Round up of today’s market news

North American News

Dow Closes Above 40,000 Despite Missing Record, S&P and NASDAQ Retreat from Intraday Highs

Market Summary:

Dow Jones Industrial Average (DJIA):

• Intraday High: 40,257.24
• Previous Record Close: 40,003.60 (May 17)
• Close: 40,000.91 (+247.13 points or +0.62%)

S&P 500:

• Intraday High: 5655.56
• Close: 5615.34 (+30.79 points or +0.55%)
• Previous Record Close: 5635.39 (Wednesday)

NASDAQ:

• Intraday Rise: +273 points
• Close: 18,398.45 (+115.04 points or +0.63%)
• Previous Record Close: 18,647.45 (Wednesday)

Weekly Performance:

Indices:

• Dow Jones: +1.59%
• S&P 500: +0.86%
• NASDAQ: +0.25%
• Russell 2000: +5.996% (best week since October 30, 2023)

Leading Dow Stocks:

• Intel: +7.71%
• Home Depot: +7.53%
• Amgen: +6.45%
• UnitedHealth: +4.87%
• Travelers: +4.83%
• IBM: +3.85%
• Goldman Sachs: +3.43%

Performance of the Magnificent 7:

• NVIDIA: +2.72%
• Apple: +1.86%
• Tesla: -1.31%
• Amazon.com: -2.75%
• Alphabet A: -2.89%
• Microsoft: -2.95%
• Meta Platforms: -7.62% (worst performer)

The Dow narrowly missed setting a new record close despite reaching a new intraday high. The S&P 500 and NASDAQ also experienced intraday highs but retreated before the close. The Russell 2000 had its best week since October 2023. Among the Dow stocks, Intel and Home Depot were the top performers, while within the Magnificent 7, Nvidia and Apple managed to post gains, with Meta Platforms seeing the largest decline.

UMich July consumer sentiment 66.0 vs 68.5 expected

• Results of the July 2024 US consumer sentiment report

• Prior was 68.2

Details:

• Current conditions 64.1 vs 65.9 prior
• Expectations 67.2 vs 69.6 prior
• 1-year inflation 2.9% vs 3.0% prior
• 5-year inflation 2.9% vs 3.0%

US June PPI +2.6% vs +2.3% expected

• June 2024 US producer price index

• Highest since March 2023
• Prior was +2.2% y/y
• PPI final demand +0.2% m/m vs +0.1% expected
• Prior was -0.2% (revised to 0.0%)
• PPI ex food/energy +3.0% vs +2.5% y/y expected
• Prior ex food/energy revised to 2.6% from 2.3%
• PPI ex food/energy +0.4% vs +0.2% m/m expected
• Prior ex food/energy +0.0% (revised to +0.3%)

Goldman Sachs says the US equity market is on “correction watch”

• Looking for a “late summer equity market correction” if earnings disappoint

A note from Goldman Sachs on US stocks, comments ion brief:

• August equity-market flows are typically the slowest of the year
• markets have historically pulled back from mid-July highs
• on guard for a “late summer equity market correction” if earnings disappoint and investors begin to focus on the autumn election results
• pain trade has shifted from the upside to the downside
• buyers are full and running out of ammo after the best trading days of the year are now behind us

Fitch on the Fed – will need to see similar CPI results on the months ahead before cutting

A snippet from a note from Fitch following the US CPI data:

• Sufficient confidence to begin cutting interest rates is getting closer
• the Federal Reserve will likely want to see similar prints in August and September before pulling the trigger on that first rate cut

Fed’s Goolsbee on US CPI report – “This is what a path to 2% inflation looks like’

Federal Reserve Bank of Chicago President Austan Goolsbee is pretty happy with the CPI report for June:

• June CPI report ‘excellent,’ improvement on shelter inflation ‘profoundly encouraging’
• This is what a path to 2% inflation looks like
• As inflation falls, leaving Fed policy rate steady means Fed is tightening policy
• The reason to tighten policy would be if economy is overheating
• We are not overheating
• Labor market is cooling, still strong
• It doesn’t feel like the beginning of a recession
• Financial conditions are pretty restrictive
• I don’t like tying our hands on policy decisions
• Need to decide when to cut rates, not trying to figure out a rate path for next seven months

Canada building permits for May -12.2% versus -5.9% expected

• US Canada building permits for May

• Prior month 20.5% (versus 2.2% expected) revised to 23.4%. Last month was a record high level of building permits at $13.4 billion.
• Building permits -12.2% to $11.7 billion. Last month was a record at 13.4 by dollars led by a sharp rise in British Columbia multiunit permits.
• Residential -16.3% to $7.1 billion in May. British Columbia fell -53.7% following a record high value of multiunit permits in the province last month. Excluding British Columbia residential construction fell -3.8% for the remaining provinces and territories in May
• Residential construction permits rose by 22,700 dwelling units, contribute to the 12 month cumulative sum of 267,600 units since last June
• Nonresidential -5.0% to $4.6 billion in May. Declines in institutional of -18% and commercial -7.4% more than offset the growth in the industrial component of 20.6%.
• Total value of building permits on a constant dollar basis fell 12.5% in May following a 23% gain in April

British Columbia led the national decline with a significant drop of -50.7 after experience a record high in April. Excluding British Columbia the total value of building permits for the remaining provinces fell -0.7% in May.

Canadian June home sales activity fell 9.4%

• CREA data

The Canadian Real Estate Association reports that June sales fell 9.4% y/y.

Seller’s are still mostly holding out for higher prices but inventories are building — particularly in condos and new builds. The CREA price index rose 0.1% in June but is down 3.4% y/y.

“The second half of 2024 is widely expected to see the beginnings of a slow and gradual return of buyers into the housing market,” said James Mabey, Chair of CREA.

The national average home price was $696,179 in June, At a 5% mortgage and 20% down, that would put the monthly payment around $3100.

Commodities

Gold holds firm above $2,400

• Gold price sticks to key support level, set for third consecutive weekly gain on Fed rate cut expectations.
• US PPI rises above estimates; University of Michigan Consumer Sentiment drops, inflation expectations moderate.
• The FedWatch Tool indicates 94% chance of September rate cut; US Dollar Index falls over 0.40% to 104.09.

Gold’s price clung above $2,400 on Friday after hitting a daily low of $2,391. The golden metal is set to extend its gains for the third consecutive week on speculation that the Fed might begin its easing cycle in September. Data from the US Department of Labor showed that factory prices rose above estimates, though they failed to underpin the Greenback, a tailwind for the precious metal.

The yellow metal trades at $2,415, virtually unchanged.

Crude oil futures settle at $82.21

• Down $0.41 or -0.50%

Crude oil futures are settling the day at $82.21.That is down $0.41 or -0.50%. For the trading week, the price is down -1.21% after closing last week at $83.16.

Industrial metals see demand wain in China – TDS

Base metals have held strong as stimulus optimism gets baked in, however there’s an increasing level of bearishness on the ground in China, TDS com

Base metals see their longs liquidated

“With the upcoming plenum in China gaining plenty of market focus, base metals have held strong as stimulus optimism gets baked in. However, our tracking of top Shanghai Futures Exchange (SHFE) traders highlights an increasing level of bearishness on the ground in China.”

“Traders add nearly 5k lots short and liquidated longs in Copper, seeing their net short position grow to roughly the largest it has been since the start of the year. Likewise, in Aluminium, Chinese traders have added 8k lots short and cut longs, seeing their position flip net short after holding a notable long position. Zinc also saw a heavy 8k lots worth of long liquidations.”

“Pressures are building on the industrial metals as our gauge of global commodity demand continues to weaken. Any disappointment on potential Chinese stimulus will likely see continued liquidations of bloated positioning. As upside momentum fails to manifest, CTAs have turned recent sellers of the Red Metal, while Aluminium could also be in the crosshairs in the near-term.”

EU News

Germany June wholesale price index -0.3% vs +0.1% m/m prior

• Latest data released by Destatis – 12 July 2024

Slight delay in the release by the source. Compared to the same month a year ago, German wholesale prices are seen down 0.6%.

France June final CPI +2.2% vs +2.1% y/y prelim

• Latest data released in INSEE – 12 July 2024

• Prior +2.3%
• HICP +2.5% vs +2.5% y/y prelim
• Prior +2.6%

Core annual inflation is seen at 1.8%, reflecting a slight increase from 1.7% in May. Services inflation remains relatively sticky at 2.9%.

Spain June final CPI +3.4% vs +3.4% y/y prelim

• Latest data released by INE – 12 July 2024

• Prior +3.6%
• HICP +3.5% vs +3.5% y/y prelim
• Prior +3.8%

Asia-Pacific-World News

China June M2 money supply +6.2% vs +6.8% y/y expected

• Latest Chinese credit data for June 2024 has been released

• Prior +7.0%
• New yuan loans ¥2.13 trillion
• Prior ¥950.0 billion

China trade data: YTD USD denominated exports +3.6% y/y, imports +2%

• China trade data for June and January – June

January -June (ie YTD), in US dollar terms:

• trade surplus $435 billion
• exports +3.6% y/y
• imports +2.0% y/y

In Yuan terms:

• trade surplus 3.1 trillion yuan
• exports +6.9% y/y
• imports +5.2% y/y

June only month data, USD terms:

• trade balance USD 99.05bn
• imports -2.3% y/y
• exports +8.6% y/y

PBOC sets USD/ CNY reference rate for today at 7.1315 (vs. estimate at 7.2514)

• 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

NATO allies are discussing reclaiming some Chinese-owned infrastructure in Europe

• “China can sue them in court”

CNN with the report on NATO nerves over China-owned infrastructure in Europe.

• NATO countries now see those investments as a liability
• The fear, according to one US official, is that Beijing could use the infrastructure it owns in Europe to provide material assistance to Russia
• discussions on taking action on infrastructure, according to three officials involved in them, are still in their early stages
• A NATO official said that if a war erupted, the infrastructure “would almost certainly be nationalized, or nations would temporarily assume operating control, under emergency security measures.China can sue them in court after the fact.”

Here is the link for much more details.

Westpac reiterate bullish view on AUD/USD

• Need to see pullbacks contained

Via Westpac on the Australian dollar after the US CPI data on Thursday:

• As previously noted, the bias for AUD/USD to rise has been partly due to AU domestic and RBA’s tilt to a more hawkish hold, as well as potential that US is returning to a path of disinflation. June CPI puts this prospect firmly in play.
• After Fed Chair Powell had made it clear that the Fed needed to gain more confidence from further data releases, the CPI fall of -0.1%m/m and back to 3.0%y/y (core 3.3%y/y) was perfectly on cue. Sharp moves lower in US yields fell as much as -17bps (short-dated) with 10yr yields -13bps underscore the shift in market pricing and perceptions.
• AUD/USD continues to drive towards an interim target of 0.6820 within potential moves to retest 0.6870 (Dec. 2023 high) or even 0.6925. Critical will be that any pullbacks are contained (0.6705-15 remaining a pivot zone).

New Zealand Card Sales for June -0.6% m/m (prior -1.2%)

• Card sales data is the main retail sales indicator from NZ

Data for purchases made in New Zealand on debit, credit and store cards. Card spending data covers around 68% of core retail sales in NZ.

New Zealand June Manufacturing PMI 41.1 (prior 47.2)

• Business NZ Manufacturing PMI plummets

Business NZ Manufacturing PMI for June 2024 collapses to 41.1, its 15th consecutive month of contraction

• prior 47.2

New Zealand’s manufacturing sector PMI:

• third lowest value for a non-COVID lockdown month
• BusinessNZ’s Director, Advocacy Catherine Beard said that the freefall in activity from May to June was a major concern for a sector that had already been stuck in contraction for the past 15 months.
• BNZ’s Head of Research Stephen Toplis said that “while the weakness in these series have not been as deep as during the GFC the length of it has been longer, and it is not over yet. Manufacturing activity is highly leveraged to domestic demand, particularly residential construction and household spending. Both of these are faltering”.

Japan to slash economic growth forecast later this month – report

• Reuters reports, citing two government sources on the matter

The Japanese government tends to release their economic growth forecasts twice a year, one in January and one in July. The latest one should come some time next week and the sources above are saying that they will be cutting its growth forecast for fiscal year ending March 2025.

The revised estimate is to see forecast cut to about 1.0%, down from the current 1.3%. The sources say this reflects the rising living costs that is weighing on consumption for longer than anticipated. 

Japanese households anticipate prices to be higher in the next year – BOJ survey

• The latest findings from the BOJ quarterly public survey for June 2024

There is some 87.5% of Japanese households expecting a rise in prices in a year from now:

That is up from the 83.3% share from the previous survey in March this year. Meanwhile, the outlook for economic conditions show just ~8% of households anticipating an improvement in the economy in a year from now. That is down from the ~14% in March. That said, this figure tends to fluctuate quite a bit with it being ~8% as well in December last year and at ~11% in September last year.

Japan finance minister Suzuki says rapid FX moves are undesirable

• Suzuki weighing in after Manda and Hayashie earlier

• Rapid fx moves undesirable
• Desirable for forex to move stably
• No comment on fx intervention
• Won’t comment on media reports that japan conducted fx rate checks

Japan chief cabinet secretary Hayashi says he has no comment on FX intervention

• Referrring to the multiple rounds of intervention to prop up the yen

Japan chief cabinet secretary Hayashi

• No comment on fx intervention
• Won’t comment on forex levels
• Important for currencies to move in stable manner reflecting fundamentals
• Rapid fx moves undesirable
• Closely watching fx moves
• Ready to take all possible measures on forex
• Up to BOJ to decide details of monetary policy

Japan’s Kanda says recent yen moves are somewhat rapid

• Kanda says ‘puzzled’ about media report that there was intervention

• Recent yen moves are somewhat rapid
• Will take appropriate action on forex if needed
• Did not comment whether intervened fx market
• Can’t think if government officials commented on forex intervention
• Yen moved 5% in the past month, which is significant
• It is natural to think recent forex moves were driven by speculators
• Weak yen pushes up import costs, which would hurt people’s lives
• Undesirable if excessive forex moves triggered by speculators hurt people’s lives

Singapore Q2 GDP +2.9% y/y (expected +2.7%)

• Preliminary growth reading from Singapore

Q2 GDP q/q is +0.4%

• expected +0.4%, prior +0.1%

for the y/y +2.9%

• expected +2.7%, prior +2.7%

Cryptocurrency News

Ethereum On-Chain Metrics and Price Data Reveal Key Insights Ahead of ETH ETF Launch

Ethereum’s Divergent Post-Halving Performance:

• Post-Halving Patterns: Ethereum’s price shows a divergent pattern in the first 365 days after a Bitcoin halving event.
• Historical Drawdowns and Rallies:
  • 2016 Halving: 45% drawdown followed by a 3,400% rally.
  • 2020 Halving: 150% increase followed by a 2,150% rally.
  • 2023 Halving: Price remains relatively flat with a maximum drawdown of -42%.

Current Market Sentiment and Metrics:

• Supply in Profit: Over 90% of ETH’s supply has been in profit since January, indicating potential later stages of a bull cycle.
• Investor Confidence: With ETH ETFs on the horizon, investor confidence is slowly rising.
• Price Movement: Ethereum is up 0.3% on Friday.

SEC and ETH ETFs:

• SEC Silence: Despite earlier predictions, the SEC has not yet approved any spot ETH ETF S-1 registration statements.
• Impact of On-Chain Data: Key on-chain data from Glassnode provides insights into historical price movements and their potential impact on the current cycle.

Daily Digest of Market Movers:

• Ethereum’s Performance: How ETH has performed so far in the current cycle.
• Drawdowns: Ethereum has historically experienced steeper drawdowns than Bitcoin during bull cycles, but the current cycle’s largest drawdown is relatively low at -42%.

Conclusion:

• As the current bull cycle matures, Ethereum’s price movement and on-chain metrics suggest that investors are preparing for potential profit-taking, influenced by the upcoming ETH ETF launch and historical performance patterns.

Ripple could soon find utility in institutional crypto products, XRP extends gains by 5%

• Ripple CEO appreciated the CME Group and CF Benchmarks for adding the XRP-Dollar reference rate and indices. 
• Brad Garlinghouse says institutional crypto products have trusted benchmarks for reference rates, fuels positive sentiment among traders. 
• XRP extends gains by 5% on Friday, trades at $0.4719. 

Ripple (XRP) traders’ sentiment turned positive on Friday, as CEO Brad Garlinghouse highlighted the addition of XRP-Dollar reference rate and indices to the CME Group and CF Benchmarks. 

 Ripple traders positive with recent developments in XRP

• Ripple CEO Brad Garlinghouse tweeted about the addition of XRP-Dollar reference rates and indices to the CME Group and GF Benchmarks on X. 
• The executive highlights that institutional crypto products have trusted reference rates, fueling a positive sentiment for XRP among market participants.
• The Securities and Exchange Commission (SEC) vs. Ripple lawsuit has no further update since Attorney Fred Rispoli predicted that the legal battle will end in July 2024. 
• SEC vs. Ripple lawsuit ruling could come out as early as July 13, according to this pro-crypto attorney

JPMorgan forecasts a crypto market recovery beginning in August

JPMorgan says its expecting a diminishing in crypto liquidations during July, and then a recovery starting in August.

• revised its year-to-date crypto net flow estimate down from US$12 billion to US$8 billion
• reduction in the estimated net flow is largely driven by the decline in bitcoin reserves across exchanges over the past month
• citing Mt. Gox, Gemini creditors, and sales by the German government of seized assets

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