North American News
US markets are closed for the Juneteenth holiday
- Equities and bonds are closed
US June NAHB housing market index 43 vs 45 prior
- The latest survey of US home builders
- Prior was 45
- Current sales 48 vs 51 prior
- Six month sales 47 vs 51 prior
US MBA mortgage applications w.e. 14 June +0.9% vs +15.6% prior
- Latest data from the Mortgage Bankers Association for the week ending 14 June 2024
- Prior +15.6%
- Market index 210.4 vs 208.5 prior
- Purchase index 146.0 vs 143.7 prior
- Refinance index 552.7 vs 554.7 prior
- 30-year mortgage rate 6.94% vs 7.02% prior
Fed’s Collins: Gonna take a while for inflation to come down
- its going to take some time for inflation to come down
- economic data points to an economy coming into better balance
- Collins says she can see scenarios for both one and two cuts in 2024
BOC Minutes: Governing Council considered waiting until July to cut rates
- Minutes from the June BOC
- Members recognized chance of inflation stalling but there was a consensus that indicators showed enough progress to warrant a cut
- Members agreed that future easing would likely be gradual, timing would depend on data
- Agreed to emphasize in communications that decisions would be taken one meeting at a time
- Some members were more focused on downside risks to finlatio ndue to weak economy
- Others put more weight on upside risks related to persistent wage growth and potential for housing market rebound
- Discussed many potential drivers that could affect exchange rate
- Discussed large number of households renewing mortgages at higher rates in 2025
Canada May Teranet house price index +0.5% m/m
- Canadian house price data from Teranet and National Bank
- Prices up 0.5% seasonally adjusted
- Prices up 1.7% non-seasonally adjusted
- Prices up 5.7% y/y
- Prices are 2.04% from the May 2022 peak
Leading cities y/y:
- Calgary 16.4%
- Halifax 11.4%
- Vancouver 8.7%
- Toronto +2.8%
“The increase observed in May was entirely due to a rise in prices in the non-condo segment (+0.7%), while condo prices have remained relatively stable since August 2023 as inventory in this segment continues to accumulate,” Teranet reports. “While record population growth, the shortage of housing supply and the start of rate cuts by the Bank of Canada will continue to support the Canadian real estate market in the months ahead, we are cautiously optimistic about the magnitude of any recovery in the housing market in the months ahead and its potential impact on prices. Indeed, many uncertainties remain, including the risk of a further deterioration in the labour market, particularly among young people who are facing the worst affordability conditions in decades.”
Commodities
Gold steady amid US holiday as data fuels rate cut speculation
- Gold remains virtually unchanged during the North American session due to thin volume.
- US Retail Sales and Industrial Production data hint at an economic slowdown, boosting rate cut expectations.
- Data shows 67% chance of September rate cut with December 2024 futures implying 36 bps of easing.
Gold’s price barely moved Wednesday during the North American session as traders remained absent in observance of the Juneteenth holiday. Data from the US continues to weaken, a sign of relief for traders who remain confident the Fed will ease policy twice this year.Therefore, precious metals recover some ground, yet gold is virtually unchanged and trades at around $2,328.
Natural Gas pulls back with markets having sigh of relief on Norwegian flows
- Natural Gas gives back earlier gains and turns red.
- Traders are looking at the weak spots in the European Gas supply.
- The US Dollar index trades around 105.00 and could face another leg lower.
NatGas trades in the red after positive news emerged for the European gas flow. Norwegian Gas is flowing again at full throttle into Europe, the recent unforeseen outage from the Nyhamna Gas Plant in Norway shows how fragile and dependent Europe is on other countries to fill the gap from Russian Gas. This might create a synthetic floor in the Gas price action as any disruption will have ripple effects for Europe.
Natural Gas is trading at $2.95 per MMBtu.
Europe back to refueling
- On Wednesday, Norwegian Gas regulator Gassco reported that the unforeseen maintenance at the Nyhamna Gas Plant was resolved, and the site is back in full production, Bloomberg reports.
- Recent Gas supply data shows that, although European gas reserves are building, they are doing so at a slower pace, Reuters reports.
- Uniper and the German government still have not taken a stance on how or when they will try to reclaim the billions in undelivered Gas from Gazprom PJSC.
- Bloomberg reports that investment funds have built up positions in the assumption European gas prices will rise, highlighting increasing concerns over fuel supplies seeing the recent Norwegian outages.
ICYMI: Oil private survey of inventory shows large build vs. large draw that was expected
- This is from the privately surveyed oil stock data ahead of official government data due Thursday morning out of the US (Wednesday is a holiday in the US)
- Crude +2.264 million
- Gasoline -1.077 million
- Distillates +538,000
- Cushing +524,000
- SPR +0.4 million
EU News
European equity close: Modest declines with France struggling
- French CAC 40 falls after two days of gains
Closing changes:
- Stoxx 600 -0.2%
- German DAX -0.4%
- UK FTSE 100 +0.1%
- French CAC -0.8%
- Italy MIB -0.3%
- Spain IBEX -0.2%
Eurozone April current account balance €38.6 billion vs €35.8 billion prior
- Latest data released by the ECB – 19 June 2024
- Prior €35.8 billion
The details show surpluses were recorded for goods (€38 billion), services (€11 billion) and primary income (€2 billion). And these were offset by a deficit for secondary income (€12 billion).
UK May CPI +2.0% vs +2.0% y/y expected
- Latest data released by ONS – 19 June 2024
- Prior +2.3%
- Core CPI +3.5% vs +3.5% y/y expected
- Prior +3.9%
ECB’s Centeno: ECB will cut if disinflation process continues
- Comments from a hearing in Portuguese parliament
- Rates will fall if inflation helps us, which it is doing
‘If we look at the monetary policy cycle as it stands today, and what we know today about inflation and the trajectory of interest rates, we can anticipate that this cycle of negative results [for the Banco de Portugal] will continue for at least another two years, there is an expectation from all central banks that a more regular situation will resume in 2026’, Centeno said.
German economy minister says relationship with China has become more complex
- Remarks by German economy minister, Robert Habeck
- China is an important partner in all fields
- But relationship has now become more complex
- We do not want to separate from China
- But being too dependent on one country is a problem
Asia-Pacific-World News
PBOC Governor says monetary policy will provide support for China’s economic recovery
People’s Bank of China Governor Pan Gongsheng is speaking at the 2024 Lujiazui Forum in Shanghai”
- Monetary policy is supportive
- Monetary policy will provide financial support for China’s economic recovery
- The weakening momentum of the USD’s rise is a benefit to the yuan
- Wants to strengthen counter- and cross-cyclical policy adjustment
- PBOC aims to maintain stability in policy
- Will prevent the exchange rate from over shooting
- Will make flexible use of deposit reserves and other measures
- It is difficult to maintain the overall credit growth rate above 10% as in the past
- Conditions for PBOC to trade treasury bonds in secondary market to inject base money have become gradually ripe
- At present, it is particularly important to pay attention to the risks of holding a large amount of long-term government bonds and maintain a normal upward sloping yield
- Will particularly focus on long-term treasury bond risk to keep normal upward yield curve
- People’s Bank of China and Ministry of Finance studying implementation of government bond trading
- to gradually introduce sovereign bond trading
PBOC sets USD/ CNY central rate at 7.1159 (vs. estimate at 7.2482)
- PBOC CNY reference rate setting for the trading session ahead
PBOC injects 278bn via 7-day RR, sets rate at an unchanged 1.8%
- 2 bn yuan mature today
- a net 276 bn yuan injection Open Market Operations (OMOs)
China’s FX regulator says Will prevent yuan exchange rate from overshooting
- China has held the yuan from falling too rapidly
The State Administration of Foreign Exchange (SAFE) in the regulator:
- Will strengthen countercyclical supervision, improve the solvency, deposit reserve mechanisms
- Studying broadening the scope of foreign shareholders in non-bank institutions
- China’s forex market operation is resilient
- China’s forex market faces increasing adjustment
- China’s forex market has condition for steady operation in future
- China’s forex market remains reasonable and orderly
- Will pay high attention to changes in external environment
- Will prevent yuan exchange rate from overshooting, and prevent risks from abnormal cross-border capital flow
Hong Kong will allow trading on its exchanges during severe weather conditions, typhoons
- From September 23 this year
The Hong Kong exchange has, for decades, halted trade during severe weather conditions, such as typhoons.Currently, trading on the exchange is halted if the Hong Kong Observatory posts a typhoon signal no. 8 and above.
In a move to preserve its status as a financial hub, and compete with Shanghai and Shenzen, Hong Kong Chief Executive John Lee announced yesterday that it’ll no longer close for weather.
- “At the moment, trading is mostly conducted through electronic means, there’s no reason why Hong Kong is the exception when it comes to maintaining trading under extreme weather conditions,”
RBA recap – On hold, neutral bias, full optionality over the future path of the cash rate
- The Reserve Bank of Australia left the cash rate unchanged yesterday, as widely expected
Commonwealth Bank of Australia have a slightly different take, but also see the potential for a further rate hike from the Bank:
- The Board maintained its neutral stance, as we and most analysts anticipated.
- The Board retains full optionality over the future path of the cash rate and has once again stated, “the path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out”.
- The August Board meeting is potentially ‘live’ based on where the Q2 24 trimmed mean CPI lands –our forecast for the June quarter trimmed mean CPI is 0.8-0.9%/qtr, which would see the RBA leave policy unchanged.
- The RBA Board does not want to lift the cash rate again. But a Q2 24 trimmed mean CPI north of 1.0%/qtr would test the Board’s resolve not to tighten policy further.
- Our base case sees the RBA on hold until November 2024 where we have pencilled in the start of an easing cycle.
On alert to upside inflation risks, less confident inflation is moderating
Via Westpac, a recap, in brief:
The RBA is more alert and less confident in its inflation fight.
- the RBA Board left the cash rate on hold after only considering a rate hike or staying the course.That is, a rate cut was not discussed. What’s more, the tone of the statement and rhetoric from the RBA Governor Michele Bullock suggested a step up in concerns around upside inflation risks, despite repeating the now familiar mantra of not ruling anything in or out.
- In perhaps one of the more telling remarks of the press conference, Governor Bullock said “we need a lot to go our way if we are going to bring inflation down to the 2-3% target” and the economy’s narrow path is “getting a bit narrower.”
RBNZ’s Conway: Inflation may be more sticky in the near term
- Reserve Bank of New Zealand Chief Economist Paul Conway speech on inflation
- Inflation may be more sticky in the near term
- But inflation could fall more quickly in the medium term, there is spare capacity emerging in the economy and this may help
- Looking ahead there are some remaining challenges in bringing inflation sustainably back to target
- Overall, a period of restrictive policy is necessary to give confidence that inflation will return to target over a reasonable timeframe
- Inflation will slow down, helped by excess capacity
- NZ not experiencing stagflation
- welcomes the recent fall in expectations for inflation
- headline inflation to drop to target band by year-end
New Zealand data: Q1 Current Account -4.359bn NZD (expected -4.55bn)
- New Zealand current account Q1 2024
- Q1 Current Account GDP Ration -6.8%
- prior -6.9%
Reuters Tankan report for June 2024: Manufacturing index +6 vs. prior +9
- The monthly Reuters Tankan survey, a guide to the Bank of Japan’s quarterly tankan survey.
The monthly Reuters Tankan survey, a guide to the Bank of Japan’s quarterly tankan survey.
For June 2024:
- Manufacturers index is +6, from +9 in May
- positive for the fourth consecutive month
- Japanese manufacturers say their drop in confidence is due to higher materials costs.
- Non – manufacturers +31, from +26 in May
- three month high
Outlooks:
- Manufacturers seen at +9 in September, and the non-manufacturers at +31
Some remarks reported by Reuters:
- “Passing on materials costs to customers and the increase in labour costs are sapping appetite for capital expenditure and other spending” a machinery maker manager
Concerns about the knock-on effects of a scandal in the auto industry where Toyota, Mazda others have acknowledged irregularities in vehicle certification tests:
- “The business environment surrounding industrial machinery is clearly changing for the worse,” wrote a manager in the auto sector. “It’s unclear how the certification issue will affect our business.”
Japan May trade balance data: -1221.3bn yen (vs. -1300 bn yen expected)
- Japan trade deficit data for May 2024
Exports to:
- China +17.8% y/y
- the US +23.9% y/y
- the EU -10.1% y/y
BOJ April Minutes show some concern about the weak yen on inflation & wages
- Bank of Japan April 2024 Monetary Policy Meeting Minutes
Headlines via Reuters:
- Member agreed consumption likely to increase moderately
- A few members said companies might become more active in raising prices, wages than initially expected
- Members discussed risks associated with impact of weak yen on inflation
- One member said impact of weak yen on inflation, wages may not prove temporary
- One member said weak yen could lead to overshoot in underlying inflation
- One member said the BOJ must scrutinise without any preset idea the chance firms may renewefforts to pass on rising import costs via price hikes
- Members shared view the BOJ must scrutinise how recent yen falls could affect underlyinginflation
- One member said key to future monetary policy outlook would be capex, consumption
- One member said there were various upward risks to inflation
- A few members said fx is among key factors affecting economy, prices, boj must respond with monetary policy if outlook and risks change
- One member said the BOJ must respond with monetary policy if fx volatility affects firms’ medium-, long-term inflation expectations
- One member said the BOJ must deepen debate on timing, degree of future interest rate hikes
- One member said the BOJ could raise rates moderately before it’s sufficiently convinced about chance of durably hitting price goal, to avoid being forced to hike rates rapidly later
- One member said boj must raise rates at appropriate, timely manner to avoid causing stress on economy
- One member said there is sufficient chance pace of policy normalisation could accelerate if underlying inflation continues to overshoot due in part to weak yen
Japanese Chief Cabinet Secretary Hayashi giving assurances over troubled Norinchukin Bank
Japanese Chief Cabinet Secretary Hayashi
- financial health of Norinchukin Bank is sufficient
- will dispose of the foreign bonds gradually during the fiscal year ending in March 2025
- the bank expects to report a net loss of 1.5 trillion yen for the current fiscal year, triple the previous estimate of 500 billion yen
- It previously said it will raise 1.2 trillion yen from the agricultural cooperatives that own it
Japan’s Ministry of Finance proposes selling shorter term debt as the BOJ eyes rate hike
A draft proposal reviewed by Reuters:
- Japan must create an environment where government bonds remain an attractive investment for financial institutions, such as by issuing shorter-duration debt, a finance ministry panel is likely to say
- the Bank of Japan’s exit in March from its radical stimulus is prodding the government toprepare for an era of rising interest rates, which will increasethe cost of funding the country’s huge public debt
- The BOJ also decided last week to start tapering its huge bond buying and reduce its holdings which, at 589 trillion yen($3.7 trillion), make up roughly half of total Japanesegovernment bonds (JGB) sold in the market. The diminishing presence of the BOJ heightens the need for the government to find stable buyers of JGBs and avoid a bond selloff that could trigger a damaging spike in yields.
Info via Reuters report.
Cryptocurrency News
Ethereum ETF issuers expected to file updated S-1s before Friday
- Ethereum ETF issuers are expected to file updated S-1s before weekend following Bitwise filings.
- SEC didn’t explicitly declare ETH a commodity despite closing Ethereum 2.0 investigation.
- Ethereum’s increased implied volatility may be misleading as institutions may employ similar cash-and-carry arbitrage strategy when spot ETH ETFs launch.
Ethereum’s (ETH) price increased over 4% in the past 24 hours after the Securities & Exchange Commission (SEC) dropped its Ethereum 2.0 investigations amid expectations of spot ETH ETFs. However, the recent excitement surrounding ETH ETFs may not lead to the expected price increase.
Bitwise files updated ETH ETF S-1, SEC drops Ethereum 2.0 investigation
Bitwise filed an updated S-1 draft for its spot ETH ETF with the SEC after the agency commented on issuers’ initial S-1 filings last week.The filing disclosed that asset manager Pantera Capital will purchase $100 million of the ETF shares when it launches.
Meanwhile, Ethereum infrastructure provider Consensys announced that the SEC’s enforcement division is closing its investigation into Ethereum 2.0, meaning that the agency “will not bring charges alleging that sales of ETH are securities transactions.”
Consensys disclosed that the decision comes after it sent a letter to the SEC on June 7 asking whether the approval of spot ETH ETFs on May 23 indicates the agency would end its Ethereum 2.0 investigation.
However, the SEC’s letter to Consensys didn’t confirm whether it was concluding that ETH is a commodity. SEC Chair Gary Gensler also failed to give a direct answer when questioned if ETH is a commodity in a Senate hearing last week.
Fortune earlier reported that the SEC began investigating the Ethereum Foundation and several Ethereum-related firms based on ETH’s potential security status.
XRP struggles below $0.50 as SEC grants Ethereum yet another free pass
- Ripple proponents have called out the SEC for dropping its investigation into Ethereum.
- Consensys, an Ethereum developer, shared the news of the regulator’s response to a letter.
- XRP is back under the $0.50 resistance in response to Ethereum’s free pass.
XRP trades back below $0.50 on Wednesday as Ripple (XRP) proponents like attorney Bill Morgan have lashed out at the Securities and Exchange Commission (SEC) for what is being considered a “second free pass” for Ethereum.
Ethereum developer Consensys announced on Wednesday in its official X account that the SEC is putting an end to its investigation into the second-largest cryptocurrency. The developer had enquired the status of the investigation through a letter sent to the regulator and received a response.
SEC free pass to Ethereum angers XRP community
- The SEC’s decision to end the investigation into Ethereum has caused a stir in the Ripple community.
- The US financial regulator is embroiled in a legal battle with the cross-border payment remittance firm since 2020, alleging that Ripple sold unregistered securities through the XRP token.The SEC demands the court to impose $2 billion in penalties for Ripple.
- Ripple attempted to draw parallels between other crypto litigation, like the SEC’s lawsuit against Terraform Labs and its founders, to reduce the amount of the fine. This attempt was rejected by the regulator, but it opened the door to a significantly smaller penalty of around $102 million.
- For years, the XRP holder community has slammed the SEC for what is deemed “unequal” treatment of Ripple compared to its peers. Community members have criticized the agency for bringing a lawsuit against Ripple while Ethereum gets a “free pass.” History repeated itself with the SEC pulling a stop on its investigation into Ether.
- While the closing of the investigation marks a win for the Ethereum holder community, Ripple proponent attorney Bill Morgan has slammed the SEC for different treatment of Ethereum and Ripple for the second time in six years.
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