tesla (TSLA) leading the charge by posting an impressive gain of 10.1%.
The early optimism in the market was driven by a combination of factors, including positive economic data, encouraging corporate earnings reports, and a general sense of optimism among investors. As the day unfolded, this positive sentiment gained momentum, with investors increasingly drawn to the technology sector.
Tesla’s extraordinary 10.1% surge captured the attention of market participants and exemplified the strength of big-cap tech stocks. This surge in TSLA shares was not only a boost for the electric vehicle manufacturer but also acted as a significant driver for the broader market.
CPI Sparks Market Jitters as Oracle Earnings Take Center Stage in S&P 500 Outlook
- S&P 500 pulled back 1.3% last week, trading as low as 4,430.
- Wednesday sees the release of the US CPI for August.
- Oracle reports earnings on Monday after the close.
- US Retail Sales for August arrive on Thursday and are expected to add 0.2% MoM.
- Adobe and Lennar report earnings on Thursday.
S&P 500 Rebounds Amid Optimism: Dow Jones and NASDAQ Also Gain as Investors Anticipate August CPI Release as a Possible Catalyst for a Pause in Fed Rate Hikes”
The S&P 500 experienced a 1.3% decline last week, prompting concerns among investors. However, it made an attempt to rebound on Friday, although it relinquished much of those gains toward the end of the trading session. The market appeared to be in better spirits on Monday, with the S&P 500 showing a 0.4% increase at the opening bell. Both the Dow Jones Industrial Average and the NASDAQ Composite were trading slightly above the S&P 500’s performance.
The renewed optimism in the market can largely be attributed to the upcoming release of the CPI for August, scheduled for Wednesday. Many traders and investors view this release as a critical determinant for the Fed’s interest rate policies for the remainder of the year. If the CPI figures indicate a slowdown in inflation, it could potentially put an end to expectations of further rate hikes by the Fed in the near term.
A more certain outlook regarding monetary tightening and the possibility of a rate pause or cut have generated positive sentiment among market participants. While such cuts may not be anticipated for at least the next six months, the prospect of a reprieve from rate hikes is seen as a welcome development for the equity markets. As a result, investors are closely watching the CPI release, hoping for clarity on the direction of interest rates and its impact on the broader economy and financial markets.
US sells 3-year notes at 4.660% vs 4.650% WI
- Results of the $44 billion, three-year note sale
- Prior was 4.398%
- Bid to cover 2.75 vs 2.90 prior
The notes were trading at 4.650% ‘when issued’ ahead of the sale.
“It was a very slow start to the trading week with volumes low in Treasuries with 3-year yields effectively unchanged going into the auction. Since the result, we’ve seen a kneejerk bear flattening response,” writes BMO after the sale.
NY Fed August one-year inflation expectations 3.6% vs 3.5% prior
- The August inflation survey from the NY Fed
- Survey of consumers in August puts one-year ahead expected inflation at 3.6% vs July reading of 3.5%.
- August three-year ahead expected inflation at 2.8% vs. July 2.9%.
- August five-year ahead expected inflation at 3.0% vs. July 2.9%.
- August expected home price rise moves to 3.1% from July 2.8% — highest since July 2022
- Record number of consumers said credit now harder to get
- Households more downbeat on current and future finances
- Income growth perceptions declined to 2.9 percent, the lowest reading since July 2021
- The mean perceived probability of losing one’s job in the next 12 months rose by 2.0 percentage points to 13.8%, its highest reading since April 2021
Jamie Dimon says consumer strong today but it’s a mistake to think boom will continue
- Comments from JPMorgan CEO Jamie Dimon
The latest according to Jamie Dimon:
- “To say the consumer is strong today, so we are going to have a booming environment for years is a huge mistake,” he said
- The consumer is ‘pretty good’
- Excess savings are normalizing
- Trading at JPM is ‘doing fine’
- Credit deterioration is very modest
- Warns of economic risks from QT, fiscal spending and war
US Treas Sec Yellen said she is feeling confident about a soft landing for the US economy
US Treasury Secretary Janet Yellen spoke with media on her way back from the G20 weekend summit.
Bloomberg (gated) reporting:
- She’s increasingly confident that the US will be able to contain inflation without major damage to the job market
- “Every measure of inflation is on the road down”
- Said that while the US unemployment rate increased in August after reaching the lowest levels in more than a half-century earlier this year, that jump wasn’t caused by a large wave of layoffs
WSJ says “An Important Shift in Fed Officials’ Rate Stance Is Under Way”
- Nick Timiraos at the Wall Street Journal
He writes the Fed is likely to pause rate increases in September, then take a harder look at whether more are needed.
- Some officials still prefer to err on the side of raising rates too much, reasoning that they can cut them later.
- Now, though, other officials see risks as more balanced. They worry about raising rates and causing a downturn that turns out to be unnecessary or triggering a new bout of financial turmoil.
- The shift toward a more balanced bias on rates is driven by data showing easing inflation and a less overheated labor market. In addition, the unusually rapid rate increases implemented over the past 1½ years are expected to continue crimping demand in coming months.
Ex-Goldman Sachs Cohen says tailwinds for US economy weakening, recession risk higher
Abby Joseph Cohen is a former chief U.S. strategist at Goldman Sachs. Spoke with CNBC on Friday on her concerns for the US economy ahead, saying that she views the likelihood of an economic downturn rising in recent months:
- “The tailwinds, quite frankly, have gotten weaker”
- “That doesn’t mean that we’re heading into a recession anytime soon, but I think we are in a situation where things are not quite as easy as they might have been 18 months ago.”
US close to approving long-range missiles for Ukraine – report
- One step closer to a larger war
The Biden administration is ‘close’ to approving the shipment of longer-range missiles packed with cluster bombs, according to Reuters sources.
The shipment could include ATACMS with a range of 300 km or GMLRS wit ha 45-mile range.
Commodities
Silver regains $23.00, bears still in command
- XAG/USD jumped back above $23.000 and hit a daily high of $23.15
- The USD is trading softer, but US yields remain high.
- All eyes are now on Wednesday’s US CPI from August
On Monday, precious metals are recovering ground after seeing sharp losses last week, with Gold and Silver prices seeing daily gains. Silver stands at $23.00 and failed to maintain its momentum, which took the price to $23.15, depicting that the bears have the upperhand and limit any attempt of the buyers to make a significant upward movement.
WTI crude holds near yearly highs on supply cuts and upbeat Chinese data
- WTI trades at $86.62, bolstered by Saudi Arabia and Russia’s commitment to cut production by 1.3 million barrels until year-end.
- Positive economic data from China and potential end of negative interest rates in Japan support oil prices.
- Upcoming US CPI data could influence WTI prices, as they may signal further rate hikes.
WTI, the US crude oil benchmark, remains steady at around yearly highs on supply oil cuts, while recent data from China painted a positive outlook in the global second largest economy.WTI is trading at $86.62 after hitting a daily high of $87.61.
US and Iran agree to swap some detainees
Via Reuters:
- When $6 billion of unfrozen Iranian funds are wired to banks in Qatar as early as next week, it will trigger a carefully choreographed sequence that will see as many as five detained U.S. dual nationals leave Iran and a similar number of Iranian prisoners held in the U.S. fly home, according to eight Iranian and other sources familiar with the negotiations who spoke to Reuters.
Signs like this of agreements between the US and Iran, even those involving large dollar transfers tend to act as an indication that more Iranian oil will, eventually, flow to global markets…..And thus a headwind for oil prices at the margin.
EU News
European equity close: Stocks hang onto gains after a strong start
- Closing changes for the main European indexes
- Stoxx 600 +0.4%
- German DAX +0.4%
- UK FTSE 100 +0.3%
- French CAC +0.5%
- Italy MIB +1.0%
- Spain IBEX +0.8%
SNB total sight deposits w.e. 8 September CHF468.9 bn vs CHF 467.6 bn prior
- Latest data released by the SNB – 11 September 2023
- Domestic sight deposits CHF 459.5 bn vs CHF 458.0 bn prior
European Commission cuts Eurozone growth forecast amid building recession risks
- The forecast also sees a recession in the German economy
- Eurozone GDP growth forecast seen at 0.8% in 2023 (prev.1.1%), 1.3% in 2024 (prev.1.6%)
- Germany GDP growth forecast seen at -0.4% in 2023 (prev.0.2%), 1.1% in 2024 (prev.1.4%)
- France GDP growth forecast seen at 1.0% in 2023 (prev.0.7%), 1.2% in 2024
- Italy GDP growth forecast seen at 0.9% in 2023 (prev.1.2%), 0.8% in 2024 (prev.1.1%)
- Spain GDP growth forecast seen at 2.2% in 2023 (prev.1.9%), 1.9% in 2024 (prev. 2.0%)
On the lower revisions, the European Commission says that “weakness in domestic demand, in particular consumption, shows that high and still increasing consumer prices for most goods and services are taking a heavier toll than expected in the spring forecast.”
BOE’s Mann: I would rather err on the side of over-tightening
- Comments from Catherine Mann
- If I am wrong and inflation and economy drop more significantly, I wouldn’t hesitate to cut rates
- It’s a risky bet that inflation expectations are sufficiently well-anchored and we can wait for core inflation to ease
- We need to prepare for a world where inflation is more likely to be volatile
- The idea that 3% inflation is ‘close enough’ can’t be the BOE’s guide
Societe Generale: Will the ECB opt for a rate hike or a hawkish pause this week?
- ECB commentary from Soc Gen
Societe Generale anticipates that the European Central Bank (ECB) will maintain a hawkish pause in its upcoming September policy meeting. The bank expects a rate hike to be delayed until December, but still envisions the ECB maintaining its hawkish stance due to inflation targets.
Key Points:
- Hawkish Pause Anticipated: The ECB is expected to hold its interest rates steady this week, despite the hawkish tones that have been prevalent in recent communications.
- Downside Risks: According to the bank, the ECB is likely to note rising downside risks to the Eurozone economy since the July meeting. These risks may have implications for medium-term inflation outlooks.
- Inflation Target: Societe Generale expects that the ECB will not abandon its hawkish bias unless there is solid evidence that its 2% inflation target cannot be met within a designated time frame. This suggests the potential for one more rate hike this year, likely in December.
- More QT (Quantitative Tightening) Expected: After the anticipated December rate hike, the ECB is likely to proceed with additional Quantitative Tightening (QT) in the early part of the following year.
- New Staff Forecasts: The new staff forecasts from the ECB are likely to indicate lower growth for the next year, contrasting with the June forecast of 1.5%.
Other News
Weekend: China August inflation: CPI 0.1% y/y (vs. expected 0.2%) & PPI -3.0% y/y (expected -3.0%)
China’s consumer-price index and producer-price index from the National Bureau of Statistics.
- higher services prices (prices of air tickets, tourism and accommodation rose over the summer holiday season) dragged CPI up from its negative return in the previous month
- neverthelss CPI came in lower than the surveyed consensus of expectations from economists
- food prices fell 1.7% y/y in the month, the same as in July
- nonfood prices +0.5% y/y
The MLF rate sets the scene for the monthly Loan Prime Rate (LPR) setting.
Current LPR rates are:
- 3.45% for the one year
- 4.20% for the five year
PBOC to tighten scrutiny on bulk dollar purchases of $50 million and above – report
- Another step taken by the Chinese central bank to try and bolster support for the yuan
This is being reported by Reuters, noting that the PBOC will scrutinise bulk dollar purchases by domestic firms, citing three sources with direct knowledge of the matter. Companies will need to seek approval for purchase of dollars amounting to $50 million or more, although there is no official announcement being made yet it would seem.
I’m guessing this is to try and smooth out the timing of these transactions and I would think it would not be best for the PBOC to peruse and restrict such purchases all too much. I reckon they would just want to manage the flows accordingly and then they can use that to decide how they want to step into the FX market to limit the depreciation in the Chinese yuan.
China August M2 money supply +10.6% vs +10.7% y/y expected
- Latest Chinese credit data for August 2023 has been released
- Prior +10.7%
- New yuan loans ¥1.36 trillion vs ¥1.20 trillion expected
- Prior ¥345.9 billion
China state-backed financial media commentary piece says more RRR cuts to come
The People’s Bank of China-backed China Securities Journal has an opinion piece today, citing analysts as saying the PBoC is expected to continue to cut the RRR rate.
The Reserve Requirement Ratio (RRR) is a central bank regulation that sets the minimum amount of reserves each bank must hold in relation to their deposit liabilities. Its the percentage of total deposits that banks are legally required to keep on hand, either as cash in their vaults or in a reserve account at the central bank.
- In China, this ratio is set by the People’s Bank of China (PBOC).
- By adjusting the RRR, the PBOC can influence the lending capacity of commercial banks. For example, an increase in RRR means that banks have less money to lend out because they have to keep more in reserve. This reduces the money supply in the economy. Conversely, if the PBOC decreases the reserve ratio, banks have more money to lend because they are required to keep less in reserve. This increases the money supply in the economy, which can stimulate economic activity.
Australian worker strikes continues to trim LNG output
The two plants account for around 5% of global LNG supply. Chevron has said today it would ask Australia’s industrial relations tribunal to intervene to halt strike action.
Weekend: Australian PM keen to ink EU free trade agreement ‘as soon as possible’
Australian Prime Minister Anthony Albanese spoke over the weekend on the sidelines of a Group of 20 (G20) summit,
- “I would like to see the Australia EU Free Trade Agreement settled as soon as possible”
- “It’s quite clear with the timetables that are there, that the prospects of that being done are much greater this year than next year, because it does run into elections.”
Kremlin confirms North Korea’s Kim Jong Un to visit Russia in the coming days
- Kim will be visiting Russia on Putin’s invitation
It will be Kim’s first international visit in more than four years and the first since after the Covid pandemic.
His last trip was also to Russia back in 2019, in a meeting with Putin after the collapse of North Korea’s nuclear disarmament talks with the US (Trump was the president at the time).
This time, Kim will also be visiting Vladivostok for the 8th Eastern Economic Forum in Russia – in which China vice premier, Zhang Guoqing, has confirmed his attendance.
A Kremlin economic adviser says the weakening of the rouble has peaked
Russian media, Interfax, with the headline, conveyed by Reuters.
The working is a bit haywire but I think the adviser means that the ruble’s weakening has passed its worst.
- “The market has passed its peak,” Oreshkin said. “In the coming months, the market will receive higher volumes of foreign exchange earnings from increased prices for export goods. Which, taking into the account the declining volumes of imports of goods and services, as well as the effects of raising the key rate and tightening macro prudential policy, will create a surplus of currency in the market.”
Japan’s Matsuno: Monetary policy specifics are up to BOJ to decide
- Remarks by Japan’s chief Cabinet secretary, Hirokazu Matsuno
- Expects BOJ to closely communicate with government and to conduct policy appropriately
The yield on Japan’s 10 year JGB has risen to its highest since 2014 at 0.685%
- 10 year Japanese Government Bond yield at its highest since 2014
On the 2-year yield is up 3bp to 0.03%.
Bank of Japan Governor Ueda says his focus is on a ‘quiet exit’ reducing monetary easing
- Weekend Japanese media with an interview of BOJ Governor Ueda
Japan media, Yomiuri:
- The Bank of Japan has entered a phase of reducing monetary easing. In an interview with The Yomiuri Shimbun, BOJ Gov. Kazuo Ueda described the monetary policy modification decided in July as “a mechanism to change the balance between the effects and side effects” of monetary easing measures. The focus will now be on “a quiet exit,” which the BOJ is seeking to avoid significant impact on the market.
Cryptocurrency News
Bitcoin falls to the lowest since June
- Bitcoin down 2.4%
The risk mood is beginning to sour and an early tell was selling in bitcoin. The sales have accelerated and bitcoin broke the recent range low of $25,269. The next level to watch is the June low of $24,750. In March, bitcoin briefly fell below $20,000.
Justin Sun of Tron contemplates an offer for FTX’s holding tokens as crypto markets bend to FUD
- Tron founder Justin Sun has expressed consideration to purchase FTX’s holding tokens and assets intended to reduce FUD-induced selling pressure.
- Sun’s comment comes ahead of the Omnibus Hearing on September 13, likely to see FTX’s holdings offloaded to the market.
- Some are calling it a second example of Sun’s “savior syndrome”.
- In the first, the Tron founder offered to purchase BTC from the US government in the Ulbricht case.
Justin Sun, founder of the Tron blockchain has hinted at the possibility of purchasing defunct crypto exchange FTX’s holdings, as the cryptocurrency market keeps eyes peeled ahead of the Omnibus Hearing scheduled for September 13.
Justin Sun may have an offer in mind for FTX
Justin Sun has revealed in a post on social media platform X that he is considering “an offer for FTX’s holding tokens and assets,” even as concerns spread over the potential impact on the market should the court allow FTX to liquidate its assets.
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