North American News
U.S. Stock Market Wraps Up the Week on a Positive Note: Major Indices Finish Higher Despite Mixed Closing Day Performance
- US stocks end the day with mixed results.
- The Nasdaq continues its 6-day winning streak, while the Dow closes lower.
The Dow was lower on the day and although both the S&P and Nasdaq closed higher, it was only by modest changes.Nevertheless, the Nasdaq is now up 6 consecutive days after starting the New Year on the back foot by moving sharply lower. The last two days, however, have only risen by about 0.02%
The final numbers are showing:
- Dow Industrial Average is down -118.06 points or -0.31% at 37592.99
- S&P is closing up 3.61 points or 0.08% at 4783.84
- Nasdaq is closing up 2.56 points or 0.02% at 14972.75.
For the trading week, the major indices are ending with gains after declines last week that snapped 9-week gains for the S&P and the Nasdaq indices:
- Dow Industrial Average rose 0.34%.Last week the index fell -0.59%.
- S&P index rose 1.84%.Last week the index fell -1.52%.
- NASDAQ index rose 3.09%.Last week the index tumbled -3.25%.
A negative – at least technically – is that the S&P index moved above is all-time high closing level both yesterday and today, only to close below that level on each of the days. The high closing level is at 4796.57. The high price today reads 4802.40.. The high price yesterday reached 4798.50.
The earning season got underway with JPMorgan, Citi, Wells Fargo announcing.
Next week, other financial institutions are scheduled to release including
- Tuesday: Morgan Stanley, PNC, Goldman Sachs
- Wednesday Citizens Financial Group, U.S. Bancorp, Discover
- Thursday: Key Bank, M&T Bank, Truist, Northern Trust
- Friday: State Street, Comerica, Ally
Treasury yields settle lower
Treasury yields settled mostly lower. The 2-yr note yield sank 12 basis points to 4.15% and the 10-yr note yield declined three basis points to 3.95%. For the week, the 2-yr note yield declined 24 and the 10-yr note yield declined nine basis points.
Reminder: Monday is a holiday in the US
- It’s Martin Luther King Jr day
US markets are closed on Monday so it will be a quiet one. However Asian, European and Canadian markets are open and the forex market never closes for holidays.
US December PPI 1.0% vs 1.3% expected
- US PPI data
- Prior was +0.9% y/y (revised to +0.8%)
- PPI m/m -0.1% vs +0.1% expected
Core:
- PPI ex food and energy YoY 1.8% versus 1.9% expected. Prior month 2.0%
- PPI ex food and energy MoM 0.0% versus +0.2% expected. Prior month 0.0%
- PPI Ex food and energy/trade 2.5% versus 2.5% last month (revised from 2.4%)
- PPI Ex food and energy/trade 0.2% versus 0.1% last month
Goldman Sachs anticipates Federal Reserve tapering announcement in May ’24
- And to begin tapering soon after
Goldman Sachs is expecting a tapering announcement from the Federal Open Market Committee (FOMC) at the May meeting (April 30 – May 1 meeting).
- We expect the FOMC to announce that it will slow the pace of runoff at its May meeting and begin tapering soon thereafter
- We continue to expect runoff to stop in Q1 of 2025 because the runoff should last longer if it proceeds more slowly
The state of the US consumer and the economic risks, according to JP Morgan
- Comments from Jamie Dimon
US equity futures are flat but banks stocks are largely lower.
One exception is JPMorgan, which beat analyst estimates. Here are comments:
The U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing.It is important to note that the economy is being fueled by large amounts of government deficit spending and past stimulus. There is also an ongoing need for increased spending due to the green economy, the restructuring of global supply chains, higher military spending and rising healthcare costs.This may lead inflation to be stickier and rates to be higher than markets expect.On top of this, there are a number of downside risks to watch. Quantitative tightening is draining over $900 billion of liquidity from the system annually, and we have never seen a full cycle of tightening. And the ongoing wars in Ukraine and the Middle East have the potential to disrupt energy and food markets, migration, and military and economic relationships, in addition to their dreadful human cost. These significant and somewhat unprecedented forces cause us to remain cautious. While we hope for the best, the past year demonstrated why we must be prepared for any environment.
Canadian retail spending ticked lower in December – RBC
- RBC tracks spending with cardholder data
Retail spending from Canadian consumers at the country’s largest bank suggests a slight decrease in spending, with hardly any improvement year-over-year.
“Purchases of physical merchandise (excluding motor vehicles) ticked lower in December,” RBC said in its month spending tracker, which is based on its cardholder data.
Spending on gifts was up just over 4% this year in Nov/Dec in nominal terms, just ahead of the 3% y/y inflation rate. However for December alone, both discretionary goods and services spending ended on a softer note.
Canadians continue to feel the squeeze of higher interest rates, but softer broader economic growth data (per-person GDP is on track to decline for a 6th consecutive quarter in Q4 2023) is bringing the Bank of Canada closer to a potential pivot to interest rate cuts, likely in the middle of the year in our own forecast.
Commodities
Gold soars on geopolitical tensions, dovish Fed rate cut speculation
- Gold’s rally fueled by increased geopolitical risks in the Red Sea region and a shift towards risk-averse trading.
- US Producer Price Index data falls short of expectations, bolstering speculation of imminent Fed policy easing.
- Decline in US Treasury yields and a mixed Dollar performance further support Gold’s upward momentum.
Gold price rallied sharply on Friday, spurred by a risk-off impulse due to tensions arising around the Red Sea, as the US and the UK retaliated against Houthi’s attack on a US ship on Thursday. Therefore, the yellow metal refreshed five-day highs at around $2062, and trades at $2045, up 0.70%.
Silver soars to near $23.35 on soft US PPI, escalating geopolitical tensions
- Silver price rises vertically to near $23.35 as US PPI report surprisingly turns out softer.
- Deepening Middle East tensions have improved the safe-haven appeal.
- Silver price recovers sharply and approaching the downward-sloping trendline of the Descending Triangle chart pattern.
Silver has rallied to near $23.35 as the United States Bureau of Labor Statistics (BLS) has reported a softer-than-anticipated Producer Price Index (PPI) report for December. The headline PPI contracts by 0.1% and core PPI remains stagnant for the second month in a row. Investors projected headline and core PPI rising by 0.1% and 0.2% respectively.
Producers at factory gates rose prices of goods and services at a slower pace of 1.0% against 1.3% as anticipated by investors. The core PPI decelerated sharply to 1.8% vs. consensus of 1.9% and the prior reading of 2.0%.
Gold earlier climbed up by over 1% as buyers look for near-term breakout
- The precious metal is a sort of outlier to the market moves today
With rates moving higher alongside the dollar, you’d typically associate that with weaker gold prices. At least that seems to be the case these days when it comes to the buy the dollar, sell everything else narrative; vice versa.But perhaps with tensions growing in the Middle East, that is lending a helping hand to gold to push higher alongside oil prices today.
For some context, gold is moving up even as 10-year Treasury yields are at the highs for the day now – up 2.8 bps to 4.00%.Meanwhile, the dollar is also sitting firmer across the board and trading to session highs as well while stocks are being pushed lower ahead of US trading.
Crude oil settles at $72.68
- Up $0.66 or 0.92%
Crude oil futures are settling at $72.68.That represents a gain of $0.66 or 0.92%. The high-priced extended to $75.25. The low price reached $72.36. The sharp rise to the upside was spurred on by the US and UK bombing of Houthi rebel in Yemen.
The price rises did extend above the January 5 high (high for the new year) at $74.15, but reversed lower and ended up using that level as resistance when rebroken to the downside. For the week, the price is down -1.57%. after rising 3.0% last week and falling -2.6% the week before that.
Surge in oil prices adds another dent in the disinflation narrative this week
- WTI crude is up over 4% to near $75 today
With the US and UK carrying out strikes in Yemen, the tensions in the Middle East is pushing oil prices higher on the day.Oil tankers are reportedly avoiding passage through the Red Sea in order to stay away from the conflict that is adding to the situation at the moment. In the bigger picture, oil’s resilience and push higher this week just adds another dent to the disinflation narrative this week. It’s no major blow whatsoever but it likely will help to drag out the process even longer.
Baker Hughes oil rigs -2 in the current week to 499
- Baker Hughes rig count data for the current week
The weekly Baker Hughes rig count data is showing:
- Oil rigs -2 to 499
- Gas rigs -1 to 117
- Total rigs -2 to 619
EU News
France December final CPI +3.7% vs +3.7% y/y prelim
- Latest data released by INSEE – 12 January 2024
- Prior +3.5%
- HICP +4.1% vs +4.1% y/y prelim
- Prior +3.9%
Spain December final CPI +3.1% vs +3.1% y/y prelim
- Latest data released by INE – 12 January 2024
- Prior +3.2%
- HICP +3.3% vs +3.3% y/y prelim
- Prior +3.3%
UK November monthly GDP +0.3% vs +0.2% m/m expected
- Latest data released by ONS – 12 January 2024
- Prior -0.3%
- Services output +0.4% m/m
- Industrial output +0.3% m/m
- Manufacturing output +0.4% m/m
- Construction output -0.2% m/m
ECB’s Lane: Interest rate cuts are not a near-term topic
- Comments from Lane
- December inflation number broadly confirmed assessment from December meetings
- Once we are firmly on our way to 2%, then rate cut topic will come to the forefront
- Interest rate cuts are not a near-term topic
Concerns about protracted economic weakness in the euro zone
- Sooner and deeper European Central Bank rate cuts?
S&P Global analysts have expressed concerns about protracted economic weakness in the euro zone, not just concern on the eurozone but into other parts of Europe (mainly central Europe).
S&P highlight:
- “One of the key risks which we see is what could be a more protracted weakness in advanced Europe, including Germany,”
- weaker growth could put pressure on public finances and put government debt on the upward path
Asia-Pacific-World News
China December CPI -0.3% y/y (expected -0.4%)
- Inflation data from China for December 2023 – deflation continues
Inflation data from China for December 2023
Very weak numbers, deflation y/y and barely positive m/m.
Monthly PPI -0.3%
- prior -0.3%
China’s annual crude oil imports hit an all-time high in 2023
Trade data from China’s General Administration of Customs today contained the numbers for oil imports last year.
- crude imports hit 11.28 mln bpd, +11% y/y
- up from a previous record of 10.81 million bpd in 2020
- thus imports hit a record high
Among the reasons:
- Domestic passenger transport levels increased steadily through 2023
- Highway traffic for 2023 jumped 43.6% from the previous year in passenger kilometres for the January to November period
- Domestic air traffic also recovered rapidly, rising 27% on the previous year to reach a new record in December
- Domestic diesel demand was weaker
Info via Reuters
China December M2 money supply +9.7% vs +10.1% y/y expected
- Latest Chinese credit data for December 2023 has been released
- Prior +10.0%
- New yuan loans ¥1.17 trillion vs ¥1.40 trillion expected
- Prior ¥1.09 trillion
China December trade data shows exports and imports both gained y/y
China’s December Trade Balance (in yuan terms CNY) is a surplus of 540.9bn
- prior surplus, in November, was 490.8bn
- Exports +3.8% y/y in December, prior +1.7%
- Imports +1.6% y/y in December, prior +0.6%
In US dollar terms, the trade balance is a surplus of 75.34bn
- expected 74.75bn, prior 68.39bn
- exports +2.3% y/y (expected +1.7%, prior +0.5%)
- imports +0.2% y/y (expected +0.3%, prior -0.6%)
China 2023 CNY denominated exports +0.6% y/y & imports -0.3% y/y
- China’s Customs says China’s 2023 exports and imports of goods are better than expected
Australian data – November home loans +1.0% m/m (expected +1.3%)
Home loans up 1.1% m/m in November 2023, fourth month in a row of higher
- expected +1.3%, prior +5.4%
- y’y rise was 13.1%
Owner occupied housing finance +0.5% m/m and +10.6% y/y
- Investor housing finance +1.9% m/m & +18% y/y
Shipping chaos: Industrial action at 3 major east coast Australian ports
- Sydney, Melbourne and Brisbane, with potential to spread to the west coast port of Fremantle
Industrial action at 3 major east coast Australian ports.
DP World’s stevedores at the Port Botany terminal in Sydney are refusing to work on Friday morning.
There are partial work bans in Melbourne.
Concerns about wider stoppages are growing, the fear is that all port terminals owned by Australia’s second-biggest stevedore, DP World, may be brought to a halt next week. DP World handles about 40 per cent of Australia’s freight.
BOJ to broadly maintain forecast of inflation staying near target in coming years – report
- Reuters reports, citing sources familiar with the BOJ’s thinking
The sources cited in this report say that the BOJ is likely to cut its core inflation forecast for the fiscal year 2024 (currently 2.8%) amid the recent decline in oil prices. That fits with the linked story from above yesterday. However, policymakers are not likely to make any major changes to their “core core” inflation forecast – expected to stick around 1.9% for both fiscal year 2024 and 2025.
One of the sources said that “the broad uptrend in inflation and wages remains intact”, with another stating that “consumption is holding up and there’s growing conviction that wage hikes will continue, and even broaden, this year”.
Japan chief cab sec says supports US & Allies efforts to secure safety of shipping vessels
- Japan is a major exporting country and thus reaps benefits from safe seas
Japan chief cabinet secretary Hayashi:
- Japan supports US and Allies decision to secure safety of vessels, when asked about US and UK strikes against Houthi forces
- Japan condemns acts by Houthi forces that violate free passage of vessels around Arabian peninsula
Cryptocurrency News
Bitcoin extends decline. What’s next?
- A tale as old as time
The ETFs came and yesterday’s volume numbers were big but not as big as I thought they would be for some of the most-hyped financial products ever created.
Now the pain trade is hitting with bitcoin down nearly 6%. In the bigger picture, bitcoin ran to $49K from $30K on ETF hype. If you’re buying today, what’s your catalyst?
Bitcoin Spot ETF race sees Grayscale capture major share of trades on day 1
- Bitcoin Spot ETF trading volume, dominated by Grayscale’s GBTC, totaled more than $4.6 billion on Thursday.
- Bitcoin ETFs registered 700,000 individual trades, doubling those in the Nasdaq 100’s tracking fund QQQ.
- BTC price hit a peak of $48,900 for the first time since December 2021, but corrected to $46,000 on Friday.
Bitcoin (BTC) price falls to around $46,000 during Friday’s Asian session, correcting from the two-year high of $48,900 seen on Thursday.Bitcoin’s rally was likely caused by rising market interest following the US Securities and Exchange Commission’s (SEC) approval of spot exchange-traded funds (ETF) that track Bitcoin’s price.
During the first trading day of the ETFs on Thursday, around 700,000 individual trades were registered and trading volume exceeded $4.6 billion.
Ethereum likely to steal Bitcoin’s spotlight after ETFs historic win
- Bitcoin ETF approval failed to catalyze gains in BTC, instead Ethereum price rallied and traders turned their capital to the altcoin.
- SEC’s greenlight to Bitcoin ETFs likely fueled anticipation of Ethereum ETF approval, among market participants.
- Ethereum ETF’s final deadline is in May, this could catalyze gains in Ether.
Bitcoin ETF approval marks a key milestone in the crypto ecosystem as the largest cryptocurrency by market capitalization gains acceptance.However, instead of catalyzing gains in Bitcoin, the ETF fueled a rally in Ethereum. Market participants are in anticipation of an Ethereum Spot ETF approval, this is likely one of the catalysts driving gains in Ether.
PEPE selling pressure mounts as whale deposits two trillion PEPE to Binance
- PEPE reserves on exchanges climbed to 40.59% of the meme coin’s total supply, as seen on Santiment.
- A large wallet investor deposited two trillion PEPE tokens to Binance on Friday.
- PEPE price could continue its decline as whales engage in profit-taking, according to on-chain data.
PEPE (PEPE), a frog-themed meme coin, registered an increase in its reserves on cryptocurrency exchanges, which reached the highest level in two months.On-chain data signals a likely increase in selling pressure on PEPE, supporting a bearish thesis for the meme coin’s price.
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