Round up of today's market news *

North American News

NASDAQ Surges Over 1% While Dow Remains Steady

The major US stock indices are all closing higher on the day, however with different variances.

The Dow Industrial Average averages closing near unchanged at 39069.58 up 0.01%.
The S&P index is closing up 36.86 points or 0.70% at 5304.71.A close short of its record close reached on Tuesday at 5321.42.
The Nasdaq index is closing up 184.76 points or 1.10% at 16928.79.

The small-cap Russell 2000 rebounded 21.25 points today or 1.04% at 2069.60.

For the trading week, the major indices are closing with mixed results:

Dow Industrial Average average fell -2.33%
S&P index eked out a small gain of 0.03%.The gain was good enough for its fifth consecutive positive week
NASDAQ and the rose 1.41% for its fifth weekly gain.
Russell 2000 fell -1.24% snapping its 4 week up string.

Looking at individual stocks this week:

Nvidia shares rose 15.13% after earnings beat expectations and the company announced a 10:1 stock split
Meta Platforms, +1.34%
Amazon, -2.14%
Alphabet, -0.60% after closing at a record level last week
Microsoft is closing at a record level and is up 2.37%
Apple. rose 0.05%
Tesla rose 1.0%
Netflix rose 4.13%
ServiceNow fell -3.47%
Chipotle fell -1.92%
Micron rose 3.35%
Salesforce -4.66%
Crowdstrike, rose 1.60%
Dell rose 7.13%
Gamestop fell -14.45%
Trump Media, fell -10.03%

Atlanta Fed GDPNow growth estimate for Q2 falls to 3.5% from 3.6%

Atlanta Fed GDPNow growth estimate for Q2

Atlanta Fed GDPNow growth estimate for 2Q dips to 3.5% from 3.6% on May 16. In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 3.5 percent on May 24, down from 3.6 percent on May 16. After recent releases from the US Census Bureau and the National Association of Realtors, the nowcast of second-quarter real gross private domestic investment growth decreased from 5.6 percent to 5.1 percent.

University of Michigan consumer sentiment versus 69.1 estimate. Preliminary 67.4

University of Michigan consumer sentiment final for May

The University of Michigan consumer sentiment final for May is showing:

Consumer sentiment 69.1 vs 67.5 estimate and 67.4 preliminary.Last month 77.2.
Expectations 68.8 versus 66.5 preliminary. Last month 76.0
Current conditions 69.5 versus 68.8 preliminary. Last month 79.0.
1-year inflation expectations 3.3% versus 3.5% preliminary. Still highest level since December, but it is a relief from the 3.5% preliminary. Last month it was at 3.2%.
5 year inflation expectations 3.0% versus 3.1% preliminary.

US durable goods orders for April 0.7% versus -0.8% expected

US durable goods orders for April

Prior month +0.9%
Durable goods orders for April 0.7% versus -0.8% expected.Prior month 0.8%
Ex-transport +0.4% versus 0.1% expected. Last month 0.0%.
Ex-defense MoM was 0.0% vs 1.2% last month
Nondefense Cap Ex-air 0.3% vs 0.1% expected. Last month -0.2%.
Shipments were up 1.2% month on month. YoY shipments are up 2.3%

For the year:

Durable goods orders rose 0.5%.
Ex-transportation +2.1%
Ex Defense + 1.4%

The gain in durable goods orders was the third consecutive monthly increase.Transportation equipment – also up three consecutive months, led the increase with a 1.2% gain for the month.

Fed Gov. Waller: US financing pressures may contribute to rise in longer run neutral rate

Fed Gov. Waller speaks about the neutral rate. Less on policy/current economy

US financing pressures may contribute to a rise in the longer run neutral rate in coming years.
Only time will tell how large a factor US fiscal position will be in affecting neutral rate.
If US treasury supply begins to outstrip demand, this will put upward pressure on neutral rate.
Changes in banking regulations, role of central banks, and sovereign wealth funds and liberalization of capital markets not likely to have significant impact on raising neutral rate.
Demographics will continue to put downward pressure on neutral rate.
Demand for us safe, liquid assets outpacing supply over past 40 years has pushed down treasury yields and neutral rate.
US dollar remains by very large margin the world’s reserve currency.
Recent events point more to increase influence for dollar than any significant decline.
Real return on capital not appropriate interest rate to use to gauge longer run neutral rate.
Real 10 year treasury yield a good, real world proxy for theoretical value of neutral rate.
Need to be humble in deciding numerical value of neutral rate.

Dollar selling the flavour for this month-end – Barclays

The firm’s proprietary month-end rebalancing model indicates a strong signal for selling the dollar across the board

Barclays notes that: “Markets had reacted to slightly softer US data in May, as seen in outsized moves to PPI, CPI, and retail sales, with bonds rallying and stocks reaching new highs. This will likely trigger more rebalancing needs to sell dollars at month-end.” Adding that “although the broad rally extended to other G10s, the large market cap in US equity markets has dominated hedging flows” on the month. Taking that into consideration, their model “suggests this dollar-selling signal is consistent across G10s”.

Goldman Sachs now expects the Fed to start cutting rates in September instead

The firm previously had July penciled in for the first Fed rate cut

That’s a bit of a late revision as markets have ruled out both June and July for quite some time now. As of today, the odds of a September move are priced at a ~58% probability with just ~36 bps of rate cuts for the year.

Canada retail sales for March -0.2% versus 0.0% expected

Canada retail sales data for March 2024

Prior month -0.1%
Retail sales for March -0.2% vs 0.0% expected.Prior month -0.1%
Retail sales ex-autos -0.6% versus 0.1% expected. Prior month -0.3% revised to -0.2%.This is the first decline in four months and was broad-based with sales at all but one core retail subsector being down
The preliminary estimate for retail sales for April came in at +0.7%.

Details:

Sales were down in seven of nine subsectors and were led by decreases at furniture, home furnishings, electronics and appliances retailers.
In volume terms, retail sales decreased 0.4% in March.
Retail sales were down 0.2% in the first quarter, while in volume terms, retail sales increased 0.3%

Sales were down in six provinces:

Retail sales decreased in six provinces in March.
Ontario experienced the largest provincial decrease (-0.3%), driven by lower sales in:
- Sporting goods
- Hobby
- Musical instrument
- Book and miscellaneous retailers
In the Toronto CMA, sales increased by 1.5%.
Saskatchewan saw a retail sales decrease of 3.4%, primarily due to lower sales at motor vehicle and parts dealers.
The largest provincial increase in retail sales in March was in Quebec (+0.6%).
In the Montréal CMA, sales increased by 0.3%.

Commodities

Gold price is firm on soft US Dollar

Gold climbs 0.23% on Friday but is set for weekly drop above 3%.
US Durable Goods Orders exceed expectations, though March’s revised down data softened the impact.
Gold recovers on mixed US data that weighs on US Dollar.
Traders now anticipate only 25 basis points of Fed rate cuts in 2024, reducing expectations for easing.

The price of gold stabilized on Friday after registering back-to-back days of losses, climbing some 0.23%. Yet it was down more than 3% on the week, the largest weekly loss since December 2023. The US Durable Goods Orders data was better than expected, but a downward revision to the previous month’s reading diminished the report’s impact, giving the green light to Gold buyers.

The yellow metal trades at $2,332 after bouncing off a daily low of $2,325.

Gold traders had stepped in ahead of the weekend. US economic data on Thursday showed that US business activity picked up, decreasing the chances of seeing the Fed cut rates.At the time of writing, fed funds rate futures estimate just 25 basis points of interest rate cuts in 2024.

Gold price climbs as the Greenback gets battered

Gold prices are boosted by a softer US Dollar and an improvement in risk appetite as Wall Street recovers some ground.
April’s US Durable Goods Orders increased by 0.7% MoM, surpassing the estimated -0.8% contraction but lower than the downwardly revised figures of 0.8% for March.
The University of Michigan Consumer Sentiment Index for May was 69.1, down from April’s 77.2 but above the forecast of 67.5.Inflation expectations for one year rose slightly to 3.3% from 3.2%, while five-year inflation expectations remained unchanged at 3%.
S&P Global released the final US PMI readings for May. The Manufacturing PMI rose to 50.9, surpassing both estimates and April’s figure of 50.0. The Services PMI significantly outperformed forecasts and April’s 51.3, increasing to 54.8.
FOMC Minutes showed that Fed officials remained uncertain about the degree of policy restrictiveness. They added that “it would take longer than previously anticipated to gain greater confidence in inflation moving sustainably to 2%.”
Gold prices were underpinned by emerging markets’ central bank buying, according to an article in The Wall Street Journal.The catalyst that sparked the buying was Western sanctions on Russia after its invasion of Ukraine.
The World Gold Council revealed that central banks added around 2,200 tons of the golden metal since Q3 2022.

Crude oil futures trade to new session highs

Up around one dollar on the day

Crude oil futures are trading up around one dollar on the day at $77.85 (up 1.25%).The low price today extended down to $76.18. That was the lowest level going back to February 26.

This week, the price is currently down $-1.62 or minus 2.05%.

Bakers Hughes oil rigs unchanged in the current week

Total rigs -4 in the week.

The weekly Baker Hughes rig count is showing:

Total rigs -4 at 600
Oil rigs unchanged at 407
Natural Gas -4 to 99

OPEC+ meeting at the start of June to be a virtual one

The virtual meeting is scheduled for 2 June

The bloc is likely to reach an agreement to extend the production cuts through to Q3 this year. That said, the key detail to watch will be any dissent or signs that they may taper those cuts subsequently. In turn, such headlines will be a negative drag for oil prices.

EU News

European indices close unchanged, down. Lower for the week

European stock indices end the day little changed, down for the week.

The major European indices are ending the day little changed or down. For the week, the major indices are closing lower:

A snapshot of the closing levels at today shows:

German DAX, +0.01%
France CAC, -0.09%
UK FTSE 100 under -0.26%
Spain’s Ibex -0.58%
Italy’s FTSE MIB +0.07%

For the trading week:

German DAX, -0.06%
France CAC, -0.89%
UK FTSE 100, -1.22%
Spain’s Ibex, -0.72%
Italy’s FTSE MIB, -2.57%

Germany Q1 final GDP +0.2% vs +0.2% q/q prelim

Latest data released by Destatis – 24 May 2024

No change to the initial estimate as the German economy is seen expanding slightly in Q1 this year. But the trend has been one of alternating quarterly growth for Europe’s largest economy since 2022:

France May business confidence 99 vs 99 prior

Latest data released by INSEE – 24 May 2024

Prior 99
Manufacturing confidence 99
Prior 100
Services confidence 101
Prior 100

UK April retail sales -2.3% vs -0.4% m/m expected

Latest data released by ONS – 24 May 2024

Prior 0.0%; revised to -0.2%
Retail sales -2.7% vs -0.2% y/y expected
Prior +0.8%; revised to +0.4%
Retail sales (ex autos, fuel) -2.0% vs -0.6% m/m expected
Prior -0.3%; revised to -0.6%
Retail sales (ex autos, fuel) -3.0% vs -1.1% y/y expected
Prior +0.4%; revised to 0.0%

Breakdown:

Non-food stores sales volumes dropped by 4.1% as a whole in April, which marks the joint-largest drop (alongside December 2023) since January 2021.

UK data – May Consumer confidence -17 (expected -18)

GfK Consumer Confidence hits its highest since December 2021

UK data – GfK Consumer Confidence for April 2024 comes in at -17

expected -18, prior -19

Joe Staton, client strategy director at GfK:

“All in all, consumers are clearly sensing that conditions are improving. This good result anticipates further growth in confidence in the months to come”

ECBs Muller: ECB must stay cautious as inflation can surprise to the upside

ECBs Muller speaking

ECB must stay cautious as inflation can surprise to the upside.
Wage jump does not derail deflation.
If inflation slows more, the ECB has the scope to ease further.
The GDP rebound is not in danger the downtrend in prices

ECB’s Nagel: The probability of a June rate cut is increasing

Remarks by ECB policymaker, Joachim Nagel

German economy fared better than expected in Q1
Wage developments have been strong but we expected it to flatten
Probably have to wait on the next move until September (HMMMM)
The wage uptake was not a surprise.
Core and headline inflation are both decelerating after June.

ECB’s Schnabel: A June rate cut is likely

Remarks by ECB executive board member, Isabel Schnabel, in an interview given on 16 May last week

The decision won’t be made until the day the Governing Council meets
If data gives us confidence that price target can be met sustainably, a June rate cut will be likely
Some elements of inflation are proving persistent, services in particular
Would caution against moving too quickly on rate cuts

Goldman Sachs expect a Bank of England 25bp rate cut in August (previously tipping June)

Updated BoE Monetary Policy Committee forecast from Goldman Sachs

Goldman Sachs is tipping no help for Sunak from the Bank of England, changing its forecast from a June rate cut to August now.

Given firmer incoming price and wage data, we no longer expect a June Bank Rate cut.
First, services inflation came in at 5.9% year-on-year in April, well ahead of consensus expectations and the MPC‘s May projection of 5.5% year-on-year.

Asia-Pacific-World News

PBOC sets USD/ CNY mid-point today at 7.1102 (vs. estimate at 7.2539)

The PBOC trying to support the yuan in the face of a strong US dollar

PBOC injects 2bn via 7-day RR, sets rate at an unchanged 1.8%

2bn mature today
thus neutral in OMOs today

China continues military drills in Taiwan Strait, mock missile strikes conducted

The Chinese military sent bombers carrying live missiles to conduct the mock strikes

The tensions are definitely escalating with dozens of mock missile strikes reportedly being conducted. Here’s the heatmap of the latest drill as compared to the previous one almost two years ago:

New Zealand data – ANZ Roy Morgan Consumer Confidence (May 2024) 84.9 (prior 82.1)

May has bounced back a little from a very poor April when consumer sentiment fell 4 points to 82.1, close to lows seen during the Global Financial Crisis.

The move up to 84.9 is welcome, but its still “very low” says ANZ.

The survey also ask about inflation expectations, these fell in May, to 3.8%. The lowest since October 2020.

prior 4.4%

New Zealand April Annual trade balance -10.11bn NZD (prior -9.98bn)

Exports and imports both higher

RBNZ Dep Gov Hawkesby: Cutting interest rates is not part of near term discussion

Reserve Bank of New Zealand Deputy Governor Hawkesby

While near-term inflation risks are to upside, confident medium-term inflation is returning to target
No single data point will cause rate hike, watching domestic inflation pressures, expectations
Cutting interest rates is not part of near-term discussion
A lot of uncertainty about tradable inflation going forward

RBNZ Assistant Governor Silk says concerned about near term inflation risks

Reserve Bank of New Zealand

says concerned about near term inflation risks
says the Bank has adjusted its modelling after it underestimated the strength of domestic inflation

Japan’s Kanda: Excessive FX moves undesirable. Ready to take action if needed

Japan top currency diplomat Kanda speaking

excessive FX moves undesirable so need monitoring.
Told G7 that they must respond appropriately to excessive disorderly FX moves.
Japan ready to take appropriate action if excessive moves in FX market
won’t comment on recent Yen moves.
I am always in close communication with overseas counterparts. Particularly with US
if there is excessive FX volatility that has adverse impact on economy, intervention is necessary and justified
Japan is ready to take action at any time if needed
We are still working to issue G7 communiqué but hoping to include language on FX

10 year Japanese Government Bond yield rises higher, to 1.005%, highest since April 2012

The Bank of Japan will not want this yield to go higher, and would like it to fall back under 1%

The Bank of Japan will continue to buy bonds to try to control yields.

Cryptocurrency News

Ethereum price lags after ETF approval, experts share reason for SEC’s change of mind

Ethereum ETFs were approved partly because of Bitwise’s correlation analysis.
Analysts expect spot ETH ETF to disappoint due to key metrics.
Ethereum faces temporary sell-off after its first double-digit gain in months.

Ethereum declined briefly on Friday as experts weighed in on why the Securities & Exchange Commission (SEC) approved spot ETH ETF applications and when to expect S-1 comments from the agency.

Why SEC approved ETH ETFs

Several experts have pointed out that the SEC approved 19b-4 spot ETH ETF filings on Thursday due to spot ETH price’s high correlation with CME Ethereum futures prices, similar to that of Bitcoin. As a result, it concludes that spot ETH is tightly linked to the regulated CME futures market.

Immediately after the ETFs were approved, Van Eck submitted an amendment to its S-1 application. This follows amended S-1 submissions from Fidelity and Grayscale.

BlackRock also unveiled ETHA as the ticker for its spot ETH ETF, according to a listing on DTCC.

Scott Johnsson, a general partner at Van Buren Capital, mentioned that the SEC’s pace and breadth of first comments on S-1 filings are key to watch as they are the next key steps before a spot ETH ETF launch.

Bloomberg analyst speculated that the SEC’s comments may come in four to six weeks.
He also noted that one of the challenges ETH ETFs will face in attracting boomers is “distilling its purpose/value into an easy-to-understand sound bite a la “Bitcoin is digital gold.”

According to crypto researcher’s, spot ETH ETFs will meet a disappointing reception when they launch. He highlighted the CME’s low interest in ETH derivatives — ranking fifth — as a signal suggesting spot ETH ETFs may not be attractive.

“The relatively low participation from the same institutions that will probably be expected to pour into the ETH spot ETF upon launch, suggests that the initial inflows could be disappointing,” Acheson said.

He also pointed to ETH accounting for only 15% of the total assets under management (AUM) of Hong Kong’s spot crypto ETFs. Additionally, he shared how some investors may not be willing to part ways with their staking yields to subscribe to these ETFs, as many experts suggest the SEC may not allow issuers to stake their assets.

Solana and XRP ETFs may be on the cards in 2025, Standard Chartered analyst says

Ethereum ETF approval may open the floodgates to assets like Solana and XRP that may receive approval for ETFs in 2025.
Standard Chartered analysts say that cryptocurrencies like Solana and XRP will not be classified as securities.
SOL wiped out nearly 6% value on Friday, while XRP price is nearly unchanged on the day.

Ethereum Exchange Traded Fund (ETF) approval news has renewed optimism on Solana and XRP ETFs approval in 2025. Analysts at Standard Chartered believe more cryptocurrency ETFs may be approved next year, and these assets will not be classified as securities.

Adrian Zduńczyk’s Birb Nest calls market participants to “unleash a full-blown meme mania on Solana.”

Solana and XRP ETFs could be approved next

As market participants celebrate the approval of Ethereum ETFs, analysts turn their attention to the next asset that could see an Exchange Traded Fund (ETF) launch.An analyst behind the handle @CryptoKaleo said in a recent tweet, that the next three likely coins in line for ETF discussions are Solana (SOL), Avalanche (AVAX) and Dogecoin (DOGE).

Analyst at Standard Chartered said that SOL and XRP ETFs may be approved in 2025. Kendrick believes that the approval of the ETH ETF means that Ether and similar cryptocurrencies (other altcoins) will not be classified as securities.

Analysts note that the Solana ETF narrative is being discussed on crypto Twitter and by the media, and “this will probably happen.” Analysts say that the market definitely needs more time to introduce a legitimate crypto regulatory framework. While regulation may take time, analysts call market participants to “unleash a full-blown meme mania” on Solana.

Dogecoin inspiration Kabosu dies, leaving legacy of $22.86 billion market cap meme coin behind

The original Shiba Inu dog Kabosu, who inspired Dogecoin, died peacefully in her sleep on May 24.
The Dogecoin inspiration leaves behind a legacy of $22.86 billion market capitalisation of DOGE.
DOGE price increased 6% this week, but declined nearly 1.5% on Friday.

Kabosu, the popular Shiba Inu dog that inspired the logo of the largest meme coin by market capitalization, Dogecoin (DOGE), died early on Friday after losing her fight to leukemia and liver disease.Kabosu had gained popularity as the dog behind the viral “doge” meme.

DOGE sustained its 6% gains from this week and dipped 1.2% on Friday following the news.

Dogecoin holders mourn death of original Doge meme dog Kabosu

Kabosu, the Shiba Inu dog popular as the logo of Dogecoin – the largest meme coin by market capitalization – peacefully passed away in the early hours of Friday, according to a blog post written by her owner.

DOGE holders mourn the loss of the iconic dog that fought leukemia and liver disease for nearly two years prior to her passing.

Kabosu-inspired DOGE’s market capitalization is at around $22.86 billion on Friday.

DOGE price retraces on Friday

DOGE price declined from $0.16165, the 61.8% Fibonacci retracement level of the decline from March 28 peak of $0.2288 to the May 1 low of $0.12010.In case of further falls, DOGE is likely to sweep support first at the May 20 low of $0.14740 and then the May 1 low of $0.12010.

If DOGE closes above $0.16165, it could climb towards $0.17449, the 50% Fibonacci retracement of the March 28 to the May 1 decline.

The green histogram bars on the Moving Average Convergence Divergence indicator signal the underlying positive momentum in DOGE.Meanwhile, the Relative Strength Index (RSI) reads 51.97, close to neutral at 50.

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Round up of today’s market news

ByBilals Tech