Round up of today's market news *

North American News

US Equities Struggle Again

Despite not-so-pleasant numbers, main North American markets closed modestly above their session lows. The Dow Jones Industrial Average was down 1.3%, the S&P 500 index dropped 0.8%, and the NASDAQ Composite fell 0.7%. Meanwhile, the Russell 2000 declined by 1.9%

US initial jobless claims reaches the highest level since August of last year

Weekly US initial jobless claims and continuing claims

Prior week 222k revised to 223K.
Initial jobless claims 243K vs. 230K estimate. Highest since August of last year.
4-week moving average of initial jobless claims 234.75K vs 233.75K last week
prior week continuing claims 1.852M revised to 1.847M.
Continuing claims 1.867M vs 1.855M estimate. This is the 6th week above 1.800M. Highest since November 2021.
4-week moving average of continuing claims 1.851M vs 1.839M last week.

US July Philly Fed +13.9 vs +2.9 expected

Philadelphia-area manufacturing survey for July 2024

Prior was +1.3
Six month index +38.7 vs +13.8 prior
Capex +7.4 vs +12.1 prior
Employment: +15.2 vs -2.5 prior
New orders: +20.7 vs -2.2 prior
Prices paid: +19.8 vs +22.5 prior
Prices received: +24.2 vs +13.7 prior
Shipments: +27.8 vs -7.2 prior
Unfilled orders: +9.1 vs +8.9 prior
Delivery times: +8.5 vs -9.4 prior
Inventories: -9.4 vs -6.4 prior
Avg employee workweek: -1.6 vs +4.8 prior

US June leading indicators -0.2% vs -0.3% expected

Leading indicators from The Conference Board
Prior was -0.5%

Fed’s Logan: We’re making progress in getting banks ready to use the discount window

Comments from the Boston Fed President

Fed emergency lending programs have been effective
All eligible banks should be prepared for the discount window

IMF says Fed should wait until at least late 2024 to cut rates

Comments in Article IV IMF staff report

It would be prudent for the Fed to wait for clearer evidence that inflation is sustainably returning to 2%
US should consider scaling back tax exemptions for employer-paid health care, capital gains on the sale of primary residences
US has a pressing need to reverse ongoing increase in public debt
US should consider progressively raising income tax rates, including those earning less than $400,000
US should consider scaling back deductions for mortgage interest

Fed’s Goolsbee: I feel ‘a lot better’ about multiple months of improvement in CPI

Comments from the Chicago Fed President

It’s very clear that inflation has come way down in 12-18 months
This is about as fast as inflation has ever fallen
Inflation path isn’t done but it makes me feel a lot better to see components decline, including housing
The labor market has been cooling to a position of better balance
So far this doesn’t look like a recession in the labor market but there are warning lights
We want to be stable at full employment
If you saw a sharp of an uptick in unemployment, you would be justified to be agitated about the unemployment level. Thus far it doesn’t look like that.
Unemployment needs to steady

Bank of America’s global fund manager survey – most expect first Fed rate cut in September

September is the red hot favourite for the first FOMC interest rate cut

Via the Bank of America’s global fund manager survey for July

Most investors anticipate that the Federal Reserve will start cutting interest rates in September
56% of responding investors expect a first Fed rate cut at the September 17/18 meeting
87% anticipate a first cut in H2

UBS expect the Federal Reserve to cut in September, say get into attractive yield now

Snippet from UBS’ global wealth management division on their outlook for the Federal Open Market Committee (FOMC) and investor implications.

UBS expects the first rate cut from the FOMC in September
investors should “act now to put cash to work” as attractive yield from ‘quality fixed income’ is unlikely to persist much longer

Goldman Sachs – Global hedge funds reducing exposure to US stocks for 5 days in a row

A note from Goldman Sachs, info via Reuters, citing GS ‘without providing figures’:

value of stocks hedge funds ditched over the last five trading sessions was the biggest since November 2022 and is close to a five-year record
de-risking has been led by the information technology sector, followed by industrial, healthcare, consumer discretionary and communications services

Canada – Trudeau holds meeting with Mark Carney to join government

Carney getting closer to joining the CAD government

Canadian media, Globe and Mail (gated) are reporting that Prime Minister Justin Trudeau has urged Mark Carney to join his Liberal government.

Commodities

Gold Price Slips Beneath $2,450

Despite growing speculations that the Federal Reserve would lower borrowing costs at its September meeting, gold prices continued to drop on Thursday. The precious metal is now trading around familiar levels of $2,450 per troy ounce as the U.S. dollar stages a recovery.

Key factors impacting the gold market:

US jobless claims: The number of Americans filing new applications for unemployment benefits rose more than expected last week, according to data released by the Labor Department on Thursday. However, there has been no significant shift in the labor market.
Fed officials’ statements: Federal Reserve officials had previously stated that the central bank could be “closer” to lower borrowing costs as the dual mandate risks have become more balanced.

However, the International Monetary Fund (IMF) said on Thursday that the Fed should not cut interest rates until late 2024.

Gold’s all-time high: Gold prices recorded an all-time high of $2,483 but failed to hold onto those gains as investors booked profits and former U.S. President Donald Trump’s rhetoric on imposing at least 60% tariffs on China’s products spurred flows to the American dollar.

With these factors in mind, gold prices have slipped beneath $2,450 despite growing speculations of a September Fed rate cut. The U.S. Dollar Index, which tracks the currency’s performance against six other currencies, is up 0.43% at 104.18.

Copper starts to feel the summer heat as August looms

Copper is enduring another rough week, down nearly 5% in the past four days

When copper futures eyed a push above $5 per pound in May, it looked like we were starting to witness one of the breakout trades this decade. However, the hype quickly died down as price fell sharply towards the end of May and that led to another 5% drop in June. The slight rebound earlier this month has been dashed and copper is down almost 5% again in the last four days.

Fundamentally, the factors driving copper prices higher this year hasn’t changed too much. The drive for the green transition and supply concerns were key reasons in providing a tailwind for copper.

But at the same time, copper tends to correlate with the health of the global economy. And the outlook for the latter has been struggling, especially with the major slowdown in China since last year. For some context, China buys roughly 40%-50% of the newly mined copper each year. So, that’s a major demand source.

Looking at the seasonal pattern, August has been the worst month for copper over the last 20 years.

JP Morgan on oil – wary of diminished incentivization driving a spike to US $100 / barrel

Say equilibrium is around $70

Via a note from JPM on oil ICYMI:

estimate the equilibrium price of WTI oil at around $70/bbl
even at $60/bbl, WTI prices are too low to incentivize production, potentially leading to a spike to $100/bbl in following year

EU News

European equity closes mixed

Closing changes in the main European bourses

German DAX -0.4%.
France CAC +0.4%
UK FTSE 100 +0.3%
Spain’s IBEX +0.5%
Italy’s FTSE MIB +0.5%

ECB leaves key rates unchanged in July monetary policy decision, as expected

ECB announces their latest monetary policy decision – 18 July 2024

Main refinancing rate 4.25% vs 4.25% expected
Prior 4.25%
Deposit facility rate 3.75% vs 3.75% expected
Prior 3.75%
Marginal lending facility 4.50%
Prior 4.50%
Incoming information broadly supports previous assessment of inflation outlook
Not pre-committing to a particular rate path
Determined to ensure inflation returns to 2% target in a timely manner
Will keep policy rates sufficiently restrictive for as long as necessary to return inflation back to medium-term target goal
Domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year

UK May ILO unemployment rate 4.4% vs 4.4% expected

Latest data released by ONS – 18 July 2024

Prior 4.4%
Employment change 19k v s 18k expected
Prior -140k
June payrolls change 16k
Prior -3k; revised to 54k
May average weekly earnings +5.7% vs +5.7% 3m/y expected
Prior +5.9%
May average weekly earnings (ex bonus) +5.7% vs +5.7% 3m/y expected
Prior +6.0%

If anything else, real earnings continues to pick up and that might be a concern for the central bank. Here’s the trend:

Switzerland June trade balance CHF 6.18 billion vs CHF 5.81 billion prior

Latest data released by SECO – 18 July 2024

Prior CHF 5.81 billion; revised to CHF 5.79 billion

The Swiss trade surplus expanded in June as exports were seen down by 2.5% while imports slumped by 5.3% on the month.

Hawks on the ECB open to September rate cut provided upcoming data confirms disinflation

The traditional ECBs sources leak is out saying:

ECB hawks open to September rate cut provided upcoming data confirms disinflation underway

Lagarde: Q2 growth was likely slower than Q1

Comments in ECB President Lagarde’s opening statement

More jobs were likely created in Q2, mainly in services
Labour market is more resilient
Expect recovery to be supported by consumption
Most inflation measures were either stable or edged down in June
Wages are still rising at an elevated rate
Latest surveys indicate that wages will moderate over the next year
Inflation expected to fluctuate around current levels for the remainder of the year, in part due to base energy effects
Expected to decline to target in the second half of 2025
Risks of economic growth are tilted to the downside

Lagarde Q&A: Question of what we do in September is wide open, will be data dependent

Comments from Lagarde in response to questions

There is no pre-determined path for September
Sept projections plus other data will be taken into account
Decision today was unanimous
Surveys indicate wage growth will decline in 2025 and 2026
Various wage measures point in the direction of rather elevated levels
We’re data dependent, not data-point dependent
We will stay in restrictive territory as long as is necessary
We must look at all components of data in the next weeks and months, this is going to be a process
It’s clear between now and Sept, we will be receiving a lot of information
The inflation target won’t be debated on my watch

There are still issues plaguing labour market data transformation – ONS

As a reminder, the UK labour market data hasn’t been one that is too accurate since the latter stages of last year

This is due to the fact that the Labour Force Survey (LFS) has been experiencing a fall in response rates and some quality challenges as a result. The idea put out by the ONS is to transition to a Transformed Labour Force Survey (TLFS), in order to improve the quality of the labour market data based on a more adaptive and responsive survey.

But so far, the change has not quite materialised with the progress running into a few bumps in the road.

ONS notes that there are “challenges that remain before we are able to transition confidently and securely”. Adding that “there are issues that remain before we can transition and further steps are required so that the TLFS can reach the quality necessary for users”.

Asia-Pacific-World News

China’s central committee adopts resolution on further deepening reforms

China publishes its Third Plenum communique

To adopt resolution on further deepening reform comprehensively
Must consciously place reform in a more prominent position
Reform tasks set out in this decision to be completed by 2029
Will implement measures to prevent, defuse risks in key areas such as real estate, local government debt, and small and medium-sized financial institutions
Will raise the level of party’s leadership in further deepening reforms across the board and promoting Chinese-style modernisation
To further coordinate reforms in key areas such as finance and taxation
To deepen the reform of foreign trade system
To carry out social security risk prevention and control network, effectively maintain social stability
To deepen the reform of management system for foreign, outbound investments
Will deepen supply-side structural reform, establish and development new growth drivers

PBOC sets USD/ CNY central rate at 7.1285 (vs. estimate at 7.2587)

PBOC CNY reference rate setting for the trading session ahead

In open market operations:

PBOC injects 49bn via 7-day RR, sets rate at an unchanged 1.8%
2bn mature today
thus net 47 injection via OMOs today.

Chinese Communist Party news conference – Third Plenum briefing

Friday, 19 July 2024

Chinese Communist Party Central Committee will conduct the press conference:

Scheduled for July 19 (I don’t have a time yet)
it’s a briefing on the third plenum held this week

Australian Q2 business survey shows conditions eased

National Australia Bank Q2 2024 Business Survey

Business conditions +5 index

prior +10
trading conditions and profitability both fell 6pts
employment index fell 3pts
forward orders fell 4pts to -6

Business confidence -1

prior-2

NAB comments:

“Consistent with our monthly business survey, today’s release shows business conditions eased in Q2 as slow economic growth and soft consumer demand weighed on firms,”
“At +5, conditions are still slightly above the long-run average for the quarterly survey which dates back to 1989, but nonetheless have now come down some way from their recent highs. Confidence also remained weak.”
“There was further softening in the forward indicators in the business survey this quarter,”
“Expectations for future business conditions have weakened, which suggests businesses are becoming more worried about the outlook for the economy even as we have so far managed to avoid a recession.”
labour costs +1.2% (unchanged from Q1)
purchase costs +0.9% (from 1.1% in Q1)
“The story on cost pressures and prices is mixed in this survey,”
“There appears to be ongoing improvement in materials cost growth which is very welcome, but labour cost growth is still elevated. Labour availability was a significant constraint for 30% of firms and wage costs remain a top concern.”
“That said there has also been some gradual further easing in price growth, suggesting the slowing demand environment is putting downward pressure on firms’ ability to pass on costs to consumers,”
“Pressure on margins is also now among the top issues weighing on business confidence.”

Australian June unemployment rate

Employment report from Australia for June 2024
Actual: 4.1%
Expected: 4.1%
Previous: 4.0%

Australia Full Employment Change (Jun)

Actual: 43.3K
Previous: 41.7K

Australia Employment Change (Jun)

Actual: 50.2K
Expected: 19.9K
Previous: 39.7K

Another strong employment report from Australia.

BOJ data does not suggest evidence of intervention on 17 July

No evident traces of intervention efforts from Japan yesterday

The circled column should show a net receipt instead, which was the case in calculating the roughly ¥6 trillion spent on intervention on Thursday and Friday last week.

Japan chief Cabinet secretary says no comment on FX moves

Remarks by Japan chief Cabinet secretary, Yoshimasa Hayashi

Specifics of monetary policy are up to the BOJ to decide
BOJ monetary policy is not aimed at guiding FX levels
Closely monitoring FX market

Former Bank of Japan Exec Director says Bank of Japan unlikely to raise rates this month

The BoJ meet July 30 and 31

Hideo Hayakawa is a former Bank of Japan Executive Director and now a Senior Fellow at the Tokyo Foundation for Policy Research.

He spoke in an interview with Bloomberg, saying “I don’t think there’s a chance of a rate hike in July”:

The Bank of Japan is unlikely to raise interest rates this month
Will instead cut its bond buying a little more than expected to avoid any fueling of yen weakness

Bloomberg is gated.

Japan data – June exports & imports

Japan trade data for June 2024
exports +5.4% y/y (expected 6.4%)
imports +3.2% y/y (expected 9.3%)

Exports to:

China +7.2% y/y
the EU -13.4% y/y
the US +11% y/y

Cryptocurrency News

Ethereum ETFs Could Spark New All-Time High, But Face Potential Grayscale Barrier

Ethereum (ETH) is down 0.4% on Thursday amid speculation about the potential negative impact of Grayscale’s Ethereum Trust fees and ETH dump from the Ethereum Foundation.

Daily digest market movers:

Grayscale’s fee: The Grayscale Ethereum Trust 2.5% fee has left many investors frustrated, as the asset manager maintained the high fee structure it applied to Bitcoin ETFs. Several analysts predict that this move may result in increased outflow from Grayscale’s Ethereum Trust, similar to its Bitcoin counterpart when ETH ETFs go live. This could cancel out potential inflows for other Ethereum ETFs and reduce the upward impact on ETH’s price.
Ethereum Foundation dump: An Ethereum Foundation-related wallet is suspected of dumping ETH after depositing 1,602 ETH worth $5.48 million to Kraken in recent hours following a recent price dip.

While an all-time high for Ethereum may be possible if it moves above a key resistance level, these potential barriers could impact its performance.

Shiba Inu Crushed by Over 5 Trillion SHIB Transfer

Shiba Inu (SHIB), one of the largest meme coins in the crypto ecosystem, experienced a steep correction early on Thursday after an Indian cryptocurrency exchange was exploited for over $102 million in SHIB tokens.

The hacker offloaded their assets, causing panic selling from traders and leading to a mass sell-off of Shiba Inu tokens. As a result, the meme coin lost 8% of its value on that day.

Data from CryptoQuant shows over 5 trillion SHIB tokens were moved to crypto exchanges within hours, indicating a large volume of the token to be sold. The transfers are likely due to panic selling by traders in response to the WazirX exploiter offloading their SHIB holdings.

At the time of writing, Shiba Inu traded at $0.00001711.

Ripple Traders Realize Over $111 Million in Gains, as XRP Suffers Steep Correction to $0.57

Between July 12 and 18, Ripple (XRP) traders took over $111 million in profits on their holdings, according to data from Santiment. This profit-taking led to a steep correction for XRP, which dropped by 7% on Thursday alone.

The cryptocurrency currently trades at around $0.58, just below the key psychological level of $0.60. The recent surge in XRP’s price had seen it reach a peak of $0.6378 on July 17.

However, the selling pressure from profit-taking activities has erased those gains for now. The US Securities and Exchange Commission (SEC) vs. Ripple lawsuit remains unresolved, with no sign of settlement or end in sight.

Rumors surrounding a potential settlement, as well as expectations that the lawsuit would be resolved ahead of July 31, were market movers for XRP. The cryptocurrency rallied to its local top on Binance before dipping again.

Other factors influencing XRP’s performance include Bitcoin reaching past $65,000 and anticipation surrounding the approval of a Spot Ethereum Exchange Traded Fund (ETF).

While attorney Fred Rispoli predicted that the SEC vs. Ripple lawsuit could be settled by the end of July 2024, there are no new filings in the lawsuit, and no evidence of a settlement.

On-chain data shows that XRP traders took over $111 million in gains between July 12 and 18, leading to increased selling pressure on the altcoin and pushing it lower.

The network realized profit/loss metric displayed positive spikes during this timeframe, indicating that profit-taking occurred within the specified window. The active addresses metric also showed a rising trend, signaling an increase in activity related to profit-taking.

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Round up of today’s market news

ByBilals Tech