North American News
US Stock Indices Stage Impressive Comeback, Posting Substantial Gains Following Last Week’s End to 9-Week Winning Streak
- Nasdaq index leads the way
The major US stock indices rebounded after its first declining week last week in over 2 months (9 week win streak).The Nasdaq index surged over 319 points or 2.20%.The Dow Industrial Average which was dragged down by Boeing shares (down $-20.26 or -18.1%) still closed higher by 0.58%.
The closing levels:
- Dow Industrial Average up 216.90 points or 0.58% at 37683.00
- S&P index up 66.32 points or 1.41% at 4763.55
- Nasdaq index up 319.69 points or 2.20% at 1843.76
The small-cap Russell 2000 index surged by 37.86 points or 1.94% at 1989.00.
The S&P index is now down only -0.13% on the year.The NASDAQ index is still down -1.1%. The Dow Industrial Average is now unchanged.
It winners today included some of the big winners in 2023:
- Adobe, +2.81%
- AMD +5.47%
- Nvidia +6.46%
- Apple +2.44%
- Amazon +2.69%
- Coinbase 3.53%
- Intel +3.28%
- Salesforce +3.94%
NY Fed one-year inflation expectations fall to the lowest since January 2021
- One year inflation seen at 3.0% vs 3.4% in December
The monthly New York Fed inflation expectations survey is out and it’s dovish:
- 1-year seen at 3.0% vs 3.4% prior
- Three year seen at 2.6% vs 3.0% prior
- Five years seen at 2.5% vs 2.7% prior
- Median expected home price change 3.0% vs 3.0% prior
US November consumer credit +23.75B vs +9.0B expected
- US November 2023 consumer credit
- Prior was +5.78B
US December employment trends 113.15 vs 113.05 prior
- Employment trends from the Conference Board
- Prior was 113.05 (revised to 112.48)
Fed’s Bostic repeats that he sees an initial rate cut in Q3
- Other Comments from Atlanta Fed President Bostic
- Rise in unemployment would be far less than would be typical in the case given the reduction in inflation
- Fed is in a very strong position right now
- Fed can let restrictive policy continue to work to slow down inflation; expect the process will remain ‘orderly’
- Families are catching up to past price increases.
- Pain of higher prices is easing and sentiment should follow
- Goods inflation is back to pre-pandemic levels
- Services inflation is moving more slowly and not expecting big drops
- Many economic measures are back at levels seen in the years immediately before the pandemic
- At this point shorter-term measures of inflation, such as over three and six months, are more important. They are pointing in a positive direction
- Not comfortable declaring victory.Fed needs to ‘remain diligent’ and ‘short run attentive’
- Top line job numbers have been pretty strong.
- The recent strength in jobs has been focuses in a relatively small part of the economy
- Concentrated job growth means that slowing is occurring. Question in if job growth overall falls off a cliff.Concentrated job growth means that slowing is occurring.Question in if job growth overall falls off a cliff.
- Sees two 1/4% rate cuts by the end of the year (the Fed forecast 80 basis points of cut in their most recent dot-plot).
- Risks are balanced with employment slowing, but inflation still above target. Bias is still to stay tight.
- Plans to work with team over the next six months to get a better view of how balance sheet policy should evolve
- Businesses say that hiring practices are normalizing as is the ability to pass along price increases
- Labor market risks are much more balanced; many sectors not showing growth
- Inflation and employment mandates are not yet in conflict
- Labor markets remain strong in the aggregate and suggest continued momentum in the economy
Eyes are on the bond auction schedule this week
- Tues, Wed and Thursday feature sales
The first significant supply of Treasuries comes to the market this week, with a trio or auctions starting on Tuesday.
All the auctions are at the usual time at 1 pm ET:
- Tuesday $52 billion in 3s
- Wednesday $37 billion in 10s
- Thursday $21 billion in 30s
Goldman Sachs says Q4 US corporate earnings will beat analyst forecasts, may again in 2024
- GS cite stronger US economic growth, lower interest rates, and a weaker dollar
A note from equity analysts at Goldman Sachs, bullish for 2024 on US firms’ earnings.
Currently their forecast is for S&P 500 companies’ earnings per share to rise 5% to $237 this year, well above the median $231-per-share forecast, but still in danger of being too low says GS:
- “We see potential upside to our EPS estimate from stronger US economic growth, lower interest rates, and a weaker dollar” despite lower oil prices
GS’ most recent S&P 500 index forecast for 2024 was issued in December is 5100, raised from 4700 issued in November.
JP Morgan warn on ‘boiling frog’ US$34 trillion debt could easily become unsustainable
Media reports on the US’ $34 trillion debt pile:
JP Morgan say it could well be a “boiling frog” phenomenon for the economy, as higher deficits and ballooning debt servicing costs could easily become unsustainable:
- A boiling frog situation is one in which people fail to act on a potential problem that grows over time, causing it to become more severe until it eventually bubbles over.A frog thrown in boiling water might jump out, but if the water comes to a boil slowly, it’s too late by the time it notices it’s being cooked.
Anyway, JPM argue that:
- national debt hit a fresh $34 trillion this month
- debt picture will only worsen in the coming years
JPM:
- “The problem for the US is the starting point; every round of fiscal stimulus brings the US one step closer to debt unsustainability,”
- “However, we’re accustomed to deteriorating US government finances with limited consequences for investors, and one day that may change”
Morgan Stanley says Federal Reserve will hold rates higher for longer, but then cut deeper
- FOMC will cut more deeply than the market expects
Morgan Stanley’s chief US economist Ellen Zentner spoke at a conference re her projections Federal Open Market Committee (FOMC):
- “Make no mistake, they will be cutting rates this year”
- But “they can be patient and they can take their time”
Morgan Stanley are forecasting the first in a series of rate cuts at the June meeting:
- Fed will hold rates steady for longer than the market expects
- but will then cut much more than expected
- first 25bp cut in June
Then, 25bp cuts in:
- September
- November
- December
- and following on with a 25bp cut in every meeting through 2025
Fed’s Logan: We shouldn’t rule out rate hike given recent easing in financial conditions
- Comments from the Dallas Fed President
- Premature easing of financial conditions could allow demand to pick back up
- If we don’t maintain sufficiently tight conditions, there is a risk inflation will pick back up, reversing progress
- Appropriate to consider parameters to guide decision to slow Fed’s balance sheet runoff
- Labor market ‘still tight’ but continues to rebalance
- Financial system overall has ‘more than ample’ bank reserves and liquidity, though no longer ‘super abundant’
- Inflation in a ‘much better place’ than last January but Fed’s job is not yet complete
- We should slow the pace of asset runoff as the Fed’s overnight reverse repurchase balances approach a low level
Alaska Airlines Boeing 737 MAX 9 blowout – “incident is alarming”
- Boeing will address safety issues company-wide on Tuesday
On Friday a Boeing 737 MAX 9 suffered a door plug blow out on an Alaska Airlines flight. The depressurized plane, carrying 171 passengers and 6 crew members, returned safely to Portland International Airport with no serious injuries.
- Alaska Airlines grounded all of its Boeing 737 Max 9 planes on Sunday
- US federal officials indicated further maintenance might be required to assure that another inflight blowout like the one that damaged one of its planes doesn’t happen again
Boeing will hold a company-wide webcast on safety on Tuesday to address its response.
Goldman Sachs:
- The incident is alarming
- a grounding of a fleet of an aircraft type leaves open questions as to what corrective actions will be required and how long they will take to perform
- Any quality control issues introduce risk to production and delivery cadence
ICYMI – Wharton’s Jeremy Siegel says the Dow could surpass 40,000
Wharton finance professor Jeremy Siegel likes the DOW index higher, favouring the big round number just above us at 40,000:
- “We could definitely get it past 40,000”
- “A 10% to 12% rise in stock prices is not out of the question for 2024”
The risk is the Fed:
- “If the Fed is stubborn and says, ‘I’m just going against inflation, even if the data gets soft,’ those figures would have to be adjusted downward…if the Fed keeps money [supply] stagnant, as it has been, you are looking at a recession right in the face. That is why the Fed must ease.”
Siegel says the economy is slowing, and the Fed must recognise that “all its tightness is in the pipeline and will press on the economy in 2024, so they have to start thinking about lowering rates”. Siegel tips a March rate cut from the FOMC.
- “Even if they don’t lower interest rates in January, they may have to lower it in the March meeting.”
He says inflation is beaten, but:
- “There will be core elements in the CPI that will continue to rise, and institutionally determined prices that take months to come down, but to eliminate those remaining price increases would mean crushing the economy—and that would be inadvisable from an economic standpoint”
A significant step has been taken to avert a US government shut down
- The threat of a shut down still lingers, but the prospect of avoiding it are better
An sgreement on a “topline” spending level has been reached by House Speaker Mike Johnson and Senate Majority Leader Chuck Schumer.
This agreement has broken the stall on the process to avoid a shut down. While the threat still lingers its much reduced.
For the political folks, more here.
Commodities
Silver trims losses amid weak dollar and lower yields, positive market mood
- Silver is rallying during the American session towards the $23.20 level with a current 0.90% increase after bottoming at $22.80.
- Still, the metal holds onto mild losses on the day.
- USD struggles to maintain the previous week’s bullish momentum as risks on flows resume.
- Investors await key CPI data on Thursday to place their bets on the Fed.
In Monday’s trading session, the white metal, took a bullish turn, trading at a higher level of around $23.15. The rally originates from a combination of a weakening Dollar and descending yields, giving silver an advantageous footing at the start of the week.
In its final meeting of 2023, the Federal Reserve recognized a dip in inflation rates and affirmed that 2024 will be free of rate hikes. The Fed even suggested a 75bps easing, leading market speculations to factor in rate cuts for March and May. In that sense, markets now await the next set of data after last week’s strong labor reports, which were offset by the disappointing ISM PMI figures, keeping afloat the dovish rhetoric.
Gold struggles carry over to the new week
- The precious metal is now down 2% already in January trading
Things are really not panning out for gold so far this January, as the precious metal sinks lower in European trading today. It is now down over 1% today and it looks like sellers are leaning towards a push to $2,000 next potentially, if the technicals are anything to go by.
There’s still a trendline support at around $2,003 to get past but sellers are in the driver’s seat in the near-term now.And it’s not likely things will change unless bond yields start dropping or the market reverses the price action from last week for some other reason.
Crude oil futures settle at $70.77
- Down -$3.04 or -4.12%
Crude oil futures are settling at $70.77.That is down $-3.04 or -4.12%.The low price for the day reached $70.13.The high price was at $73.95.
Saudi Arabia announced that they would cut crude oil prices particularly for Arab Light Crude to Asian customers by $2 per barrel.The move is viewed as a reaction to the high U.S. crude production and weakened demand from China.
Previously, OPEC+ have reduced their production by 2.2 million barrels per day.Despite these efforts and ongoing geopolitical tensions in the Middle East, these factors have not significantly affected crude oil supplies.
One problem for the cartel, is the U.S. market remains robust, with a high crude output of 13.2 million barrels per day and a notable increase in crude exports to 5.2 million barrels per day.
Saudi Arabia’s strategy to cut prices is seen as an attempt to maintain its market share.
Weekend oil news – Saudi Aramco said it would cut crude prices to all regions
- The price cut for Asia is the biggest in 13 months.
Saudi Aramco says it’ll cut its crude oil prices to all regions
- February prices for various grades of Saudi crude, including its flagship Arab light, in Asia would fall $2 a barrel versus the Oman/Dubai regional benchmark from their January levels. The price cut is the biggest in 13 months.
- Prices in northwest Europe and the Mediterranean will be down $1.50 to $2 a barrel versus the ICE Brent crude benchmark versus January prices.
EU News
European equity close: Weak start, good finish
- Closing changes in Europe on Jan 8, 2024
Closing changes:
- STOXX 600 +0.3%
- German DAX, +0.7%
- France CAC +0.3%
- UK FTSE 100 flat
- Spain’s IBEX +0.4%
- Italy’s FTSE MIB +0.4%
Eurozone November retail sales -0.3% vs -0.3% m/m expected
- Latest data released by Eurostat – 8 January 2024
- Prior +0.1%; revised to +0.4%
- Retail sales -1.1% vs -1.5% y/y expected
- Prior -1.2%; revised to -0.8%
The monthly reading matches estimates, although it comes after a positive revision to the October reading. Here is the breakdown of the retail sales for the month:
Eurozone January Sentix investor confidence -15.8 vs -15.5 expected
- Latest data released by Sentix – 8 January 2024
- Prior -16.8
- Expectations -8.8
- Prior -9.8
Euro area investor sentiment improves for a third straight month to its highest level since last May. The expectations reading has also improved to its highest since February last year. However, any signs of a strong recovery remains wanting as the outlook – especially for Germany – remains uncertain. Sentix notes that:
“This is unlikely to be a turnaround.This is partly due to Germany ,whose economy is still in recession and therefore in crisis.”
Germany November industrial orders +0.3% vs +1.0% m/m expected
- Latest data released by Destatis – 8 January 2024
- Prior -3.7%; revised to -3.8%
This series has been a bit of a volatile one in recent months due to one-off factors but appears to be normalising a little towards the year-end. Domestic orders were up 1.4% on the month while foreign orders declined by 0.4%. Looking at the breakdown:
- Capital goods +0.8%
- Consumer goods +1.1%
- Intermediate goods -0.4%
Germany November trade balance €20.4 billion vs €17.9 billion expected
- Latest data released by Destatis – 8 January 2024
- Prior €17.8 billion
Switzerland December CPI +1.7% vs +1.5% y/y expected
- Latest data released by the Federal Statistics Office – 8 January 2024
- Prior +1.4%
- Core CPI +1.5% y/y
- Prior +1.4%
ECB’s Vujcic: Eurozone will avoid a recession – Bloomberg
European Central Bank (ECB) Governing Council member Boris Vujcic said on Monday that he thinks the Eurozone will be able to avoid a recession, as reported by Bloomberg.
Vujcic noted that he also expects inflation to slow gradually, adding that they are not discussing rate cuts and they probably will not do so before summer.
Asia-Pacific-World News
China ‘wealth manager’ Zhongzhi goes bankrupt amid property market collapse
- Zhongzhi is a major player in China’s shadow banking sector
Zhongzhi is a shadow banking-linked wealth manager with major exposure to the property sector. Its not a bank so manages to operate outside many of the prudential and regulatory rules governing commercial banks. Shadow banking firms typically sell ‘wealth products’ to retail and channel the proceeds to real estate developers and other sectors.
- the filing for bankruptcy has come after the firm failed to repay debt, being mired deep in the property market downturn
- its assets are insufficient to pay all its debts
- back in November it apologised to investors and admitted it was insolvent with liabilities circa USD64bn
- the bankruptcy filing will ease the firm’s asset liquidation, investors will be lucky to recover more than 30% of their money, and it’ll take a long time
Liu Yongzhuo, Executive Director of China Evergrande New Energy Vehicle has been detained
- Resumption of trading requested.
The executive director of China Evergrande New Energy Vehicle has been detained on suspicion of illegal activity.
Trading in the company’s shared had been suspended. The firm has applied for a resumption of trading in shares effective 13:00 Hong Kong time (this was 0500 GMT and 0000 US Eastern time).
First of 2 key Australian CPI data points ahead of Feb. RBA meeting is out mid-week
- Australian November CPI data is due on Wednesday 10 January
Australia’s latest monthly CPI indicator, for November 2023, is due out on Wednesday:
- 11.30 am Sydney time
- which is 0030 GMT Wednesday and 7.30pm US Eastern time Tuesday
This is the first of the two key inflation indicators ahead of the RBA’s February Board meeting. The Q4 2023 CPI is more important, it will be published on January 31. The quarterly CPI remains the benchmark measure of consumer prices in Australia. However, the November data is highly relevant, it will include data for most services, which is where the RBA is most concerned about sticky inflation.
Preview snippet from Commonwealth Bank of Australia on the November print due mid-week:
- Private survey data have showed a cooling in inflation pressures over the last few months of 2023.
- Melbourne Institute’s inflation gauge has moderated sharply.
- NAB’s Business survey final price growth measure also dipped.
- And the S&P output price PMI has eased from their Q3 23 pace.
- All of this data is encouraging. Inflation pressures across other advanced economies have also rapidly cooled.Inflation is above, but getting close r to, central banks’ targets.Australia has seen the disinflation process start later.
For the data on Wednesday:
- We are confident the data will show a continued easing in inflationary pressures.
- We forecast consumer prices rose by 0.5% in original terms in the month and annual CPI inflation eased to 4.4% y/y in November (from 4.9 %/ yr in October).
South Korea’s central bank meets this week – expected to hold interest rates unchanged
- Bank of Korea’s Base Rate is expected to hold at 3.50% for the eighth straight meeting.
Bank of Korea will meet on Thursday January 11.
It’s the first major Asian economy central bank to meet in the new year.
HSBC are expecting the ‘on hold’ at 3.25% decision to be unanimous
- The Board to retain the wording ‘maintain a restrictive policy stance for a sufficiently long period of time’ in its forward guidance
- BOK might change its tone which could hint at a possible easing in the near term
- HSBC do warn though that “inflation is likely still too high for a near-term start of easing.”
Cryptocurrency News
Stacks price could trigger 25% rally ahead of Bitcoin spot ETF approval this week
- Stacks price is stuck in consolidation since December 26, hinting at a volatile breakout.
- STX has already breached the upper trend line, indicating a bullish rally.
- Investors can expect the altcoin to tag $1.9, $2.12, $2.25 and $2.46 hurdles.
- Since Stacks is a Bitcoin Layer 2 solution, the ETF approval news could influence it.
Stacks (STX) price shows strength despite the market slump in the New York trading session on Sunday. One of the reasons could be that Bitcoin-related altcoins like Bitcoin Cash, Bitcoin SV and others are going to see demand due to the upcoming ETF approval.
Likewise, investors looking to trade the ETF approval news might short altcoins, including Ethereum, to hedge their bullish BTC trades, which could cause a short-term dip in other cryptocurrencies.
Stacks price breaks out
Stacks price has been on an uptrend since December 12, 2023. The altcoin doubled in under two weeks and set up a local top at $1.74. Since then, STX has slipped into a consolidation with roughly equal highs and higher lows.
Despite the sell-off, Stacks price has managed to undo the losses and trigger a breakout from the horizontal resistance level of $1.74. If this trend and strength continue, STX could reach the following targets – $1.90, $2.12, $2.25 and $2.46.
These take-profit levels are key Fibonacci extensions of three swing points created between January 5 and 7.
The 161.8% Fibonacci extension level is 18% away from where Stacks price currently stands – $1.84.The last target would constitute nearly 33% gain.
Bitcoin Spot ETF could see SEC greenlight, Grayscale Investments files amended S-3 sets 1.5% fee
- Bitcoin Spot ETF could launch as early as the day following SEC’s key vote on pending application decisions.
- The SEC needs to grant two sets of approvals, 19b-4s and S-1s filed by Spot Bitcoin ETF applicants.
- Bitcoin price eyes recovery to the psychologically important $45,000 level.
Bitcoin Spot ETFs are likely to receive the US financial regulator’s approval as early as this week, according to a Bloomberg report.BTC holders are awaiting the Securities and Exchange Commission’s (SEC) greenlight on the securities product with the upcoming deadline on January 10.
Bloomberg reports that insiders speculate the regulator will use the January 10 deadline to announce their decision on several Spot Bitcoin ETF applications at once. Nearly a dozen applicants are awaiting the SEC decision and have lined up seed capital and marketed their Spot BTC ETF product.
Ripple CTO states strategy for company’s XRP holdings – “to sell as quickly as we can”
- XRP price bounces back after a 12.5% decline over the past week ahead of expected spot Bitcoin ETF approval.
- Ripple CTO David Schwartz states that the crypto market is still in its early stages and that a “winner” is yet to be found.
- Schwartz reiterates Ripple’s strategy of reducing XRP holdings as quickly as possible.
XRP price is noting the initiation of a comeback ahead of the potential spot Bitcoin ETF approval from the Securities & Exchange Commission (SEC). Ripple had its moment during the lawsuit proceedings last year and is now set to experience bullishness from broader market cues.
Ripple CTO shares company plans
The Chief Technology Officer (CTO) of Ripple, David Schwartz, recently took to X, formerly Twitter, to answer a couple of questions regarding the company and its plans. Replying to a tweet about Ripple’s core business regarding XRP dumping, Schwartz noted,
“Ripple has two choices. We can continue to hold as much XRP as we do or we can reduce the amount of XRP that we hold. There really isn’t any third option. Ripple’s original plan was to reduce our XRP holdings as quickly as we could.
Bitcoin races higher as firms look to undercut each other on ETF fees
- BlackRock is setting a fee of 0.30% for the proposed spot Bitcoin ETF, much lower than expected
For some context, Fidelity is charging a fee of 0.39% and ARK has also dropped their fee to 0.25% just 20 minutes after BlackRock put in their respective filing. BlackRock’s fee structure will actually see 0.20% for the first 6 months or $5 billion and then 0.30% after.
Things are certainly heating up but one can argue that this is to be expected as everyone wants to be the one taking the lead on this. Does this mean that the ETF approval is imminent some time this week? Perhaps, but not a guarantee.
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