North American News
Stocks Retreat as Salesforce and Nvidia Take a Hit
Major stock indices moved lower today, significantly impacted by steep declines in Salesforce and Nvidia. Salesforce shares plummeted by 19.74%, contributing heavily to the market’s downturn. Nvidia also saw a sharp drop of 3.77% following Bloomberg’s report that the US is curbing AI chip sales to the Middle East to prevent them from being redirected to China. Despite the substantial fall in the Dow 30, only seven of its stocks were in the red, highlighting the outsized influence of Salesforce’s dramatic tumble on the overall market performance.
The final numbers:
- Dow industrial average -330.08 points or -0.86% at 38111.42
- S&P index -31.49 points or -0.60% at 5235.47
- NASDAQ index -183.50 points or -1.08% at 16737.08
The small-cap Russell 2000 but the trend with the gain of 20.40 points or 1.0% at 2056.59.
After the close Dell announced their earnings:
- EPS $1.27 versus $1.26 expected
- Revenues came in at $22.24 billion versus expected $21.64 billion
Despite the small beat, shares of Dell are down -8.78% at $155 in after-hours trading.
US pending home sales for April -7.7% versus -0.6% expected
- Pending home sales for the month of April 2024
- Prior month +3.4%
- Pending home sales month on month change -7.7% versus -0.6% expected
- Pending home sales index 72.3 vs 78.2 last month
- Pending home sales -7.4% y/y vs +0.1% y/y prior
US initial jobless claims 219K vs. 218K estimate
- Weekly US jobless claims and continuing claims data
- Prior week initial jobless claims 215K revised to 216K
- Initial jobless claims 219K vs 218K estimate
- 4-week moving average of initial jobless claims 222.5K vs.220.00K last week
- Prior week continuing claims 1.794M revised lower to 1.787M
- Continuing claims 1.791M vs 1.797M estimate.
- Haven’t been above 1.800M since the last week in March.
- 4-week moving average of continuing claims 1.786M vs. 1.781M last week
US Q1 GDP +1.3% vs +1.3% expected
- The second look at Q1 2024 GDP
- Advance Q1 reading was +1.6% annualized
- Final Q4 reading was +3.2% annualized
- Q3 was +5.2% annualized
Details:
- Consumer spending +2.0% vs +2.5% advance
- Consumer spending on durables +% vs -2.1% advance
- GDP final sales +1.7% vs +2.0% advance
- GDP deflator +3.1% vs +3.1% advance
- Core PCE +3.6% vs +3.7% advance
- Business investment +% vs +3.2% advance
- Corporate profits -1.7% vs +3.9% in Q1
- PCE services inflation excluding energy and housing 4.9% vs 5.1% advance
Percentage point changes:
- Net trade pp -0.89 vs -0.86 pp advance
- Inventories -0.45 pp vs -0.37 pp advance
- Govt +0.28 pp vs +0.21 pp advance
US April advanced goods trade balance -$99.4 versus -$91.8B expected
- Advanced goods trade balance for April 2024
- Prior was -91.54B
US wholesale inventories (preliminary) for April 0.2% versus 0.0% estimate
- US wholesale inventories preliminary for the month of April 2024
- Prior month -0.4%
Advanced wholesale inventories
- Wholesale inventories for April 0.2% versus 0.0% expected
- April 2024 End-of-Month Level: $896.3 billion.
- Month-over-Month Change (March 2024 to April 2024): Up 0.2%
- Year-over-Year Change (April 2023 to April 2024): Down 1.6%
- Revised February 2024 to March 2024 Change: Unchanged from preliminary estimate, down 0.4%
Advanced retail inventories ex air
- Retail inventories ex autos 0.3% vs -0.4% last month (revised from -0.2%).
- April 2024 End-of-Month Level: $790.9 billion.
- Month-over-Month Change (March 2024 to April 2024): Up 0.7%
- Year-over-Year Change (April 2023 to April 2024): Up 4.8%
- Revised February 2024 to March 2024 Change: Revised from up 0.2% (±0.2%) to up 0.1%
Fed’s Bostic: I don’t see a rate cut in July but I am open if data justifies
- Comments from the Atlanta Fed President on Fox Business
- The outlook is inflation will come down very slowly
- The economy continues to grow but it’s growing at a slower pace
- I expect to reach the inflation goal without an unemployment jump
US to reign in AI chip sales to Middle East by Nvidia and AMD
- Report on chip sales
It’s obvious that H100 chips are making their way all over the world and the US wants to stop it. This is only going to raise tensions further.
Shares of NVDA are down on the news and off by 3% on the day.
Fed’s Williams: Fed policy positioned well to get inflation back to 2%
- Comments from Williams
- Recently there’s been a dearth of progress on lowering inflation
- Inflation still too high but should moderate in H2
- Expects inflation at 2.5% this year and ‘closer’ to 2% next year
- Wage gains still too high relative to 2% inflation goal
- Economy moving into better balance
- Fed will watch all data to make decisions on policy
- Inflation expectations have been stable
- Russia war on Ukraine important inflation driver.
- Economy is doing really well.
- Isn’t worried about the actions of other central banks.
- Does not know when fed will change monetary policy
- At some point interest rates will need to come down
- Does not feel urgency to act on monetary policy
- Doesn’t need to be exactly at 2% to cut rates
- Expects to squarely hit 2% inflation in early 2026
- Rate hike are not baseline forecast.
- Fed will take whatever action needed to lower inflation
- There are lots of indications job market cooling to decent levels
- Letting data drive policy is best Fed can do
- Amid uncertainty about when rate cuts start, unclear how much easing will be needed
- R-star estimates want a bear heavily on rate change to liberation’s
- Markets understand the Fed’s outlook shifts with incoming data
- No one knows for sure exactly where neutral rate of interest is
Former NY Fed Pres Dudley: The FOMC isn’t doing enough to fight inflation
- Commentary from the Fed’s Dudley today
Former New York Fed President Bill Dudley is out with a new commentary today saying that the Fed needs to hike rates further.
“I think r* is a lot higher than the Fed recognizes — which means the central bank isn’t doing enough to fight inflation,” he writes.
Goldman Sachs data shows that hedge fund exposure to “Magnificent 7” rises to record high
- This is partially due to the market cap surge in Nvidia
Snippet from Goldman Sachs on equites:
- Magnificent 7 stocks collectively now make up 20.7% of total U.S. single stock net exposure
- highest level on our record
- above the previous peak level of 20% seen last summer
Fed’s Bostic: price gain breadth significant, less breadth would add to confidence for cut
Federal Reserve Bank of Atlanta President Bostic is in a moderated conversation on “Economic Outlook and Leadership” before the American Economic Association Conference on Teaching and Research in Economic Education:
- inflation path will be bumpy
- general inflation trend is down
- path to 2% inflation is not assured
- job market is tight, but not as much as it was
- breadth of price gains still significant
- less inflation breadth would add to confidence for a rate cut
US has given the Ukraine permission to US weapons inside Russia near Kharkiv
- This could lead to escalation
NATO allies have slowly been giving Ukraine permission to use weapons in Russia, and now we get the big one with the US authorizing its weapons to be used in Russia but only in the area around Kharkiv.
The report is from Politico, citing two people familiar.
“The president recently directed his team to ensure that Ukraine is able to use U.S. weapons for counter-fire purposes in Kharkiv so Ukraine can hit back at Russian forces hitting them or preparing to hit them,” a U.S. official confirmed, adding that the policy of allowing long-range strikes inside Russia “has not changed.”
Canada Q1 current account -5.37B vs -5.50B expected
- Canadian first quarter GDP report
- Prior was -1.62B (revised to -4.51B)
Commodities
Gold shines again as weaken US economic growth sparked Fed rate cut hopes
- Gold bounces to $2,347 from daily lows of $2,322, up 0.41%.
- Slower US GDP growth and rising unemployment claims weaken the Greenback.
- Traders eye April’s PCE inflation data, which could dictate Gold’s direction.
Gold prices trimmed some of Wednesday’s losses and rose 0.41% on Thursday after the US GDP showed the economy is slowing, reigniting hopes that the US Fed may cut rates later in the year.
The yellow metal trades at $2,347, bouncing off daily lows of $2,322. The US Dollar Index lost 0.43%, at 104.67.
The US economy grew at a slower rate than in the fourth quarter of last year, indicating that higher borrowing costs set by the Fed are taking their toll on the economy. Meanwhile, the US Department of Labor revealed an increase in the number of people applying for unemployment benefits.
Recently, New York Fed President John Williams grabbed the headlines. He said that monetary policy is well-positioned, that inflation is too high, and that he doesn’t feel urgency to slash interest rates. He added that inflation would reach the Fed’s 2% goal in early 2026.
Even though he was hawkish, Gold prices barely heeded his words, standing at current spot prices. The US housing market is also weakening, according to the Pending Home Sales data revealed by the National Association of Realtors.
Ahead in the week, traders are anticipating the release of April’s PCE Price Index. The core PCE figure is expected to be 2.8% YoY, while the headline PCE is projected to increase by 0.3% MoM.
OPEC+ discusses keeping voluntary cuts until year end – report
- That could significantly tighten the market
OPEC is discussing continuing the 2.2 million barrels per day voluntary cut through year end, according to three sources cited by Reuters.
Oil prices are perking up on the report.
Extending through year end is one option, with another option extending the cuts through Q3. Two sources also said they wouldn’t rule out a deeper cut or releasing oil back into the market if demand rises.
OPEC is currently holding back 5.86 mbpd, including a 2.2 mbpd voluntary cut. Even if US producers stay disciplined, it could take years for global demand to soak up that supply.
Keep in mind, that Saudi Arabia is offering shares in Aramco at the moment so Saudi Arabia may have an incentive to keep markets tight for now.
EIA weekly US oil inventories
- Weekly US EIA crude oil inventories
- Prior +1825K
- Crude: -4.156M vs -1950K expected
- Cushing: -1.766M
- Gasoline: 2.022M vs -450K expected
- Distillates: 2.544M vs -150K expected
Private survey of oil inventories shows huge headline draw
- The inventory data from the private survey is out now, official data follows Thursday morning (US time).
- Crude oil -6.490 million
- Gasoline -452,000
- Distillates +2.045 million
- Cushing -1.706 million
EU News
European equity close: Spain leads the way
- Closing changes
- Stoxx 600 +0.4%
- German DAX +0.1%
- UK FTSE 100 +0.6%
- French CAC +0.6%
- Italy MIB +0.8%
- Spain IBEX +1.8%
Eurozone May final consumer confidence -14.3 vs -14.3 prelim
- Latest data released by the European Commission – 30 May 2024
- Economic confidence 96.0 vs 96.2 expected
- Prior 95.6
- Industrial confidence -9.9 vs -9.4 expected
- Prior -10.5; revised to -10.4
- Services confidence 6.5 vs 6.5 expected
- Prior 6.0; revised to 6.1
Eurozone April unemployment rate 6.4% vs 6.5% expected
- Latest data release by Eurostat – 30 May 2024
- Prior 6.5%
Spain May preliminary CPI +3.6% vs +3.7% y/y expected
- Latest data released by INE – 30 May 2024
- Prior +3.3%
- HICP +3.8% vs +3.7% y/y expected
- Prior +3.4%
Switzerland April trade balance CHF 4.32 billion vs CHF 3.54 billion prior
- Latest data released by the Federal Statistics Office – 30 May 2024
- Prior CHF 3.54 billion; revised to CHF 3.77 billion
The Swiss trade surplus expanded in April as exports were seen up 10.4% while imports rose by 9.6% on the month.
Switzerland Q1 GDP +0.5% vs +0.3% q/q expected
- Latest data released by the Federal Statistics Office – 30 May 2024
- Prior +0.3%
SNB’s Jordan says small risk for higher inflation
- Chairman of the governing board of the Swiss National Bank (SNB) Jordan
Chairman of the governing board of the Swiss National Bank (SNB) Jordan at the 2024 Bank of Korea International conference, Seoul.
- says there is an upward risk to the bank’s inflation forecast, a small risk
- there are reasons to believe that the natural rate of interest has increased or may well rise
- weaker franc is currently the most likely source of higher Swiss inflation
- the Bank could counteract this by “selling foreign exchange”
- a rise in the natural rate of interest also poses a risk to the consumer-price outlook
- SNB estimates this gauge is around 0% in Switzerland at present
- “There are currently reasons to believe that r* has increased somewhat, or might rise over the coming years,” he said. “We view this as a small upward risk to the inflation forecast.”
Asia-Pacific-World News
Chinese companies buy back shares, lift dividends – driving rally
- Record cash dividends
Reuters with the summary of developments in Chinese stock markets:
- China-listed firms announced record cash dividends totalling 2.2 trillion yuan ($300 billion) for 2023 despite a fall in combined profit, official data shows.
- Over 100 listed companies returned money to investors for the first time.
- a growing number of firms are unveiling share buyback schemes
- China’s measures, designed to improve investor returns and announced in March, have triggered a solid rebound in stocks
PBOC says will ensure stable growth, risk prevention
- Will support development of offshore yuan market
A People’s Bank of China deputy governor:
- Bank will coordinate relationship between short-term tasks and long-term goals, stable growth and risk prevention, and internal and external balances
- Will support development of offshore yuan market
- Will prompt trade and investment facilitation
- will accelerate implementation and effectiveness of reledning facility for scient and tech innovation
- Will support small- and medium-sized tech firms’ first-time loans and equipment upgrades in key areas with big efforts
- Will establish and improve financial infrastructure, improve service capacity of yuan cross-border interbank payment system
- Will strengthen the supervision of cross border yuan business
- Will make financial markets more transparent, rule-based and predictable, and increase the liquidity yuan financial assets
- Will support more foreign central banks, international development institutions and multinational enterprises in issuing panda bonds in China
PBOC sets USD/ CNY mid-point today at 7.1111 (vs. estimate at 7.2663)
- PBOC CNY reference rate setting for the trading session ahead
PBOC injects 260bn via 7-day RR, sets rate at an unchanged 1.8%
- 2bn mature today
- net adding 258bn to banking system
China’s suspension of 5 Australian meat processing plants has been lifted
- Good news for AUD at the margin
China has lifted bans on beef shipments from five major Australian meat producers. Agriculture Minister Murray Watt confirmed the suspensions were lifted by Chinese authorities overnight with immediate effect
Australian Q1 Capex +1.0% q/q (expected +0.5%)
- Private Capital Expenditure for the January – March quarter of 2024
The headline number is just part of the capex story.
Q1 Capex % q/q
- expected +0.5%, prior +0.8%
- Plant and machinery +3.3% q/q (prior -0.1%)
- Building capex -0.9% q/q (prior +1.5%)
Estimates improving:
There were also data on building approvals for April, -0.3% m/m, not as good as expected
- expected +1.5%, prior +1.9%
RBA head economist Hunter says agrees with the Australian Treasury’s inflation forecast
- Treasury is bullish on falling inflation
Reserve Bank of Australia Assistant Governor (Economic) Hunter:
- We agree with the Treasury forecast on inflation
- CPI confirmed there was strength in some price sectors
- The RBA Board is clearly focused on inflation staying out of the band, clearly there is strength in inflation
- Wages growth in around its peak
Notes:
The Treasury’s inflation forecast was contained in the Budget released earlier in May:
- Inflation could return to the Reserve Bank’s target band by the end of 2024
- annual headline Inflation is expected to ease to 3 ½ per cent by June(slightly below the estimates in December’s mid-year budget update of 3 ¾%)
- inflation will ease to 2 ¾ % a year later – in line with RBA’s 2 to 3 per cent target band
New Zealand Building Permits April: -1.9% m/m (prior -0.2%)
- New Zealand Building Consents for April 2024
New Zealand Building Permits April: -1.9% m/m
- prior -0.2%
For the y/y +6.0%
Stats NZ with the caveat on the y/y :
- There were 20 working days in April 2024 compared with 17 in April 2023, with Good Friday falling in March in 2024. More working days in a month means more time for building consent authorities to issue consents for new homes.
New Zealand budget – Treasury forecasts inflation below 3% in Q3 2024
- The New Zealand deficit has widened
New Zealand forecast a budget deficit of NZ$11.07($7.04 billion) for the fiscal year ending June 30 2024,
- wider than a deficit of NZ$9.32 billion forecast in its half-year fiscal update in December.
Treasury inflation forecasts:
- falling below 3% in Q3 this year
- to 2% around 2026
- sees a contraction in GDP in H1 of 2024, return to growth in H2 of this year
Cryptocurrency News
Ethereum lags, investors potentially reallocating capital after BlackRock’s updated S-1 filing
- Ethereum ETFs will likely begin trading soon after BlackRock filed its updated S-1 application.
- Vanguard won’t offer Ethereum ETFs on its platform.
- Ethereum investors may be reallocating capital to benefit from the potential larger upside of smaller-cap DeFi tokens.
Ethereum (ETH) price shows neutrality despite positive updates of BlackRock’s spot ETH ETF updated S-1 application and the Securities & Exchange Commission’s (SEC) engagement with issuers. A key reason for the price lag may be a potential capital reallocation from investors to DeFi tokens in hopes of a larger upside if the launch of spot ETH ETFs spurs a rally.
Daily digest market movers: BlackRock S-1 filing, Vanguard says no to Ethereum
BlackRock filed an updated S-1 for its spot Ethereum ETF on Wednesday, according to updates on the SEC’s website.The recent filing comes after the SEC approved 19b-4 applications of eight issuers — including BlackRock’s iShares Ethereum Trust — on May 23.
National exchanges like the NASDAQ or the New York Stock Exchange (NYSE) submit 19b-4 filings to the SEC to seek approval for listing new products on their trading platforms. On the other hand, S-1 refers to the initial registration form detailing how a fund would be managed and how it would track the underlying asset’s price.
The SEC must approve S-1 applications before the ETFs can launch officially.
BlackRock’s IBIT fund becomes the largest Bitcoin ETF
- IBIT is now the largest Bitcoin ETF in the world after a $20 billion growth.
- IBIT may be set to overtake IAU Gold ETFs with its current run.
- Grayscale’s high fee structure has caused massive outflows.
Bitcoin ETFs experienced a shake-up on Wednesday after IBIT surpassed Grayscale to become the biggest Bitcoin fund.
IBIT surpasses Grayscale
BlackRock’s IBIT flipped Grayscale’s GBTC on Wednesday to become the largest Bitcoin ETF with nearly $20 billion in total assets. Since spot Bitcoin ETFs went live in the US on January 11, IBIT has been on a meteoric rise, adding an average of $145 million daily.
According to Bloomberg analyst, the JP Morgan Equity Premium ETF (JEPI) was the only ETF to reach $20 billion in under 1000 days. While JEPI took 985 days to achieve that feat, IBIT did the same in less than 137 days.
President of ETF Store Nate Geraci said IBIT’s next target is to track down the IAU gold ETFs.Since its launch in 2005, IAU has held about $29 billion in total assets.With IBIT at $20 billion, it may go ahead and flip IAU before the year runs out.
IBIT’s successful growth, according to Balchunas, is largely tied to its low fee structure, improved liquidity and brand name.
On the other hand, Grayscale has faced a massive exodus of BTC from its platform as users have complained of its high fee structure.
How researchers cracked an 11-year-old password to a $2 million+ crypto wallet
- A good read on a lost password found via hacking
Wired has the story of a BTC owner who lost the password to his encrypted wallet containing 43 Bitcoin.
He contacted “an electrical engineer who began hacking computing hardware at age 10” to help him crack the password and get into his wallet.
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