Round up of today’s market news

North American News

S&P and Nasdaq Hit New Records, Led by Apple and Tesla

• Market Milestone: The S&P and Nasdaq indices closed at record highs once again, extending their streaks of consecutive record closes amidst ongoing bullish sentiment.
• Fed’s Dual Concerns: Federal Reserve Chair Powell reiterated concerns over dual risks of inflation and slowing employment growth, highlighting the complex economic landscape.
• Record-Breaking Performance: The S&P 500 achieved its 6th consecutive record close, surpassing 5600 for the first time. Meanwhile, the Nasdaq marked its 7th consecutive record day, reaching new heights since July 2.
• Noteworthy Performers: Apple and Tesla continued their upward trajectory, with Apple closing higher for the seventh consecutive day, while Tesla extended gains for the 11th consecutive day.
• Market Gains: The Dow Industrial Average surged 429.39 points or 1.09% to 39,721.37, the S&P 500 rose 56.95 points or 1.02% to 5633.92, and the Nasdaq climbed 218.16 points or 1.18% to 18,647.45. The Russell 2000 also saw a rise of 22.28 points or 1.10% to 2051.75.
• Top Gainers: Key gainers included Nvidia, AMD, Micron, and Intel, with notable performances driven by recent stock splits and robust trading activity.
• Emerging Stars: Companies like Palantir and Corning showed notable gains, reflecting strong market interest and positive investor sentiment.
• Costco’s Move: After hours, Costco announced a membership price hike, leading to a 4.10% increase in its share price to $920, showcasing market responsiveness to corporate strategy changes.

US treasury sells $39 billion of 10 year notes at a yield of 4.276%

• WI level at the time of the auction 4.286%

• High yield 4.276%
• WI level at the time of the auction: 4.286%
• Tail -1.0 basis points versus six-auction average 0.4 bps
• Bid-to-Cover 2.58X versus six-auction average 2.52x
• Dealers 11.53% versus six-auction average 16.1%. Least since August 2023
• Directs 20.86% versus six-auction average 16.7%
• Indirects 67.61% versus six-auction average 67.2%

Atlanta Fed GDPNow growth estimate for Q2 rises to 2.0% from 1.5% previously

• Atlanta Fed GDPNow Q2 growth estimate surges to 2% from 1.5% following recent data releases. Check out the latest update on July 10.

The Atlanta Fed GDPNow growth estimate for Q2 has risen to 2.0% from 1.5% on July 3.The move to the upside snaps a series of declines.

In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 2.0 percent on July 10, up from 1.5 percent on July 3.After last Friday’s employment report from the Bureau of Labor Statistics and this morning’s wholesale trade report from the US Census Bureau, the nowcasts of second-quarter real personal consumption expenditures growth and second-quarter real gross private domestic investment growth increased from 1.1 percent and 6.5 percent, respectively, to 1.5 percent and 7.6 percent.

US May wholesale sales +0.4% vs +0.1% expected

• US May 2024 data on wholesale sales and inventories

• Prior was +0.1% (revised to +0.2%)
• Inventories +0.6% vs +0.6% expected
• Prior inventories +0.6%
• Inventories -0.5% y/y

US MBA mortgage applications w.e. 5 July -0.2% vs -2.6% prior

• Latest data from the Mortgage Bankers Association for the week ending 5 July 2024

• Prior -2.6%
• Market index 206.1 vs 206.5 prior
• Purchase index 144.3 vs 142.9 prior
• Refinance index 532.3 vs 544.1 prior
• 30-year mortgage rate 7.00% vs 7.03% prior

Day two on Capitol Hill: Fed’s Powell says inflation down but still too high

• Fed’s Powell to echo day one remarks on dual mandate, balance sheet, and policy stance. Sustainable fiscal path in question as inflation adjusts to demand-supply dynamics.

• dual mandate has served us well.
• On the balance sheet runoff, the Fed has made quite a lot of progress but there still is a ways to go.
• It is hard to pick a precise stopping point but want a bit of a buffer. Going slower could allow them to go further
• Policy is currently restrictive. The neutral rate must have moved up at least in the short term.
• The fiscal path is unsustainable.
• Inflation caused by very strong demand and constrained supply.
• We have observed a waning of demand with increase in supply and inflation has come down.
• Economy is growing around 2%, it feels like and with inflation in jobs these are good numbers.
• Fed does not want to wait until inflation reaches all the way down to 2% to ease polity
• Chair is not sending any signals on policy decisions
• We want to have greater confidence which means more good inflation readings
• We are not just an inflation targeting central bank, we have an employment mandate
• Now the risks of the two mandates much closer to being in balance. We are looking at both sides.
• Inflation has come down but prices are still high
• I do have some confidence in inflation going down, but not prepared to say sufficiently confident in it coming sustainably down to 2% yet
• We are going to return to 2% inflation, I am reasonably confident
• There is a path to price stability and at the same time, keeping unemployment down
• Our undertaking is to make decisions when and as they are needed
• I have some confidence inflation is on a downward path. We need to finish the job on inflation while keeping a strong labor market.

Goldman Sachs on US, “absolutely a soft landing”, Fed rate cut cycle to begin in September

• Goldman Sachs Asset Management see a 25bp each quarter after the first in September

An ICYMI from Goldman Sachs Asset Management (GSAM), bullish on Federal Open Market Committee (FOMC) rate cuts ahead. Info comes via Reuters.

• “It’s absolutely a soft landing … as the data comes through, that’s what we’re seeing.”
• expect the Fed to begin cutting in September
• rate cuts could then continue @ 25 basis points per quarter

“Fed has no business lowering rates now … lost touch with economic reality”

• Cites enormous national debt and deficit, neutral rate is higher now, inflation that is still significantly elevated

An interesting opinion piece from a US University of Maryland economist and emeritus business professor, Peter Morici, carried by Dow Jones Newswires (gated).

Says the Federal Open Market Committee (FOMC) should not cut the Fed Funds rate, “Fed policymakers appear to have lost touch with economic reality”.

Citing:

• federal deficit this year will be 6.7% of GDP … a lot more fiscal stimulus and it requires greater monetary restraint to keep inflation in check
• bond investors should require higher interest rates to offset the risks that Washington could inflate its way out of its large debt service burden
• inflation, while improved, remains significantly elevated
• inflation expectations … are hardly anchored at 2% … expected inflation at 3% to 4%. Higher inflation expectations reflect a loss in confidence that the Fed can adequately tame inflation or that the current cast of monetary and fiscal policymakers are prepared to do what it takes. 
• Past battles with inflation would indicate that if the Fed lowered rates before reaching its 2% goal, inflation would accelerate again, and inflation expectations would rise further and harden
• This is a theoretical concept representing the interest rate that neither stimulates nor restrains the economy when it is operating at full capacity and with stable inflation.
• The natural rate of interest is important for central banks because it helps them set their policy rates.
• If the policy rate is above r*, the policy is considered contractionary, which could slow economic growth and lower inflation.
• Conversely, if the policy rate is below r*, the policy is seen as expansionary, potentially boosting economic growth and raising inflation.
• Determining the actual value of r* is challenging as it cannot be observed directly. It must be estimated using economic models that consider various macroeconomic factors, such as productivity growth, demographics, and global economic conditions. These estimates can change over time due to shifts in these underlying factors.

Apple to ship 10% more iPhones in 2024

• Bloomberg is reporting

Bloomberg is reporting that Apple aims to ship 10% more new iPhones in 2024 after a bumpy 2023.

Apple shares are now trading up $3.68 or 1.61% at $232.39 and reached a new record high level. Shares of Apple are up 20.37% in 2024 after rising 48.18% in 2023.

Commodities

Crude oil futures settled at $82.10

• Up $0.69 or 0.85%

The price of WTI crude futures are settling at $82.10.That is up $0.69 or 0.85%.

The gains come after three consecutive losing sessions, and was driven by a bullish OPEC demand forecast and a significant drop in U.S. inventories.

Market drivers:

The EIA reported a 3.4 million-barrel drawdown in U.S. oil inventories, surpassing the expected 1.3 million-barrel draw.

Meanwhile, OPEC maintained its 2024 demand forecast, predicting a rise of 2.2 million barrels per day over 2023, higher than other agencies’ forecasts.

Gold Retreats from $2400 Peak as Market Optimism Favors Equities

Gold prices surged earlier today, peaking at $2386, but retreated to $2372 amid a broader market preference for equities. Despite recent attempts to surpass $2400, gold has struggled to maintain higher levels, facing selling pressure exacerbated by the People’s Bank of China’s (PBoC) non-purchase of gold and other market factors.

The upcoming US CPI report tomorrow holds potential to influence gold’s trajectory further. A hotter-than-expected CPI could weigh on gold prices, while indications of lower inflation might support gold by signaling potential for lower interest rates.

US EIA Crude oil inventory -3.443M vs -1.333M estimate

• The weekly oil inventory data from the EIA

• Crude oil inventory -3.443m draw versus a draw of -1.333m estimate
• Gasoline inventory -2.006m draw versus a draw of -0.600M estimate
• Distillates build of 4.884M versus a build of 0.833M estimate
• Cushing draw of -0.702M vs a gain of 0.345M last week
• Crude production 13.3M versus 13.2M last week
• refining utilization 1.9% versus expected -0.1%. Per week 1.3%

CIBC boosts gold price forecasts

• CIBC sees gold rising to $2600 in 2025

Key Takeaways:

1. Gold:
   • 2024: New forecast is $2,290/oz, up from the previous $2,100/oz.
   • 2025: New forecast is $2,600/oz, up from the previous $2,000/oz.
   • 2026: New forecast is $2,400/oz, up from the previous $1,900/oz.
   • 2027: New forecast is $2,200/oz, up from the previous $1,875/oz.
   • Long-term (2028 and beyond): New forecast is $1,975/oz, up from the previous $1,875/oz.
2. Silver:
   • 2024: New forecast is $28.75/oz, up from the previous $24.97/oz.
   • 2025: New forecast is $34.50/oz, up from the previous $24.00/oz.
   • 2026: New forecast is $32.50/oz, up from the previous $23.50/oz.
   • 2027: New forecast is $30.50/oz, up from the previous $23.00/oz.
   • Long-term (2028 and beyond): New forecast is $26.00/oz, up from the previous $23.00/oz.
3. Market Drivers:
   • The main driver for the change is central bank demand. “We do not see central bank demand materially dissipating any time soon.”
   • “Demand for gold remains strong, with central banks continuing to purchase gold driven by a longstanding strategy of USD diversification and, in some cases, efforts to sanction-proof FX reserves.”
   • Retail demand, especially in Eastern economies, remains robust as investors seek wealth preservation amidst soft stock and real estate markets.
   • Central banks such as China, Russia and India possess gold holdings at 1-3% of foreign exchange reserves, well below European central banks at over 10%, a level PBoC has in the past repeatedly noted it sees as more ideal. Gold slumped this week on data showing the PBoC wasn’t buying but they expect that to reverse
   • ETFs have been a weak link but despite recent outflows, they are expected to reverse course with Fed cuts
4. US politics:
   • A Trump presidency would be particularly bullish for gold due to policies favoring higher deficits, tariffs, and potential pressure on Federal Reserve independence. Simply extending the maturing tax cuts would add US$3 trillion to the deficit over the next ten years.
   • While a second term for Biden is also seen as positive for gold, Trump’s approach could create a more inflationary environment, further boosting bullion prices.
5. Silver Market Outlook:
   • Industrial demand for silver, particularly in solar and electrification sectors, is expected to rise, adding to a supply deficit.
   • The gold-to-silver ratio is projected to contract, benefiting silver prices.

Comment:

If we marry the different starting positions (fiscal, monetary and valuation) with the policies articulated by Trump (bigger deficits, higher tariffs, less Fed independence), it is easy to see a better environment for gold prices if Trump repeats in 2024 – albeit Biden does not seem much more restrictive on deficits and tariffs. Given neither candidate seems concerned on fiscal positions coupled with a Federal Reserve (and to some extent all central banks) seemingly more comfortable with higher structural inflation, we believe a Biden second term shouldn’t be a negative for gold prices; but if Trump is re-elected (and follows through on his policy positions), the already impressive rally in gold prices likely continues into 2025.

OPEC leaves world oil demand forecasts unchanged

• No change to 2024 and 2025 oil demand forecasts unchanged

• 2024 world oil demand growth forecast unchanged at +2.25m barrels
• 2025 world oil demand growth forecast unchanged at +1.85m barrels

In a separate report from RIA:

• Russian production decreased by 114K bpd in June
• OPEC oil production in June decreased by 80k bpd in June

EU News

European major indices rebound higher

• Spain’s Ibex leads the way

The major European indices are closing higher on the day, bouncing back from the declines seen during yesterday’s trade.

A snapshot of the closing levels shows:

• German DAX, +0.99%
• France CAC, +0.86%
• UK FTSE 100 +0.66%
• Spain’s Ibex +1.59%
• Italy’s FTSE MIB +1.31%

Euro zone wage rises quickened in June

• Rose faster than the previous three months

Newswires with info on wage growth in the euro zone, data via the latest, June, Indeed Wage Tracker. The European Central Bank use this survey in policy deliberations, frequently referred to by chief economist at the bank, Lane.

• Salaries for jobs advertised on the Indeed website were up 3.7% year-on-year in June
• from 3.5% in the previous three months
• still below a post-pandemic peak of 5.4%

Comment:

• “Wage growth has been stable or falling in France, Germany and Ireland, and is already at or close to pre-pandemic levels in those countries.But in Italy, the Netherlands and Spain, wage growth has been picking up and remains high.”

Bank of England’s Mann: 2% inflation we see now as a touch and go

• BOE’s Mann is speaking

• Supply side of the economy is growing very slowly
• Sees labor market tightness.
• Says that wage growth is still far away from being consistent with the inflation target
• We have to see disciplining of service sector price growth.
• On rate cuts Mann says that until I see some deceleration in services prices, I am not in a position to cut rates
• 2% inflation we see now is a touch and go. Inflation will be above 2% for the rest of the year

BOE’s Pill: Services and wages continue to point to uncomfortable strength in inflation

• Comments from the BOE chief economist

• When-rather-than-if characterization of prospective rate cuts seems appropriate
• The challenge for the MPC is to get the balance right
• We have to be realistic about how much any one or two economic releases adds to our assessment
• Services price inflation and wage growth continue to point to an uncomfortable strength in underlying inflation
• Hard to dispute the case that inflation persistence in the UK continues to prove persistent
• Uncertainty around UK wage data is unlikely to disappear soon
• I’m not sure if we’re in a world of persistent inflation pressures are not
• Important to see if reduce tightness in the labor market leads to slower wage growth

100bp of BoE cuts to come, leaves GBP “asymmetric risk to the downside than to the upside”

A note from RBC on the Bank of England and sterling, says that apart from the BoE outlook the currency could drop on fiscal risks regardless. In summary:

• BOE could cut by 50 basis points in both 2024 and 2025, leaving GBP with still one of the highest rates in the G10
• the constrained fiscal backdrop not leaving much space for flexibility
• any deterioration in fiscal policy credibility would leave sterling vulnerable
• GBP faces more “asymmetric risk to the downside than to the upside”

Asia-Pacific-World News

People’s Bank of China sets yuan reference rate at 7.1342 (vs. estimate at 7.2711)

• 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

China June 2024 CPI & PPI

• China CPI (YoY) (Jun)
• Actual: 0.2%
• Expected: 0.4%
• Previous: 0.3%

• China CPI (MoM) (Jun) $CNY
• Actual: -0.2%
• Expected: -0.1%
• Previous: -0.1%

• PPI -0.8% y/y (expected -0.8%)

Core CPI rose by 0.6% y/y, unchanged from May.

RBNZ leaves it cash rate on hold at 5.5%, as expected

• Reserve Bank of New Zealand July 2024 monetary policy decision

Reserve Bank of New Zealand meeting is a policy review, not a full Monetary Policy Statement; there are no fresh economic forecasts or briefings being issued.

Statement from the Bank:

• Restrictive monetary policy has significantly reduced consumer price inflation, with the Committee expecting headline inflation to return to within the 1 to 3 percent target range in the second half of this year. The decline in inflation reflects receding domestic pricing pressures, as well as lower inflation for goods and services imported into New Zealand.
• Labour market pressures have eased, reflecting cautious hiring decisions by firms and an increased supply of labour.
• The level of economic activity, including business and consumer investment spending and investment intentions, is consistent with the restrictive monetary stance.
• Current and expected government spending will restrain overall spending in the economy. However, the positive impact of the pending tax cuts on private spending is less certain.
• Some domestically generated price pressures remain strong. But there are signs inflation persistence will ease in line with the fall in capacity pressures and business pricing intentions.
• The Committee agreed that monetary policy will need to remain restrictive.The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures.
• Committee expecting headline inflation to return to within the 1 to 3 percent target range in the second half of this year
• The Committee agreed that monetary policy will need to remain restrictive. The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures.

Westpac on the RBNZ statement today – “less hawkish” than May statement

WPAC response to the RBNZ, in brief:

• Dovish RBNZ surprise for markets
• against expectations that the brief statement would repeat the key messages from May, it was less hawkish.
• Guidance, via the final paragraph in the statement, was: “The Committee agreed that monetary policy will need to remain restrictive.The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures.” This is less hawkish than May.
• probably extend during the day ahead as offshore market participants react to the update.

BOJ will likely project inflation will stay around its 2% target in coming years

• Forecast for what to expect from the BoJ at its July 30 / 31 meeting

Reuters citing unnamed sources on what to expect from the Bank of Japan at its meeting this month

• will likely trim this year’s economic growth forecast
• project inflation will stay around its 2% target in coming years
• will likely make no big changes to its fiscal 2025 and 2026 GDP forecasts, and stick to its view that the economy remains on track for a moderate recovery
• keeping alive the chance of an interest rate hike this month

Japan PPI (June 2024) +0.2% m/m (expected +0.4) and +2.9% y/y (expected +2.9%)

• The PPI is also referred to as the Corporate Goods Price Index, its published by the Bank of Japan.

Cryptocurrency News

Investors Prepare for Ethereum ETF Launch Amidst Buying Surge and Golem Sales Fears

Investors are gearing up for the imminent launch of spot Ethereum (ETH) ETFs, with preparations marked by increased buying despite lingering Fear, Uncertainty, and Doubt (FUD) surrounding potential Golem selling activities. Ethereum saw a 2.3% rise on Wednesday, driven by investor optimism and strategic accumulation ahead of the ETF rollout.

Bitwise’s chief compliance officer, Katherine Dowling, indicated significant progress, noting that S-1 amendments are nearing final approval with the Securities & Exchange Commission (SEC). This regulatory clarity signals a step closer to the ETF launch, bolstering market confidence.

While Ethereum faced recent bearish pressure, investors seized the opportunity to accumulate the altcoin, as indicated by CryptoQuant’s data. These purchases, often directed to staking platforms, reflect a strategic move to capitalize on discounted ETH prices before the ETFs debut.

A notable trend is the Ethereum 2.0 staking contract, now holding 47.36 million ETH, approximately 34% of the total supply. This significant increase from under 11% in 2022 underscores growing investor participation in ETH staking amidst broader market conditions.

As anticipation builds towards the ETF launch, investors remain vigilant of key resistance levels that could influence Ethereum’s trajectory.

CFTC Confirms Bitcoin and Ethereum as Digital Commodities Amid Regulatory Clarity

In a significant development for the cryptocurrency market, Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam affirmed during a Senate Committee hearing that Bitcoin and Ethereum are officially recognized as digital commodities under the Commodity Exchange Act. This declaration follows a summary judgment from an Illinois District Court, reinforcing their status as commodities rather than securities.

Behnam’s statements come amidst ongoing regulatory debates and lawsuits within the crypto community. He emphasized that 70% to 80% of cryptocurrencies are not securities, providing clarity on their regulatory classification. This clarity is pivotal, especially in light of recent SEC lawsuits against crypto firms like Ripple for the alleged sale of unregistered securities.

During the hearing, Behnam addressed concerns over regulatory jurisdiction between the SEC and the CFTC. When asked about consolidating regulatory oversight under the CFTC, Behnam expressed readiness, citing the commission’s expertise and capacity to oversee digital assets effectively.

Meanwhile, Bitcoin (BTC) and Ethereum (ETH) have maintained positions above key support levels on Wednesday, with BTC trading at $57,560 and ETH above $3,000. These levels indicate ongoing market stability and investor confidence following regulatory clarity provided by the CFTC.

XRP Traders Anticipate $17 Price Surge by 2025 Amid SEC Lawsuit Decision

XRP traders are closely monitoring developments in the ongoing lawsuit between Ripple Labs and the US Securities and Exchange Commission (SEC), with a ruling anticipated by July 31, 2024. Recent reports suggest significant implications for XRP’s classification as a security, potentially impacting its market trajectory.

Meanwhile, a crypto analyst has projected a bullish scenario for XRP, predicting a rally to $17 by 2025 based on the Bent Fork chart analysis. Currently trading at $0.44 on Wednesday, XRP has seen a modest 2% increase, reflecting market optimism amidst legal uncertainties.

Recent on-chain metrics show a notable uptick in active addresses on the XRP Ledger, exceeding 27,000 on July 10. This surge in activity supports a bullish outlook, indicating heightened demand and relevance among investors.

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