Round up of today’s market news

North American News

Major US indices close higher for the day and the week

• NASDAQ does the best today/this week

The 3 major US stock indices closed higher today and this week. The gains were led by the NASDAQ on both measures.

A summary of the day shows:

• Dow Industrial Average rose 450.02 points or 1.18% at 38675.69
• S&P index rose 63.61 points or 1.26% at 5127.80
• NASDAQ index rose 315.37 points or 1.99% at 16156.33

For the trading week:

• Dow Industrial Average average rose 1.14%
• S&P index rose 0.55%
• NASDAQ index rose 1.43%

For the trading week what major stocks had great weeks?

• Beyond Meat +26.56% (they announce earnings next week)
• Moderna, +15.77%
• Trump Media +15.38%
• Amgen, +15.32%
• Snap +11.68%
• Pfizer +9.61%
• Roblox, +9.08% (they announce next week).
• Qualcomm +8.44% (they announced earnings this week)
• Apple +8.30%
• Tesla +7.64%
• Boeing, +7.50%
• Shopify 4.40% (they announce next week)
• Celcius 3.76% (they announce next week)
• Amazon, +3.69%
• Palantir (they announce next week)

US March non-farm payrolls +175K vs +243K expected

• April 2024 US employment data from the non-farm payrolls report
• Prior +303K
• Two-month net revision -22K vs +22K prior
• Unemployment rate 3.9% vs 3.8% expected
• Prior unemployment rate 3.8%
• Participation rate 62.7% vs 62.7% prior
• U6 underemployment rate 7.4% vs 7.3% prior
• Average hourly earnings +0.2% m/m vs +0.3% expected(+0.202% unrounded)
• Prior avg hourly earnings +0.3% m/m
• Average hourly earnings +3.9% y/y vs +4.0% expected
• Average weekly hours 34.3 vs 34.4 expected
• Change in private payrolls +167K vs +190K expected
• Change in manufacturing payrolls +8K vs +5K expected
• Household survey -25K vs +498K prior

US average hourly earnings MoM 0.2% versus 0.3% expected. YoY 3.9% vs 4.0% expected.

• More details from the US jobs report

Some more detail from the April US jobs report:

• Average hourly earnings rose 0.2% versus 0.3% expected. Last month 0.3%
• Average hourly earnings YoY 3.9% versus 4.0% expected. Last month 4.1%.
• Average work week Hrs 34.3% versus 34.4 expected. Last month 34.4
• The labor force participation rate for April 62.7% vs 62.7% last month
• U6 (underemployment rate) 7.4% versus 7.3% last month.

ISM April services index 49.4 vs 52.0 expected

• The US services index from the Institute for Supply Management – April 2024

• Prior was 51.4

Key details:

• Employment 45.9 vs 48.5 prior
• New orders 52.2 vs 54.4 last month
• Prices paid 59.2 vs 53.4 last month

Other components:

• Inventories 53.7 vs 45.6 last month
• Supplier deliveries 48.5 versus 45.4 last month
• Backlog of orders 51.1 versus 44.8 last month
• New export orders 47.9 versus 52.7 last month.
• Imports 53.6 versus 52.4 last month
• Inventory sentiment 62.9 versus 55.7 last month

Comments in the report:

• “Steady improvement toward lower costs in food and beverages; however, avian bird flu may affect pricing moving forward. Already seeing increases in chicken and eggs. In the technology space, prices are not decreasing but holding steady.” [Accommodation & Food Services]
• “Movie production is recovering, which should increase volume in movie theaters in the second half of 2024.” [Arts, Entertainment & Recreation]
• “Although it varies by global region, we’re starting to see market softening in terms of price and lead time stability. That bidders are providing reasonable bid validities is an indication that much of the supply chain is coming into supply and demand equilibrium. Electrical equipment remains the outlier.” [Construction]
• “Inflation is raising our unit cost on products and services when compared to last year’s expenditures.” [Public Administration]
• “Continue to be challenged with inflationary pressure through labor and service cost increases, but we are working hard at finding utilization savings to offset where possible.” [Health Care & Social Assistance]
• “Business remains soft.” [Information]
• “We are still experiencing supply chain challenges with increased costs of raw materials, particularly chemicals and their containers, as well as higher U.S. and overseas freight transportation costs. A containers shortage has increased costs and slowed down the supply chain.” [Management of Companies & Support Services]
• “Steady demand has been favorable during this traditionally slower season. Pricing is stable and the supply chain is strong. Employee recruitment and retention has been a challenge in some areas; however, the situation isn’t critical.” [Retail Trade]
• “Construction, administrative and technical/scientific labor are in high demand. Long lead times for brass plumbing fittings and electrical equipment and components.” [Utilities]
• “The overall market has definitely slowed down. Our business is up year over year and month over month; based on our advanced analytics, we know that growth is coming from new customers. This means we are taking market share from our competitors.” [Wholesale Trade]

S&P Global final April services 51.3 vs 50.9 prelim

• The final reading on the services sector in April from S&P Global

• Prelim was 50.9
• Prior was 51.7
• Composite PMI 51.3 vs 50.9 prelim
• Prior composite PMI was 52.1
• Services PMI 51.3 vs 50.9 prelim. Last month the PMI was 51.7

In their own words, Chris Williamson, business economists at S&P global market intelligence said:

“Service sector growth slowed in April to point to a sluggish start to the second quarter for the US economy. Alongside a concomitant cooling in the rate of growth of manufacturing output, the weaker service sector performance means overall business activity grew in April at the slowest rate seen so far this year. At current levels, the PMI indicates that GDP is expanding at a modest annualized rate of approximately 1.5% so far in the second quarter.

“Demand has weakened, as signaled by the first fall in new orders for goods and services for six months, in part a reflection of both businesses and households adjusting to higher costs and the prospect of higher for longer interest rates. Business optimism has likewise cooled, dropping to the lowest since November, and companies are taking a more cautious approach to staffing levels.

“From an inflation perspective, the April survey brought some good news in that prices charged for services rose at a much reduced rate, registering one of the smallest increases seen over the past four years as greater competition and lower wage growth were reported to have taken some of the heat out of price setting.”

Fed’s Goolsbee: Jobs reports like this will give us confidence the economy not overheating

• Comments from Goolsbee in an interview with Bloomberg TV
• The more jobs reports you get like this, the more confident we can be the economy isn’t overheating
• Hit a bump in inflation at the start of the year
• The more we see jobs reports that look like pre-covid, the more confidence that there is that the economy is not overheating
• The Fed must get comfort that recent inflation is not a sign of re-acceleration
• What happened in the jobs market this year has to be reset based on estimates of higher immigration but we’re still trying to analyze that
• We have some cross-currents, there’s no question about that
• Are we on the long arc of last year where we saw inflation steadily coming down or some different environment?
• If we remain this restrictive for too long, we’re definitely going to he have to be thinking about the employment side of the mandate
• Manufacturing business contacts indicate ‘more of the same’ in a decent environment
• We don’t hear much input about supply chain bottlenecks anymore
• We didn’t have an advanced look at the jobs numbers

Goldman Sachs still thinks a July rate cut is more likley

• Comments from Jan Hatzius, chief economist at Goldman Sachs

Goldman Sachs chief economist Jan Hatzius was on CNBC and said this:

• I’m pretty confident the wage trend is down
• If we look at other indications like the Atlanta tracker, wage trend is down
• I do expect ‘much better’ PCE numbers in the second quarter
• A July cut is still a reasonable baseline, it’s still more likely in our view

Fed’s Bowman: Baseline outlook still that inflation will decline with rates steady

• Comments from the Fed’s Bowman
• Still willing to hike at future meeting should data show progress on inflation stalled or reversed
• Still sees a number of upside risks to her outlook
• Monetary policy stance appears to be restrictive
• Unclear whether further supply-side improvements will continue to lower inflation
• Risk strong that consumer demand, more immigration and tight labor market could lead to persistently high core services inflation
• Fiscal stimulus could juice demand
• Extent of data revisions in past few years makes assessing economy even more challenging
• Says she will remain cautious in her approach to deciding future chances to policy stance
• Recent inflation pickup evident across many goods and services categories

Importantly she says:

It is important to note that monetary policy is not on a preset course. My colleagues and I will make our decisions at each FOMC meeting based on the incoming data and the implications for and risks to the outlook. While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed. Restoring price stability is essential for achieving maximum employment over the longer run.

HSBC cuts their Fed forecast to 25bp this year, from 75bp previously

• HSCB cite the strong US economy, sticky inflation

HSBC have revised their Federal Open Market Committee (FOMC) projections for 2024 and 2025. Analysts at the bank say the the timing of the first rate cut is still very uncertain:

• forecast 25bp of cuts this year
• forecast 75bp of cuts in 2025
• strong dollar is going to persist
• strong U.S. economy, evident in the activity numbers and stickier inflation, will make it difficult for the Fed to start cutting rates

Commodities

Gold price retreats from daily highs as US NFP dampens demand

• Gold peaked at $2,310 but reversed gains, unable to surpass the May 2 high of $2,326.
• US Nonfarm Payrolls missed expectations, leading to lower real yields and diminished safe-haven appeal for Gold.
• Federal Reserve officials offer mixed signals, with Governor Bowman ready to hike rates.

Gold experienced a brief uptick in its price following the release of the Nonfarm Payrolls report for April, which fell short of market expectations and hinted at a cooling US job market. This initial positive momentum pushed the precious metal towards its daily high of $2,310, although it failed to surpass the high set on May 2 at $2,326. As a result, gold prices retraced from these levels, currently trading below the psychologically significant $2,300 mark with a decrease of 0.24%.

One of the key factors influencing gold’s movement is the prevailing sentiment on Wall Street, which remains optimistic. This positive sentiment among investors is reducing the safe-haven appeal of non-yielding assets like gold, leading to a moderation in its price despite certain economic indicators pointing towards potential headwinds.

A noteworthy development affecting gold prices is the decline in US Treasury yields. The 10-year benchmark note experienced a decrease of seven basis points, contributing to a fall in US real yields. US real yields, which have an inverse correlation with gold prices, dropped from 2.219% to 2.146%. This movement underscores the complex interplay between economic data, investor sentiment, and market dynamics that collectively shape the trajectory of gold prices.

In essence, while the disappointing jobs report initially buoyed gold prices, the broader market optimism and shifting yield dynamics have tempered its gains. Continued monitoring of economic indicators, geopolitical developments, and market sentiment will be crucial in gauging the near-term direction of gold prices.

Crude oil trading at session lows going into the settlement

• Crude oil price hits session lows at $78.21, traders eye 100-day MA near $78 for potential bounce

WTI crude oil prices are currently trading lower at $78.21, down $0.74 for the day, and they are approaching significant technical levels on the daily chart. This decline marks new lows for the week and also reaches levels not seen since March 13, indicating increased selling pressure in the market.

One critical technical level in focus is the 100-day moving average (MA), which currently stands at $77.99. The last time the price traded below this MA was on February 26, highlighting its importance as a support level. Additionally, just below the 100-day MA lies the 50% midpoint of the move up from the December low to the April high, situated at $77.67. A breach below these levels could further reinforce a bearish bias in the market sentiment.

Despite the downward pressure, there is a possibility of dip buyers entering the market at these technical support zones. These buyers might view the current price level as an attractive opportunity to “stick a toe in the water,” initiating small long positions with a close stop-loss strategy. This approach allows for risk management, with the stop-loss placed just below the dual technical support targets mentioned.

In today’s session, WTI crude oil futures settled at $78.11, marking an $0.84 or 1.06% decline. Monitoring how prices interact with these key technical levels in the coming sessions will provide valuable insights into the market’s directional bias and potential trading opportunities.

Baker Hughes US oil rig count 499 vs 506 prior

• US oil rigs down 6 in the past week
• Oil rigs 499 vs 506 prior
• Gas rigs 102 vs 105 prior

Iraq and Kazakhstan pledge to make up for OPEC quota overproduction before year end

• Statement from OPEC

OPEC is out with a statement after a workshop with Iraq and Kazakhstan.

The successful exchange aimed to share compensation plans for Iraq and Kazakhstan for their outstanding overproduced volumes for the months of January, February and March 2024, which totaled about 602 tb/d for Iraq and for 389 tb/d Kazakhstan. The plans shared by both countries below show in details that the entire over-produced volumes will be fully compensated for by end of this year. Moreover, any overproduction that may arise in the month of April 2024 for these countries will be accommodated in the respective compensation plans over the remaining months in 2024.

Q1 gold demand strong, driven by China

• In Q1 global gold demand was +3% y/y

World Gold Council (a gold lobby group) Q1 report, in brief:

• total global gold demand was +3% y/y, hitting 1,238 tonnes (WGC says this is the strongest first quarter since 2016)
• WGC cite over-the-counter (OTC) investor market buying, persistent central bank buying, higher demand from Asian buyers
• central banks bought 290 tonnes in Q1
• gold exchange-traded funds (ETFs) continued to see outflows
• China demand – renewed investor interest due to the weakening local currency and poorly performing domestic equity markets
• People’s Bank of China (PBOC) bought 27 tonnes of gold in the first three months of the year, taking its reserves to a record high of 2,262 tonnes
• China’s stockpiling was probably an effort to guard its economy against Western sanctions in the event of a conflict over Taiwan
• demand for gold in technology recovered 10 per cent year-on-year driven by the artificial intelligence boom in the electronics sector

Goldman Sachs says its ‘base case’ gold forecast is USD 2700 by the end of 2024

• Got gold?

Goldman Sachs remain bulls on the metal, looking for US$2,700 / oz by year end.

Citing:

• solid demand from EM central banks and from Asian households
• lower interest rates

EU News

European equity close: A silver lining to a tough week

• Closing changes for the main markets in Europe

Most of Europe posted a positive finish but the week was a struggle

• Stoxx 600 +0.4%
• German DAX +0.5%
• UK FTSE 100 +0.5%
• French CAC +0.5%
• Italy MIB -0.3%
• Spain IBEX -0.3%

On the week:

• Stoxx 600 -0.5%
• German DAX -0.9%
• UK FTSE 100 +0.9%
• French CAC -1.6%
• Italy MIB -1.8%
• Spain IBEX -2.8%

Eurozone March unemployment rate 6.5% vs 6.5% expected

• Latest data released by Eurostat – 3 May 2024
• Prior 6.5%

UK Final April S&P Global Services PMI 55.0 vs. 54.9 expected

• The final reading on the UK Services PMI for April.

• UK Services PMI 55.0 vs. 54.9 expected and 53.1 prior.
• UK Composite PMI 54.1 vs. 54.0 expected and 52.8 prior.

Key findings:

• Activity and new work rise at fastest rates for 11 months.
• Staff hiring remains subdued.
• Input cost inflation highest since August 2023.

Comment:

Tim Moore, Economics Director at S&P Global Market Intelligence, which compiles the survey: “Service providers benefited from improving business and consumer spending in April as more favourable demand conditions underpinned the greatest improvement in activity since May 2023. The latest survey results are consistent with the UK economy growing at a quarterly rate of 0.4% and therefore pulling further out of last year’s shallow recession.

“Relief at a turnaround in the economic outlook was commonly cited as a factor supporting sales pipelines in April. However, there were also reports that clients remained somewhat risk averse and under pressure from elevated inflation. These undercurrents constrained margins and meant that some service sector companies were cautious about taking on more staff. The overall rate of job creation was only marginal in April and slipped to its weakest so far in 2024.

“Prices charged inflation across the service sector eased to a three-year low in April, suggesting that the pass-though of higher costs has started to wane. This was despite a sharp and accelerated rise in business expenses as strong wage inflation pushed up operating costs.

“Business activity expectations for the year ahead were upbeat overall in April, therefore adding to signs that the recovery in service sector performance has further to run. Election uncertainty and fading prospects for interest rate cuts were cited as headwinds on the horizon, but survey respondents still mostly reported positive sentiment towards their business investment plans and longer-term growth opportunities.”

France March industrial output -0.3% vs +0.3% m/m expected

• Latest data released by INSEE – 3 May 2024
• Prior +0.2%

German engineering orders see stronger decline in March

• According to the VDMA association

The manufacturing order books in Germany saw a deepening decline in March, as orders fell by 17% year-on-year in real terms. Domestic orders fell by 23% compared to a year ago while foreign orders fell by 15%. That being said, things need to be put into context a little. In March 2023, German manufacturing saw the biggest number of orders for the entire year. So, it is a relatively high base to compare it to.

VDMA notes by taking that into consideration, perhaps there might be a sign that the downward trend in manufacturing orders have bottomed out. But we’ll see. In January to March this year, orders are still down by 13% compared to the same period a year ago.

ECB’s Stournaras says three rate cuts this year is probable

• Stournaras’ previous call was four cuts.

Yannis Stournaras is the Governor of the Bank of Greece and thus a member of the European Central Bank Governing Council (monetary policy setting committee):

• European Central Bank will probably lower borrowing costs three times this year instead of four
• the most recent euro-zone GDP figures were a positive surprise

Morgan Stanley warn of a falling GBP, citing Fed – BoE policy divergence risk

• Morgan Stanley are eyeing a fall to 1.20

Analysts at Morgan Stanley on Sterling risks, in summary:

• While the market is pricing a similar amount of interest-rate cuts from the Bank of England and Federal Reserve there’s a risk of policy divergence that could weigh on GBP/USD
• GBP/USD could depreciate 4.5% on average for every 100 basis points decline in two-year yield U.K.-U.S. differentials
• “If markets were to price out Fed cuts for this year, while the BOE continues with its easing cycle as our economists expect (75 basis points for this year), we think that cable could test 1.20 again”

Asia-Pacific-World News

Reminder – Japanese and Chinese markets are closed for a holiday today

China was out on Wednesday and Thursday, and is again today.

Bank of Korea Gov Rhee says US Treasury shared view that recent won weakness was temporary

• This is a super-important admission from the Governor of South Korea’s central bank

Let me pop up what Rhee said and then why I think the ‘temporary’ comment is critical (for the Bank of Japan, not jus the Bank of Korea):

• Closely watching fx volatility
• Inevitable to raise GDP forecast
• US Treasury shared view that recent won weakness was temporary
• Recently made comments on fx intervention because volatility was higher than expected
• US Treasury shared view that recent won weakness was temporary

Australian April Services PMI (Final) 53.6 (prior 54.4)

• Judo Bank S&P Global PMI Final for April 2024

Judo Bank S&P Global PMI Final for April 2024

Services 53.6

• preliminary was 54.2, prior was 54.4

Composite 53.0

• preliminary was 53.6, prior was 53.3

rom the services PMI report, in brief:

Matthew De Pasquale, Economist at Judo Bank said:

• ongoing rebound in activity levels, continued employment growth, and improved business confidence
• services sector is driving the improvement in economic activity levels
• services sector … continuing to expand headcounts, with the employment index indicating moderate employment growth in April. … the index above its neutral level since August 2021
• Input price pressures remain elevated on pre-pandemic levels and appear to have stagnated in their descent, averaging 61.8 over the past few months, 5.0 points higher than the pre-pandemic average. The output price index is closer to the pre-pandemic levels at 54.2 but also appears to have stagnated in its descent towards the neutral level.

Australian data – March housing finance higher: Home loans +2.8% m/m (expected +1.0%)

• Investment lending for homes +3.8%
• Overall Housing finance +3.1% to its highest in 19 months

Japan finance minister Suzuki: Rapid currency moves are undesirable

• USDJPY lower on the day with help from US data

Japan finance Minister Suzuki is on the wires saying:

• Forex levels should reflect economic fundamentals
• if currency moves are excessive, we may need to smooth them
• Desirable for FX to move stably, eye FX volatility undesirable
• Rapid currency moves are undesirable as they would hurt households and companies
• Currency rates are set by market, reflects the fundamentals

Cryptocurrency News

Bitcoin Surges Past $61K Amid Whale Activity: 47,000 BTC Acquired in 24 Hours

• Bitcoin price soared 5% on Friday, reclaiming space above $61,000 after successful sweep of liquidity previously residing between $60,600 and $59,005.
• Data shows Hong Kong asset-managers have exposure to US spot BTC ETFs, having bought $112 million worth of it.
• CryptoQuant data says BTC whales have acquired 47,000 BTC during recent correction.
• Michael Saylor highlights Bitcoin as main crypto asset for institutional investors, foresees limited institutional acceptance for other cryptocurrencies.

Bitcoin is wrapping up the week with gains following a notable surge on Friday, a move that many expected given signals from the meme coin sector on Thursday. Beyond this, several positive reports have also contributed to the upward momentum for the leading cryptocurrency.

Whales snap up 47,000 Bitcoin in one day

• Whales bought the dip

Amid the recent correction that saw Bitcoin price bottom out at $56,552 on Wednesday, reports indicate that whales capitalized on the correction to buy 47,000 BTC worth a whopping $2.7 billion.

Whales in the Bitcoin market often view corrections as opportunities to accumulate more of the cryptocurrency at lower prices, leveraging their resources to capitalize on market downturns and increase their holdings. This strategy aligns with a long-term investment approach, where corrections are seen as temporary market fluctuations rather than reasons for panic.

This accumulation strategy, practiced by some prominent investors, can generate positive momentum in the market. Their increased demand during price dips can help drive up prices, potentially leading to profits when prices rebound. However, some observers argue that certain market corrections may have been orchestrated manipulations rather than natural market movements.

In recent news, Hong Kong-based asset managers Yong Rong Asset Management and Ovata Capital Management have disclosed their exposure to US spot Bitcoin exchange-traded funds (ETFs). Yong Rong invested $38 million in BlackRock’s iShares Bitcoin Trust (IBIT), while Ovata Capital Management allocated over $74 million across four other Spot BTC ETFs. This combined investment of $112 million is notable, especially considering Hong Kong’s recent launch of its own version of such products earlier this week. These developments reflect growing institutional interest in Bitcoin-related financial instruments despite regional variations in available options.

XRP recovers from week-long decline following Ripple’s response to SEC motion

• Ripple filed a letter to the court to support its April 22 motion to strike new expert materials. 
• The legal clash concerns whether SEC accountant Andrea Fox’s testimony should be treated as a summary or expert witness. 
• XRP closed above $0.51 on Wednesday, beginning a mild recovery after a nearly ten-day decline. 

Ripple’s recovery continues as it bounces back from nearly ten days of decline, maintaining gains above $0.51 since Wednesday. The ongoing legal battle between Ripple and the US Securities and Exchange Commission (SEC) remains a key factor influencing XRP’s price dynamics.

The recent focus has been on the clash between both parties regarding the testimony of SEC’s Assistant Chief Accountant Andrea Fox. Ripple filed a new letter on Thursday supporting its motion to strike new expert materials, arguing that Fox’s statements should be considered expert testimony. Ripple contends that the SEC missed the opportunity to introduce expert testimony during the remedies discovery phase, which has already passed.

The SEC is expected to respond by May 6, with market participants eagerly awaiting a ruling from the court thereafter. This legal development is closely monitored by investors and observers as it directly impacts Ripple’s regulatory status and, consequently, its market performance.

Ripple files letter to support striking expert materials

• The SEC included Assistant Chief Accountant Andrea Fox’s comments on Ripple’s financial statements in its filing. Ripple identified this as “new expert materials” and argued that this should have been introduced in the remedies discovery phase of the lawsuit, which has already ended. 
• The SEC responded to Ripple arguing that the comments from Fox aren’t expert testimony, but “facts and some basic arithmetic.” Therefore, the SEC has asked the court to deny Ripple’s motion to strike new expert materials from the lawsuit. 
• Ripple has filed a letter to support its motion on Thursday. 

The price of Bitcoin falls to 50% of 2024 this week & bounces

• The 100-day MA is around $60,000

Bitcoin recently dipped below its 100-day moving average (MA) and approached the midpoint of its 2024 trading range at around $56,150, hitting a low of $56,500. However, it has since rebounded on the back of increased risk appetite, pushing back above the 100-day MA. This MA now acts as crucial support for Bitcoin; maintaining levels above it suggests continued buyer control and potential upward momentum. The next significant target for Bitcoin would be breaking above the downward sloping trend line near $63,750. As of now, buyers remain in control as long as Bitcoin stays above the $60,000 level, supported by the 100-day MA.

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