North American News
US Equities Hold Steady as Markets Brace for Friday’s PCE Report
- Small moves for US stock indices
US equity markets remained relatively flat as investors await the upcoming Personal Consumption Expenditures (PCE) report on Friday. Notable individual stock movements included a 2.2% drop in Nvidia shares and a significant 7% decline in Micron. However, these losses were offset by a 2% rise in Amazon and a 3.5% gain in Adobe. The financial sector experienced modest declines following the results of the bank stress tests.
Despite these mixed performances, the major indices managed to extend their winning streak to three days. The S&P 500 edged up by 0.1%, the Nasdaq increased by 0.2%, the DJIA rose by 0.1%, and the Russell 2000 outperformed with a 0.8% gain. Investors remain cautious but optimistic, maintaining a steady market environment ahead of the critical economic data release.
US sells 7-year notes at 4.276%
- Results of the $44 billion sales of sevens
- Prior was 4.650%
- Bid to cover 2.58 vs 2.43 prior
- High yield 4.276% vs 4.279% pre-sale WI
- Sells $44 bln
- Awards 87.68% of bids at high
- Primary dealers take 11.87%
- Direct 18.48%
- Indirect 69.65%
US initial jobless claims 233K vs. 236K expected
- The weekly US initial and continuing jobless claims
- Initial jobless claims 233K vs. 236K expected and 238K prior (revised to 239K).
- Continuing Claims 1839K vs. 1824K expected and 1828K prior (revised to 1821K).
Atlanta Fed GDPNow 2.7% vs 3.0% prior
- The latest GDP tracker from the Atlanta Fed
Today marks one month until the initial release of Q2 GDP and the Atlanta Fed model is taking down its estimate to 2.7% from 3.0% in light of today’s economic data.
“After recent releases from the US Census Bureau, the US Bureau of Economic Analysis, and the National Association of Realtors, a decrease in the nowcast of the contribution of the change in real net exports to second-quarter real GDP growth from -0.56 percentage points to -0.95 percentage points was partially offset by an increase the nowcast of second-quarter real gross private domestic investment growth from 8.3percent to 8.8 percent.”
US Q1 final GDP +1.4% vs +1.3% expected
- The third reading on US first quarter GDP for 2024
- Second reading was +1.3%
- Final Q4 reading was +3.2% annualized
- Q3 was +5.2% annualized
Details:
- Consumer spending +1.5% vs +2.0% second reading
- GDP final sales +1.8% vs +1.7% second reading
- GDP deflator +3.1% vs +3.1% second reading
- Core PCE +3.7% vs +3.6% second reading
- Corporate profits -2.7% vs -1.7% in second reading
- PCE services inflation excluding energy and housing +5.1% vs 4.9% second reading
US May pending home sales -2.1% vs +2.5% expected
- The May US pending home sales report from NAR
- Prior was -7.7%
- Index at vs 72.3 prior
US May durable goods orders +0.1% vs -0.1% expected
- US May 2024 durable goods data
- Prior was +0.6% (revised to +0.2%)
- Ex-transport -0.1% versus +0.2% expected. Last month 0.0%.
- Ex-defense MoM was -0.2% vs 0.0% last month (revised to -0.5%)
- Nondefense cap ex-air -0.6% vs 0.1% expected. Last month +0.3%
- Shipments -0.3% vs +1.2% prior
June US KC Fed manufacturing index -11 vs -1 prior
- Manufacturing in the Kansas City Fed area worsens
- Prior was -1
- Composite index -8 vs -2 prior
Selected Manufacturing Comments
“It is clear inflation has forced the customer to make ‘either/or’ decisions on how they spend their money. We see value added items in the food sector being affected strongly. Our business is not bad per se, but not as robust as we would like to see. This is both on the restaurant side as well as retail grocery.”
“Hiring qualified hourly employees continues to be a challenge.”
“Access to unskilled labor is better than it has been since the start of the pandemic. Still not great quality wise, but the number of people looking for work is robust. Still challenges on hiring and retaining office/administrative staff. Salary/wage expectations from candidates is extremely high.”
“We believe that our customers are delaying orders to us due to the high cost of capital.”
“Saw a quick slowdown in activity in the last few weeks. Projects put on hold, delays in permitting, etc.”
US May wholesale inventories +0.6% vs +0.1% prior
- US wholesale and retail data for May 2024
- Prior was +0.1% (revised to +0.2%)
- Retail inventories ex autos 0.0% vs +0.3% prior (revised to +0.2%)
US May goods trade balance (advance) -100.62B vs. -97.95B prior
- Advanced goods trade balance for May 2024
- Goods trade balance (Adv) -100.62B vs. -97.95B prior
Fed’s Bowman: We’re not at a point yet to consider a rate cut
- Comments from Bowman
- If inflation moves towards 2%, eventually a rate cut is on the table
- Monetary policy is currently restrictive
- Inflation should ease with current policy setting
- Upside risks to inflation persist
- Economy strong but activity has moderated
- Still willing to raise rates again if inflation doesn’t rise
Fed’s Bostic: Sees a cut this year and 4 cuts in 2025
- Comments from the Atlanta Fed President
- Inflation moving in the right direction, a cut is likely in Q4
- Has penciled in four cuts for 2025
- Wants to be ‘absolutely certain’ inflation will return to 2% before an initial cut that should be seen as the first in a series, that is the reason for patience
- Shares of goods rising 5% or more has fallen below 20%
- Inflation remains chief concern, businesses say they see no cliff ahead for the jobs market
- Can achieve 2% inflation with a job market that remains tight by historical standards
- remains confidence that shelter inflation will ‘fall back into line’
- GDP and jobs market data point to an ‘orderly deceleration’ in activity that will balance supply and demand, lower inflation
Fed stress tests says banks reported higher losses than in 2023 tests
- Fed stress test results
- Banks reported higher losses than in 2023 stress test as bank balance sheets are riskier and expenses are higher.
- Stress test shows large US banks are well positioned to weather severe recession and stay above minimum capital requirements.
- Thirty-one large US banks reported nearly $685 billion in losses under 2024 Fed stress test, but capital remained well above regulatory minimums.
- Bank corporate credit portfolios have become riskier as banks downgrade loans, driving higher test losses.
- Higher expenses and lower fee income also contributed to steeper stress test losses.
- Increases in bank credit card balances and higher delinquency rates drove greater hypothetical losses.
- Charles Schwab, Bank of New York Mellon, JPMorgan Chase, and Morgan Stanley among strongest performing banks.
- BMO, Citizens Financial, and HSBC saw lowest capital ratios under stress test.
- Banks permitted to report capital plans to investors beginning Friday afternoon after US market close: Fed official.
Scotia thinks the June BoC cut was a policy mistake
- Higher CPI the reason
- The BoC’s preferred core inflation gauges, such as trimmed mean and weighted median CPI, surged in May, indicating a reacceleration of underlying inflationary pressures.
- Core services inflation, including shelter costs, remains very high. Shelter inflation is broadening, with rents continuing to soar and other drivers of shelter costs entering a new phase.
- Categories that previously contributed to disinflation, such as travel tours, accommodation prices, and food prices, reversed higher, suggesting that earlier disinflation may have been temporary.
- The BoC’s decision to cut rates seen as a policy error because it violated forward guidance and reacted prematurely to only four months of soft core inflation after a prolonged period of missing inflation targets.
Commodities
Gold surges on weak US Dollar ahead of PCE
- Gold climbs as USD falls.
- Gold rebounds from two-week low following inflation data from Canada and Australia.
- DXY drops 0.12% to 105.91, off monthly high of 106.13.
- Anticipation for May PCE drops to 2.6% YoY, with Core PCE also expected at 2.6%.
Gold rallied more than 1% on Thursday after economic data.The softer Greenback, which is retreating after posting solid gains, undermined lower US Treasury bond yields. US economic data was slightly better than expected, though ebbs and flows toward the golden metal kept gold trading at $2,326.
WTI crude oil settles up 84 cents to $81.63
- Oil remains in a narrow range
Oil has bounced back nicely from the post-OPEC dip. I think there was some short covering after shorts hit a record into the meeting.
In the bigger picture, US demand hasn’t been good to start the driving season and there is some global cyclical angst creeping into many markets. OPEC looks to be holding the line and export numbers have been soft.
Silver bounces back above $29 with US Inflation under spotlight
- Silver price rebounds strongly from $28.60 as the US Dollar corrects.
- US price pressures are expected to have slowed in May.
- Fed Bowman sees no rate cuts this year.
Silver recovers sharply from a six-week low of $28.60 in Thursday’s New York session. The white metal rises to near $29.20 as the US Dollar extends its correction amid caution ahead of the US PCE data for May, which will be published on Friday.
EU News
Eurozone May M3 money supply +1.6% vs +1.5% y/y expected
- Latest data released by the ECB – 27 June 2024
- Prior +1.3%
Looking at the details, the annual growth rate of loans to households was at 0.3% in May (previously 0.2%) and loans to non-financial corporations was also at 0.3% (previously 0.2%).
Eurozone June final consumer confidence -14.0 vs -14.0 prelim
- Latest data released by the European Commission – 27 June 2024
- Economic confidence 95.9 vs 96.2 expected
- Prior 96.0
- Industrial confidence -10.1 vs -9.6 expected
- Prior -9.9
- Services confidence 6.5 vs 6.4 expected
- Prior 6.5
BOE says that UK households, businesses are coping with higher rates
- The BOE remarks in its latest Financial Stability Report – 27 June 2024
- Counter-cyclical buffer maintained at 2%
- Risk management in private equity sector needs improving to reduce vulnerabilities
- Global financial risk environment “broadly unchanged” from Q1
- Adjustment to higher interest rates is still not complete
- Market prices are still vulnerable to a sharp correction
- Many UK households are under pressure from higher living costs, rates
- UK businesses “broadly resilient” to current economic outlook
Former BOE MPC member Saunders sees cut in August and cash rate to 3.5% at end-2025
- Comments from Michael Saunders
- BOE will probably cut in August
- Sees bank rate down to 3.5% by the end of 2025
ECB’s Kažimír: I think we can expect one more rate cut this year
- Remark by ECB policymaker, Peter Kažimír
- He adds that he expects it to be a “quiet summer” for the ECB on rates.
Asia-Pacific-World News
China industrial profits
- Industrial profits for May 2024
- China industrial profits YY 3.4% vs 4.3% prior
PBOC sets USD/ CNY reference rate for today at 7.1270 (vs. estimate at 7.2765)
PBoC injects 100 billion Yuan via 7-day repos
- Sets 7-day reverse repo rate at 1.8% vs 1.8% prior
- PBoC injects 100 billion Yuan via 7-day reverse repos
- Sets 7-day reverse repo rate at 1.8% vs 1.8% prior
RBA’s Hauser: It would be a bad mistake to set policy on the basis of one number
- RBA deputy governor, Andrew Hauser, plays down the hotter-than-expected May CPI report
- We don’t do that — setting policy based on one data point
- Inflation has picked up a little bit
- But it could just be that monetary policy is taking longer to feed through to the services sector
- The right policy response to that, clearly, would be to hold your nerve
- We’re coming down in a slightly bumpy way, but we are coming down on inflation
New Zealand Business Outlook
- Data for June 2024
- New Zealand Business Outlook: 6.1 vs 11.2 prior
- New Zealand Own Activity: 12.2 vs 11.8 prior
Japan retail sales
- Retail Sales data for May 2024
- Japan retail sales YY: 3.0% vs 2.0% expected
- Japan large scale retail sales YY: 4.0% vs 3.0% prior
Japan’s Suzuki saying watching FX moves with a high sense of urgency
- Japan Finance Minister Suzuki:
- Won’t comment on forex levels.
- FX stability is desirable.
- Watching FX moves with high sense of urgency.
- Deeply concerned about FX impact on economy.
- Will take necessary actions on FX
Japan Chief Cabinet Secretary says won’t comment on FX levels
- Comments from Chief Cabinet Sec Hayashi
- Won’t comment on forex levels, potential FX intervention.
- Will take appropriate steps on excessive FX moves.
- Important for currencies to move in stable manner reflecting fundamentals.
- Rapid FX moves undesirable.
Cryptocurrency News
Ethereum could rally due to three key metrics
- Ethereum’s decreasing exchange supply may be caused by increasing ETH staking.
- Galaxy Research predicts $5 billion in inflows in first five months of Ethereum ETF launch.
- Ethereum needs to overcome the $3,629 key resistance to validate bullish thesis.
Ethereum (ETH) is up nearly 3% on Thursday as upcoming spot ETH ETF launch and key on-chain metrics suggest an ETH rally might be around the corner.
Why declining ETH exchange supply, staked ETH and spot ETH ETF launch primes Ethereum for new high
According to data, Ethereum supply on exchanges has continued a downward trend despite recent price rises.
As earlier reported, this signifies that most ETH long-term holders (LTHs) have yet to begin profit-taking. LTHs may be anticipating higher price rises and a new all-time high before they begin locking in profits, especially with the launch of spot ETH ETFs on the horizon.
The increasing yield from ETH staking and restaking protocols could also be fueling the declining exchange supply. Data also shows that the number of staked ETH has increased steadily, meaning most of the declining exchange supply may have flowed to staking protocols.
The Securities & Exchange Commission (SEC) approved issuers’ spot ETH ETF 19b-4 applications on May 23 but have yet to greenlight their S-1 registration statements.Issuers filed amended S-1s last week after the SEC made “light” comments on them.
A recent Research report on potential spot ETH ETF inflows also aligns with this prediction. The report stated that Ethereum ETFs could attract up to $5 billion within their first month of trading.
“We expect the net inflows into ETH ETFs to be 20-50% of the net inflows into BTC ETFs over the first five months, with 30% as our target, implying $1 billion/month of net inflows,” said One analyst.
VanEck files for Solana ETF in the US
- VanEck filed to list a Solana spot exchange-traded fund in the US after the approval in January of Bitcoin ETFs.
- The asset manager says it considers Solana “a commodity, like Bitcoin or Ether.”
- Solana jumps more than 10% following the news of the filing.
Solana (SOL) price surged by 8.2% on Thursday following the announcement of Van Eck filing the first Solana exchange-traded fund (ETF) in the US.
Matthew Sigel, the firm’s head of digital assets research, announced the decision on Twitter, attaching an image of an S-1 registration form for an investment trust with the US Securities and Exchange Commission (SEC).
XRP struggles under $0.47, Ripple holders capitulate for ninth consecutive day
- Ripple holders realized losses on their XRP tokens for the ninth consecutive day on Thursday.
- Traders have taken over $41 million in losses since June 18, according to Santiment data.
- XRP hovers around $0.47, wiping out over 5% in value in the past seven days.
Ripple (XRP) holds the recent decline at around $0.47 on Thursday.On-chain data shows that different cohorts of XRP investors reacted differently to the price decline, with whales holding between 1 million and 10 million XRP distributing their token holdings at a loss.
Typically, an asset is expected to recover after a capitulation.
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