Round up of today’s market news

North American News

US Equities Climb as Nvidia Extends Winning Streak

• S&P 500 Sets Fifth Consecutive Record

US equities saw modest gains on Tuesday, with the S&P 500 closing up 0.1%, marking its fifth consecutive record close. Despite initial disappointment over Federal Reserve Chair Jerome Powell’s lack of a dovish stance, the market quickly recovered and maintained its upward momentum.

The Nasdaq Composite also increased by 0.1%, while the Dow Jones Industrial Average (DJIA) dipped by 0.1%. The Russell 2000 fell by 0.5%. Nvidia continued its strong performance, contributing to the positive sentiment in the equity market.

U.S. Treasury auctions off $58 billion of three-year notes at a high yield of 4.399%

• WI level at the time of the auction was 4.407%

• High Yield: %, six-auction average 4.390%
• Tail: -0.8 bps, six-auction average -0.1bps
• Bid-to-Cover: 2.67x, six-auction average 2.57x
• Dealers: 14.8%, six-auction average 17.0%
• Directs: 21.3.%, six-auction average 17.8%
• Indirects: 64.0%, six-auction average 65.2%

US June NFIB small business optimism index 91.5 vs 90.5 prior

• Latest data released by NFIB – 9 July 2024

Fed Chair Powell: Elevated inflation is not the only risk we face

• Comments from the Fed Chairman in his opening statement at the Senate

• Reducing restraint too late or too little could unduly weaken economy and job market
• the risks to achieving our employment and inflation goals are coming into better balance
• More good data would strengthen our confidence on inflation
• Rate cut not appropriate until Fed gains greater confidence inflation headed sustainably toward 2%
• Q1 data didn’t support greater confidence
• We continue to make decisions meeting by meeting
• Recent monthly readings on inflation show ‘modest further progress’
• Labor market conditions have ‘cooled while remaining strong’ and ‘not overheated’
• US economy expanding at a ‘solid pace’
• Labor market is more-or-less back to pre-pandemic levels
• We’re very much balancing our two risks and that’s what we’re balancing these days
• The likely direction is that we begin to loosen policy at the right moment
• The best thing we can do for housing is getting inflation down
• There was still a housing shortage before the pandemic
• Our economy has been exceptional compared to global peers
• Job creation is narrowing in the economy
• Today I’m not going to be sending any signals on the timing of future actions
• We need to see more good inflation data, that’s all
• We had one really good inflation reading and one ‘pretty good’ one
• If we get the labor market deterioration, that could also be a case for rate cuts
• We will move carefully on rates
• We are keeping a close eye on labor market, if we see unexpected weakening there, we would respond
• We had ‘kind of a bump’ in inflation in Q1
• We don’t need to see 2%, we need to see more of what we’ve seen in Q2
• “We’ve seen that the labor market has cooled really significantly” .. but it’s still a strong employment market

Morgan Stanley’s Wilson says a 10% fall in S&P 500 by US election is ‘highly likely’

• Flags an increased likelihood of disappointing earnings results

Wilson spoke in an interview with Bloomberg TV, citing uncertainty over when the FOMC will cut rates, firms facing diminished pricing power, resulting an increased likelihood of disappointing earnings results.

• “The average company has not had good earnings results,”
• the big gain in the S&P 500 YTD 2024 has been powered by a small number of companies
• price to earnings multiples have been rising, “Valuations to me look very unexciting”

S&P 500 – Oppenheimer raised its year-end target to 5900, from 5500 previously

Equity researchers Oppenheimer:

• Weare increasing our year-end target price for the S&P 500 to$5,900 (from $5,500) and raising our earnings projection to $255 from $250 for the S&P 500 in 2024.
• Our upwardly-adjusted price target and earnings projection assume a higher P/E multiple of 23.1x up from 22x with our earlier target

Commodities

Gold Prices Edge Higher as Fed Chair Powell Signals Patience on Rate Cuts

Gold prices inched higher during Tuesday’s North American session, trading at $2,364, up by more than 0.25%. The rise followed Federal Reserve Chair Jerome Powell’s appearance at the US Senate Banking Committee, where he stated that while inflation is moving towards the Fed’s 2% target, it is not yet ready to lower borrowing costs.

Additionally, the World Gold Council (WGC) reported a second consecutive month of inflows for Gold exchange-traded funds (ETFs) in June. Total fund holdings increased by approximately 18 tonnes to 3,106 tonnes. This positive trend contrasts with the People’s Bank of China’s (PBoC) decision not to purchase Gold in June, after buying in May. As of the end of June, China held 72.80 million troy ounces of the precious metal.

Oil private survey of inventory shows a headline crude oil draw larger than expected

• This is from the privately surveyed oil stock data ahead of official government data tomorrow morning out of the US.

• Crude -1.9M
• Cushing -1.2M
• Gasoline -3M
• Distillates +2.3M

Crude oil futures settle at $81.41

• Down -$0.92 or -1.12%

The price of crude oil settled at $81.41.That is down $-0.92 or -1.12%.The fall is the 3rd day in a row lower.

Technically, looking at the daily chart, the high price on Friday – before the move lower – peaked at $84.52. That price tested the topside trendline connecting highs from April 2023 and May 2024. The inability to get above that trendline, gave the sellers the go-ahead to correct to the downside.

The EIA short term energy outlook is out and they see demand increasing

• EIA’s latest outlook predicts significant growth in global oil demand, leading to raised price forecasts for both WTI and Brent. Despite projections, crude oil prices continue to face downward pressure. Will they reach the 100-day MA?

The EIA is out with its recent short-term energy outlook:

• Raises forecast for 2024 world oil demand, now seeing a 1.10 million BPD year-over-year increase.
• Raises 2025 forecast for world oil demand growth by 300,000 BPD, now seeing a 1.80 million BPD year-over-year increase.
• Raises forecast for 2024 US oil production by 10,000 BPD.Now expects output to grow by 320,000 BPD year-over-year to 13.25 million BPD.
• Raises forecast for 2025 US oil production by 60,000 BPD.Now expects output to grow by 520,000 BPD year-over-year to 13.77 million BPD.
• Raises forecast for 2024 US oil demand by 100,000 BPD.Now expects demand to grow by 200,000 BPD year-over-year to 20.4 million BPD.
• Keeps forecast for 2025 US oil demand unchanged at 20.6 million BPD, with a 200,000 BPD growth over 2024.
• Lowers forecast for 2024 world oil production by 200,000 BPD.Now expects output to grow by 600,000 BPD year-over-year to 102.4 million BPD.
• Lowers forecast for 2025 world oil production by 100,000 BPD, now expecting output to grow by 2.2 million BPD year-over-year to 104.6 million BPD.

On the price side:

• Raises 2024 WTI price forecast to USD 82.03 per barrel (previously USD 79.70).
• Raises 2025 WTI price forecast to USD 83.88 per barrel (previously USD 80.88).
• Raises 2024 Brent price forecast to USD 86.37 per barrel (previously USD 84.15).
• Raises 2025 Brent price forecast to USD 88.38 per barrel (previously USD 85.38).

Saudi crude oil exports to China to rise for the first time in 4 months

• Following deep price cuts by state energy firm Saudi Aramco

Reuters with the info, citing unnamed ‘several trade sources’.

• Saudi crude oil exports to China will rebound in August to at least 44 million barrels following deep price cuts by state energy firm Saudi Aramco
• August exports to China will rise for the first time in four months, up from about 36 million barrels in July

EU News

European major indices close lower

• Markets continue to digest the recent elections

European indices are ending the day down as the aftermath of the elections continue to bother investors. France will have trouble forming a government given their mix. The UK Labour take charge after 14 years of a Tory rule.

Uncertainty in lead to selling and that is what we’ve seen in the equity market today in Europe.

The final numbers are showing:

• German DAX, -1.28%
• France CAC -1.56%
• UK FTSE 100 -0.65%
• Spain’s Ibex -1.2%
• Italy’s FTSE MIB -1.12%

UK data – June total sales -0.2% y/y *prior +0.7%)

• British Retail Consortium (BRC) data

British Retail Consortium (BRC) data:

Like for like sales -0.5% y/y in June 

• prior +0.4% in May

total sales -0.2% y/y in June

• prior +0.7%

Data also from Barclays:

• spending on its credit and debit cards fell by 0.6% y/y June
• first drop since February 2021, cold weather cited

ECB’s Panetta says can gradually reduce rates in line with disinflation process

• Remarks by ECB executive board member, Fabio Panetta

• Should be ready to respond quickly to any shocks in one direction or the other
• Previous rate hikes will continue to dampen demand, output and inflation for months to come
• Wage growth can also be expected to ease

Asia-Pacific-World News

PBOC sets USD/ CNY mid-point today at 7.1310 (vs. estimate at 7.2676)

• PBOC CNY reference rate setting for the trading session ahead

In open market operations:

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

• 2bn mature today
• thus net neutral

Australian consumer confidence has fallen to its second lowest result for the year

• ANZ-Roy Morgan’s weekly survey of Australian Consumer Confidence
• fell 2.3pts on the week to 79.0
• hit its second lowest level for the year

Weekly inflation expectations fell 0.3ppt to 4.9%

Australia: Westpac consumer confidence index (July ): -1.1% to 82.7 (prior +1.7% to 83.6)

• Westpac-Melbourne Institute consumer confidence index, a monthly survey

Westpac’s report, main points:

• Family finances again under pressure.
• Muted lift from ‘stage 3’ tax cuts and other fiscal measures, although many yet to see cash-flow boost.
• Biggest declines amongst middle income earners, Victorians, hospitality and construction workers.
• Rate rise expectations post big jump – 60% now expect higher rates.
• Steady outlook for labour market still the main source of support.
• Same story around housing: weak buyer sentiment and positive price expectations.

Australian June business confidence 4.0 vs. prior -3.0

• National Australia Bank business survey

National Australia Bank monthly survey of business, for June 2024

Business Confidence 4.0

• prior -3.0

Business Conditions also 4.0

• prior 6.0
• the conditions index is a more objective measure compared with the sentiment-driven confidence index
• index of employment dropped 6 points to 0, under its long-run average
• sales flat
• labour costs and purchase costs slowing
• product prices quarterly rate of 0.7%
• retail prices held at 1.5%

Comments from the report from NAB:

• “While its only one month’s read, the employment index … may be signalling that the broader slowing in the economy is flowing through more strongly to labour demand”
• “Price pressures continue to ease in a trend sense though the data certainly remains bumpy”

New Zealand – RBNZ shadow board recommends the Reserve Bank keeps OCR at 5.5% on Wednesday

• The New Zealand Institute of Economic Research’s ‘Shadow’ Reserve Bank of New Zealand Board

From their report, in brief:

• Most Shadow Board members recommended that the Reserve Bank of New Zealand (RBNZ) keep the Official Cash Rate (OCR) at 5.50 percent in the upcoming Monetary Policy Review on 10 July 2024.The weaker growth and a slack labour market, along with the continued easing in annual CPI inflation, suggest that the OCR increases to date are reducing inflation pressures in the New Zealand economy. However, with domestic inflation pressures remaining elevated, Shadow Board members were of the view that the RBNZ should remain cautious about moving the OCR for now. One member considered that there is justification for a cut in the OCR given the deteriorating economic outlook.

BOJ shares briefing material on meeting with bond market participants

• The document details the matter of size and pace of bond purchase reduction being an important one to discuss

• Comparing with overseas central banks, a reduction of ¥2-3 trillion is desired
• Bond purchases should ultimately serve as a monetary adjustment tool, indicating a zero purchase amount is crucial
• A gradual reduction aiming for ¥1-2 trillion would be ideal
• Considering the principles of IRRBB, a reduction of ¥4 trillion should be appropriate keeping in mind the limited flexibility in domestic bond operations
• BOJ should aim for a reduction to about ¥5 trillion and if the situation with the bond market stabilises, then additional reductions should be considered

As for the pace of reduction in purchases, the BOJ questioned whether the tapering process should be a quick one, or fast-paced initially before moving to a more gradual pace, or just a gradual move over a period of about two years. Some of the responses were that:

• Gradual reduction of bond purchases are unnecessary given current monetary situation
• After an initial signification reduction is announced at first, then BOJ should move to a more gradual and cautious pace of reductions in order to restrain the formation of negative perceptions of monetary policy
• A gradual reduction is less impactful and will help to avoid any unwanted market disruption
• To avoid any unnecessary volatility in the market, it is prudent to implement reductions gradually over two years

BOJ meetings with JGB market players

• Meetings are aimed at gauging a realistic pace for a reduction of its bond purchases

The Bank of Japan is holding in-person meetings with market participants over the next couple of days. Three meetings are scheduled with banks, securities firms and those buying bonds for financial institutions

• the meetings are aimed at gauging a realistic pace for a reduction of its Japanese Government Bond purchases.
• the Bank will be announcing the reduction plan at its next meeting on July 30 and 31.

Bloomberg have a (gated) report up, with some comments:

• “The BOJ likely has some plans already,” said Naomi Muguruma, chief fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “What it wants to show is a stance of proceeding cautiously by hosting the gatherings.”
• “These two days are going to be critical,” said Yuuki Fukumoto, senior financial researcher at NLI Research Institute.“For the BOJ, the key point is to hear and gather information on how much more bond-buying the market can take to assuage its concerns.”

Japan finance minister Suzuki says fiscal discipline important

Japan finance minister Suzuki

• important to keep fiscal discipline to keep confidence in long-term fiscal health
• closely watching discussions at BOJ meeting with bond market

Bank of Korea is expected to hold rates steady in July, cut to come in Q4

• Preview of the July 11 BoK meeting

Reuters with its polling result on what is expected from the Bank of Korea.

• to hold its base rate steady at a 15 year of 3.5% through Q3 2024
• all 40 economists in the poll expect the BOK to leave the base rate unchanged at the July 11 meeting
• to cut by 25bps in Q4

Cited as reasoning include:

• inflation to an 11-month low of 2.4% in June, but remaining above the central bank’s 2% target
• Korean won weakening by more than 6% against the US dollar so far in 2024, limiting dovish options for the Bank

Bank of Korea Gov Rhee says disinflation expected to continue

• Notex an increase in FX volatility

South Korea’s central bank Governor Rhee Chang-yong spoke in a parliamentary session:

• said the Bank will consider trade-offs among the recent disinflation trend, growth and financial stability for future monetary policy operations
• disinflation was expected to continue after recent positive signs
• noted a pick-up in household debt growth
• noted also heightened volatility in foreign exchange markets

Cryptocurrency News

Ethereum ETFs Set to Outperform Amid Market Underpricing, Predicts K33 Research

Ethereum investors may be underestimating the impact of the upcoming spot ETH ETF launch, according to a recent report by K33 Research. The report suggests that the market has not fully appreciated the potential of these products, forecasting that US ETH ETFs will absorb 1% of the circulating ETH supply, potentially driving Ethereum’s outperformance in the latter half of 2024.

Following predictions from K33 Research, Ethereum (ETH) saw a 2% rise on Tuesday. Meanwhile, Grayscale is taking measures to mitigate potential outflows from its Grayscale Ethereum Trust by introducing the Ethereum Mini Trust. Recent bullish discussions around ETH come despite broader bearish sentiments in the altcoin market. Analysts expect the ETFs to begin trading within the next two weeks, pending final approval from the SEC.

Bitcoin Price Holds Steady Near $58,500 Amid Reduced Miner Selling Pressure and Record ETF Inflows

Bitcoin (BTC) price is consolidating near $58,500, encountering resistance at the $58,375 level despite reduced selling pressure from miners. On Tuesday, Bitcoin spot ETFs saw inflows of $294.8 million, the highest since June 6, indicating growing investor confidence and potential for a short-term price increase. However, the German Government’s transfer of 6,306.9 BTC, valued at $362.12 million, to exchanges could negatively impact Bitcoin’s price due to potential market uncertainty.

BTC is currently trading around $57,339, marking a 1.12% increase on Tuesday. On-chain data shows that miners are earning less than the historical average, suggesting reduced profitability and decreased selling pressure. Technical analysis indicates bullish divergence signals from the RSI. The 11 US spot Bitcoin ETFs collectively hold $49.47 billion in Bitcoin reserves, reflecting substantial investor interest.

Additionally, the German Government’s recent transfer activity has sparked FUD (Fear, Uncertainty, Doubt) among traders. Despite this, the German Government has received 5,366 BTC back from exchanges and currently holds 22,847 BTC, valued at $1.32 billion.

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