Round up of today’s market news

North American News

NASDAQ Experiences Steepest Decline Since November 2022 as Tech Stocks Tumble

Summary: Major US stock indices experienced their worst trading day since the end of 2022, with the NASDAQ leading the decline, followed by the S&P and Dow. The late-day sell-off pushed the NASDAQ below a critical retracement level, signaling a significant downturn for the broader market and tech stocks.

Key Points:

1. Index Performance:
   • NASDAQ: Closed down -3.64%, marking its worst day since November 2, 2022.
   • S&P 500: Closed down -2.32%, its worst day since December 15, 2022.
   • Dow Industrial Average: Fell -1.25%, closing below the 40,000 level at 39,853.86.
2. Final Numbers:
   • Dow: Fell -504.22 points or -1.25%, closing at 39,853.86.
   • S&P 500: Fell -128.63 points or -2.32%, closing at 5,427.12.
   • NASDAQ: Fell -654.94 points or -3.64%, closing at 17,342.41.
   • The NASDAQ has fallen -7.20% from its most recent high.
3. Technical Analysis:
   • The NASDAQ index dropped below its 38.2% retracement level from the May 21 low, indicating a significant technical breakdown.
4. Impact on Major Stocks:
   • The “Magnificent 7” stocks saw significant declines from their recent highs:
     • Tesla: Down -20.77%.
     • Meta Platforms: Down -15.5%.
     • Amazon: Down -10.3%.
     • Nvidia: Down -19.41%.
     • Apple: Down -8.18%.
     • Alphabet: Down -10.39%.
     • Microsoft: Down -8.70%.

The substantial declines in major tech stocks and broader indices highlight growing market volatility and investor uncertainty. The drop below key technical levels for the NASDAQ further underscores potential bearish sentiment in the near term.

IBM and Chipotle Shine with Earnings Beats, Ford Misses EPS Estimates

Summary: IBM and Chipotle saw significant gains in after-hours trading after surpassing revenue and EPS estimates, while Ford’s shares dropped due to a disappointing earnings report.

Key Earnings Reports:

1. IBM:
   • After-Hours Trading: Shares up 4.06%.
   • Revenue: $15.77 billion (vs. $15.62 billion estimate) – BEAT.
   • EPS: $2.43 (vs. $2.20 estimate) – BEAT.
2. Chipotle:
   • After-Hours Trading: Shares up 12.13%.
   • Revenue: $2.97 billion (vs. $2.94 billion estimate) – BEAT.
   • EPS: $0.34 (vs. $0.32 estimate) – BEAT.
3. ServiceNow:
   • After-Hours Trading: Shares up 4.67%.
   • Revenue: $2.63 billion (vs. $2.61 billion estimate) – BEAT.
   • EPS: $3.13 (vs. $2.84 estimate) – BEAT.
4. Ford:
   • After-Hours Trading: Shares down -9.73%.
   • Revenue: $47.8 billion (vs. $44.02 billion estimate) – BEAT.
   • EPS: $0.47 (vs. $0.68 estimate) – MISS.

The contrasting performances of these companies highlight the varied outcomes in the earnings season, with IBM and Chipotle delivering strong results, while Ford struggles to meet earnings expectations despite a revenue beat.

U.S. Treasury auctions off $70 billion of the 5-year note at a high yield of 4.121%

• WI level at the time of the auction 4.110%

• High-yield 4.121%
• WI level at the time of the auction 4.110%
• Tail 1.1 basis point versus a six month average of 0.5%
• Bid to cover 2.40X versus six month average of 2.36X
• Dealers 13.97% vs six month average of 16.3%
• Directs (domestic investors) 18.78% vs six month average of 17.9%
• Indirects (international investors) 67.25% versus the six month average of 65.8%

Atlanta Fed GDPNow growth estimate for 2Q comes in at 2.6% vs 2.7% previously

• This is the final estimate before the Q2 advanced GDP report which will be released tomorrow at 8:30 AM ET

The Atlanta Fed GDPNow growth estimate for 2Q comes in at 2.6% versus 2.7% previously. This will be the last model report for the 2Q. smart 8:30 AM, the advanced GDP will be released. The survey of economists estimates a lower value at 2.0%.

In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 2.6 percent on July 24, down from 2.7 percent on July 17. After recent releases from the US Census Bureau and the National Association of Realtors, a decrease in the nowcast of second-quarter real gross private domestic investment growth from 8.9 percent to 7.7 percent was partially offset by an increase the nowcast of the contribution of the change in real net exports to second-quarter real GDP growth from -0.75 percentage points to -0.65 percentage points.

US July flash services PMI 56.0 vs 55.0 expected

• Latest data release by S&P Global – 24 July 2024

• Services PMI 56.0 vs. 55.0 expected and 55.3 prior.
• Manufacturing PMI 49.5 vs. 51.7 expected and 51.6 prior.
• Composite PMI 55.0 vs. 54.8 prior.

Key Findings:

• Flash US PMI Composite Output Index(1) at 55.0 (June: 54.8). 27-month high.
• Flash US Services Business Activity Index(2) at 56.0 (June: 55.3). 28-month high.
• Flash US Manufacturing Output Index(4) at 49.5 (June: 52.1). 6-month low.
• Flash US Manufacturing PMI(3) at 49.5 (June: 51.6). 7-month low.

Comment:

Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“The flash PMI data signal a ‘Goldilocks’ scenario at the start of the third quarter, with the economy growing at a robust pace while inflation moderates.”

“Output across manufacturing and services is expanding at the strongest rate for over two years in July, the survey data indicative of GDP rising at an annualized rate of 2.5% after a 2.0% gain was signaled for the second quarter.”

“The rate of increase of average prices charged for goods and services has meanwhile slowed further, dropping to a level consistent with the Fed’s 2% target.”

“The good news is qualified, however, with both the growth and inflation pictures containing some worrying elements to monitor in the coming months.”

“From the output perspective, growth has become worryingly skewed, with manufacturing slipping back into contraction as the service sector gains further strength. Some of the production decline was linked to staff shortages, so could prove temporary – something which is supported by the sector reporting improved confidence about future growth prospects. However, both manufacturers and service providers are reporting heightened uncertainty around the election, which is dampening investment and hiring.”

“In terms of inflation, the July survey saw input costs rise at an increased rate, linked to rising raw material, shipping and labour costs. These higher costs could feed through to higher selling prices if sustained, or cause a squeeze on margins.”

US new home sales for June 0.617M vs 0.640M estimate

• US new home sales for June 2024

• Prior month 0.619M annualized (lowest level since December 2023. The high level came in at 0.693M annualized pace) revised to 0.621M
• New-home sales 0.617M which is lower than the estimate of 0.640M

Details:

• Sales of New Single-Family Houses:
  • June 2024: Seasonally adjusted annual rate of 617,000
  • 0.6% below the revised May rate of 621,000
  • 7.4% below the June 2023 estimate of 666,000
• Sales Price:
  • Median sales price: $417,300 flat YoY.
  • Average sales price: $487,200
• Inventory and Months’ Supply:
  • Seasonally-adjusted estimate of new houses for sale at the end of June: 476,000
  • Represents a supply of 9.3 months at the current sales rate

US preliminary wholesale inventories for June +0.2% versus 0.5% estimate

• US wholesale inventories for June 2024

• Prior month was 0.6%
• Wholesale inventories advanced for June 0.2% versus 0.5% estimate.
• Retail inventories ex auto 0.2% versus revised -0.1% last month (from 0.0%)

US goods trade balance for June -$96.8 billion versus $-98.8 billion estimate

• US goods trade balance for June 2024
• Prior month $-98.4 billion revised to $-99.37 billion
• Trade deficit for June $-96.8 billion versus expectations of $-98.8 billion

US MBA mortgage applications w.e. 19 July -2.2% vs +3.9% prior

• Latest data from the Mortgage Bankers Association for the week ending 19 July 2024

• Prior +3.9%
• Market index 209.3 vs 214.1 prior
• Purchase index 134.8 vs 140.4 prior
• Refinance index 614.9 vs 613.0 prior
• 30-year mortgage rate 6.82% vs 6.87% prior

Former Fed’s Dudley: It may be too late to fend off a recession

• Former Fed Governor changes his tune. Looks for a cut now.

Overnight, Fed’s Dudley to Bloomberg said that:

• Historically deteriorating labor markets generate a self reinforcing feedback loop
• When jobs are hard to find, household trim spending, the economy weakens, and businesses reduce investment, which leads to layoffs and further spending cuts.
• Although it might already be too late to fend off a recession, dawdling now unnecessarily increases the risk

Bank analysts see a higher USD if Trump wins the election – despite his talk of lower

• Trump tariffs, and then retaliation, will fuel a rising greenback say the analysts

Bloomberg (gated) gathered together views on the USD from Deutsche, Barclays, and Morgan Stanley.

• Deutsche Bank say that tarriffs & associated stronger implications for the USD are significantly more likely to be dominant than stated polices to seek a weaker USD
• Barclays say in isolation the tariff risk is enough to support a rally for the USD … but full retailiation for the Trump tariffs could send the dollar 4% higher against FX such as the yuan.
• Morgan Stanley also say that higher Trump tariffs will strengthen the dollar, and even more os when retailiation occurs. MS say its difficult for intervention to alter the trajectory

Bank of Canada’s Macklem. We need to be more symmetric in our policy

• BOC Macklem press conference

• There is enough excess supply in the economy to bring inflation back down toward 2% target
• We need to be more symmetric in our policy
• Canada does not need more excess supply, it needs growth and job creation to start picking up
• indicators are suggesting that broad base price pressures are easing
• If inflation continues to move down as we expect, it is reasonable to expect lower rates.
• We don’t want to predetermine policy
• There was a clear consensus to cut by 25 basis points
• There was a clear consensus that the expected path of rates is lower but we are not on a predetermined path
• Broad agreement that inflation is going to come down, but progress can be uneven. We need to watch the opposing forces.
• Our assessment is that monetary policy is still restrictive. That is why we have cut our policy right at the last two meetings.
• We are determined to get inflation to 2% but we don’t want the economy to weaken too much to push inflation below 2%.
• We have a long-standing housing imbalance pushed by a structural imbalance from increase in population
• Households are cutting back on discretionary spending
• Canadians are feeling the pinch from higher grocery prices. Rates coming down should help the consumer.
• Getting a job is harder for new immigrants, for young workers.
• The divergence is widening vs the US. There is limits on how diverged policy can go.
• With inflation moving lower in the US, my feeling is the divergence vs the US will not be particularly serious
• Inflation disproportionately affects.lower income Canadians

BOCs Macklem’s press conference opening statement

• Bank of Canada reduces interest rates to 4.5% as inflation moderates, signaling potential for further cuts. Economic growth expected to pick up in 2024 and 2025, with household spending remaining weak.

Good morning. I’m pleased to be here with Senior Deputy Governor Carolyn Rogers to discuss the July Monetary Policy Report (MPR) and today’s policy announcement.

Today, we lowered our policy interest rate a further 25 basis points to 4.5%.

This decision reflects three key considerations.

First, monetary policy is working to ease broad price pressures.

Second, with the economy in excess supply and slack in the labour market, the economy has more room to grow without creating inflationary pressures.

Third, as inflation gets closer to the 2% target, the risk that inflation comes in higher than expected has to be increasingly balanced against the risk that the economy and inflation could be weaker than expected.

Looking ahead, we expect inflation to moderate further, though progress over the next year will likely be uneven. This forecast reflects the opposing forces affecting inflation. The overall weakness in the economy is pulling inflation down. At the same time, price pressures in shelter and some other services are holding inflation up. We are increasingly confident that the ingredients to bring inflation back to target are in place. But the push-pull of these opposing forces means the decline in inflation will likely be gradual, and there could be setbacks along the way.

If inflation continues to ease broadly in line with our forecast, it is reasonable to expect further cuts in our policy interest rate. The timing will depend on how we see these opposing forces playing out. In other words, we will be taking our monetary policy decisions one at a time.

Let me highlight some of the economic dynamics covered more fully in the MPR.

Economic growth in Canada has picked up but remains weak relative to population growth. Household spending has been soft. Pent-up demand for things like new cars and travel is fading. And many families are setting aside more of their income for debt payments, leaving less money for discretionary spending.

In the labour market, employment has continued to grow more slowly than the labour force. Job seekers are now taking longer to find work, and the unemployment rate has risen to 6.4%. The job vacancy rate has come down significantly, and reports of labour shortages are now below normal. Overall, indicators suggest some slack in the labour market. Wage growth is also showing signs of moderating, although it remains elevated.

Looking ahead, economic growth is expected to increase in the second half of 2024 and through 2025. This reflects stronger exports and a recovery in household spending as borrowing costs ease. Business investment is also expected to strengthen as demand picks up, and residential investment is forecast to grow robustly. Overall, with the economy strengthening, excess supply will be absorbed next year and into 2026.

CPI inflation moderated to 2.7% in June after increasing in May, and broad inflationary pressures continued to ease. The Bank’s preferred measures of core inflation have now been below 3% for several months and the breadth of price increases across components of the CPI is near its historical average. Corporate pricing behaviour has largely normalized, and near-term inflation expectations have come down, although they are still above normal. However, shelter price inflation remains high. Inflationary pressures are also evident in services that are closely affected by wages, such as restaurants and personal care.

The Bank’s preferred measures of core inflation are expected to slow to about 2½% in the second half of 2024 and ease further in 2025. CPI inflation is forecast to come down below core this fall and settle sustainably around the 2% target next year, but it’s unlikely to be a straight line.

As always, there are risks around our inflation outlook. Globally, geopolitical uncertainty is high. Here in Canada, the biggest downside risk is that household spending could be weaker than expected. On the upside, inflation in shelter and other services could prove more persistent.

Let me conclude. With broad price pressures continuing to ease and inflation expected to move closer to the 2% target, Governing Council decided to reduce the policy interest rate by a further 25 basis points.

In recent months, we have continued to make progress bringing inflation down. With the target in sight and more excess supply in the economy, the downside risks are taking on increased weight in our monetary policy deliberations. We need growth to pick up so inflation does not fall too much, even as we work to get inflation down to the 2% target.

We are carefully assessing the downward pull on inflation from ongoing excess supply, and the pressures from shelter and other services that are holding inflation up. Monetary policy decisions will be guided by incoming information and our assessment of their implications for the inflation outlook. The Bank remains resolute in its commitment to restoring price stability for Canadians.

With that summary, the Senior Deputy Governor and I would be pleased to take your questions.

The Bank of Canada cuts rates by 25 basis points to 4.50% from 4.75%

• The Bank of Canada interest rate decision for July 2024

The Bank of Canada cut rate by 25 basis points to 4.5%.

Highlights from the Macklem’s prepared text:

• BoC lowered the policy interest rate by 25 basis points to 4.5%.
• Key considerations for the decision:
  • Monetary policy is easing broad price pressures.
  • Economy has excess supply and slack in the labor market, allowing for growth without inflation.
  • Balancing risk of higher-than-expected inflation with risk of weaker-than-expected economy and inflation.
• Inflation is expected to moderate, with progress being uneven due to opposing forces.
• Further interest rate cuts are possible if inflation eases as forecasted; decisions will be made based on evolving economic conditions.
• Economic growth in Canada remains weak relative to population growth; household spending is soft and debt payments are high.
• The labor market shows some slack, with a rising unemployment rate and moderating wage growth.
• Economic growth is expected to increase in the latter half of 2024 and through 2025 due to stronger exports, recovery in household spending, and robust residential investment.
• CPI inflation moderated to 2.7% in June; core inflation measures have been below 3% for several months.
• Inflation in shelter and wage-affected services remains high.
• Core inflation is expected to slow to about 2.5% in the second half of 2024 and ease further in 2025.
• CPI inflation is forecast to settle around the 2% target next year, though not in a straight line.
• Risks to the inflation outlook include geopolitical uncertainty and potential weaker household spending in Canada.
• BoC is committed to restoring price stability for Canadians.

All analysts surveyed expect the Bank of Canada to cut by 25bp today, Wednesday, July 24

• Wall Street Journal survey ahead of the BoC policy meeting

The survey referred to is conducted by the Wall Street Journal:

• All 14 economists surveyed last week by The Wall Street Journal predicted Canada’s central bank would cut its benchmark rate by a quarter point, to 4.5%.
• majority of analysts surveyed expect the policy rate to end 2024 at 4%, and move lower still next year to 3%
• BOC surveys showed that “high interest rates and elevated price levels are dampening aggregate demand through many channels,” said Dominique Lapointe, head of macro strategy at Manulife Investment Management.
• “Inflation was sufficiently tame in June after the pop in May, while the broader economic backdrop remains soft. The latter suggests there’s more disinflationary pressure coming,” said Benjamin Reitzes, an economist at BMO Capital Markets.

The Journal is gated, here is the link if you can access it.

Commodities

Gold Price Steadies Around $2,400 Amid Risk Aversion and Economic Developments

Summary: Gold prices remained stable around $2,400, despite reaching a daily high of $2,432, supported by a risk-off sentiment and forecasts of an upcoming rate cut by the Federal Reserve. Additional support came from India’s decision to slash import taxes on precious metals, boosting demand.

Key Points:

1. Price Action:
   • Gold hit a high of $2,432 before stabilizing near $2,400.
   • Late in the North American session, gold is virtually unchanged, maintaining around $2,400.
2. Federal Reserve Rate Cut Expectations:
   • The FedWatch Tool forecasts a 100% chance of a 25 bps rate cut in September.
   • Market participants estimate 53 bps of easing for 2024, based on December 2024 fed futures rate contracts.
3. Economic Data:
   • US Goods Trade Balance for July showed a narrower deficit than expected.
   • S&P PMI report indicated mixed business activity, with manufacturing contracting for the first time since December 2023.
4. Currency Impact:
   • The US Dollar Index (DXY) edged down 0.08% to 104.38, with the dollar remaining under pressure but trimming losses.
5. International Influence:
   • India’s reduction of import taxes on precious metals from 15% to 6% spurred additional demand for gold.
6. Market Sentiment:
   • Risk-off mood among traders helped lift spot gold prices to a three-day peak.
   • Bullion traders are buoyed by expectations of monetary easing and international demand dynamics.

The combination of anticipated Federal Reserve rate cuts, favorable economic data, and increased international demand, particularly from India, has helped gold prices maintain their stability around the $2,400 mark.

Crude oil settles at $77.59

• Closes up $0.63 or 0.82%

Crude oil futures are settling at $77.59. That is up $0.63 or 0.82%. The rise today snaps a four-day losing streak. Inventory data showed a surprise drawdown in crude, gasoline, and distillates. That helped to support the gains.

EIA weekly crude oil inventories drawdown of -3.741M vs drawdown of -1.583M estimate

• The EIA weekly oil inventory data

EIA numbers are out:

• Crude oil drawdown of -3.741M vs drawdown of -1.583M estimate
• Distillates drawdown of -2.753M vs build of +0.249M estimate
• Gasoline drawdown of -5.572M vs drawdown of -0.391M estimate
• Distillates: -2.753M

Deputy PM Novak: Russia cut oil production in July, nearly to OPEC agreed target level

• Russian Deputy Prime Minister Alexander Novak spoke with media on Tuesday ICYMI

Russian news outlet Interfax had the comments from Novak on Tuesday:

• “We have nearly reached it [the required level of oil output within OPEC+]. We are close to it. We have somewhat ‘underperformed’ the target at full volume, so to speak,”
• said that the Energy Ministry would send the OPEC Secretariat a schedule for offsetting the barrels produced above the quota going forward. Countries that have not reduced production enough as per the OPEC+ agreements will offset those volumes until the end of September 2025.

Oil Private survey of inventory shows 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 -3.9 million (exp. +0.7 million)
• Gasoline -2.8 million
• Distillates -1.5 million
• Cushing -1.6 million
• SPR +700,000

EU News

European major indices close lower

• Spain’s Ibex near unchanged. German DAX/ France CAC down above and below 1%

Major European indices moved and closed lower on the day. The declines were led by German DAX and France CAC.. Germany’s flash services and manufacturing indices were lower than expectations. France’s manufacturing index was lower as well.

The final numbers:

• German DAX -0.92%
• France CAC, -1.12%
• UK FTSE 100 -0.17%
• Spain’s Ibex -0.02%
• Italy’s FTSE MIB -0.48%

Eurozone July flash services PMI 51.9 vs 53.0 expected

• Latest data released by HCOB – 24 July 2024

• Prior 52.8
• Manufacturing PMI 45.6 vs 46.1 expected
• Prior 45.8
• Composite PMI 50.1 vs 51.1 expected
• Prior 50.9

The growth in the Eurozone economy has stalled in July, with services activity growing at a slower pace and manufacturing conditions continuing to dawdle. The former reading is a 4-month lower while the latter reading is a 7-month low. That suggests weaker economic sentiment in the euro area to kick start the second half of the year.

On the inflation front, input prices rose sharply to a 3-month high while output prices also increased but at a slightly softer pace. Meanwhile, cost prices continued to tick higher with selling prices also increasing particularly in the services sector. HCOB notes that:

“Is this the summer lull? It feels a bit like it as the Eurozone economy barely moved in July, according to the HCOB Flash Eurozone PMI. But beside the fact that we are talking about seasonally adjusted figures, looking at the two monitored sectors the situation deteriorated significantly in the manufacturing sector and counteracted moderate growth in the services sector. According to our GDP Nowcast, growth in the third quarter is still on the cards, however.

“It’s unsettling how steadily companies in the manufacturing sector are slashing jobs month by month. The pace has barely changed over the last ten months. As employment has broadly fallen at a slower rate than output, this hints at two things: companies are a bit cautious about trimming staff as there may still be some hope for better times. And secondly, labour productivity is diminishing which bodes ill for growth perspectives. As a result, an eventual recovery will likely be followed by a rather large lag in employment growth.

“While Germany is seemingly struggling to grow, the French economy is being fueled by the Olympic Games. According to anecdotal evidence, French service providers increased their business activity in July due to the preparation for the Olympic Games. In contrast, demand in the German manufacturing sector seems to have dragged down overall private sector output.

“If only growth was considered, you find a strong argument for a rate cut in September by the ECB. However, prices data did not provide hoped for relief. Input prices in the services sector increased at a faster rate and selling prices rose at a similar pace to the previous survey period. To make things worse, input prices in manufacturing, which fell for more than a year between March 2023 and May 2024, have now increased for two months straight. Output prices fell only fractionally, which may make it more difficult for overall inflation to make the necessary progress towards the 2 percent target. Our conclusion is that while a September rate cut will most probably be exercised, it will be much trickier to follow this path in the months thereafter, unless the downturn morphs into a deep recession.”

Germany July flash services PMI 52.0 vs. 53.1 expected

• Latest data released by HCOB – 24 July 2024

• Services PMI 52.0 vs. 53.1 expected and 53.1 prior.
• Manufacturing PMI 42.6 vs. 44.0 expected and 43.5 prior.
• Composite PMI 48.7 vs. 50.7 expected and 50.4 prior.

Key Findings:

• HCOB Flash Germany Composite PMI Output Index(1) at 48.7 (June: 50.4). 4-month low.
• HCOB Flash Germany Services PMI Business Activity Index(2) at 52.0 (June: 53.1). 4-month low.
• HCOB Flash Germany Manufacturing PMI Output Index(4) at 42.2 (June: 45.1). 9-month low.
• HCOB Flash Germany Manufacturing PMI(3) at 42.6 (June: 43.5). 3-month low.

Comment:

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“This looks like a serious problem. Germany’s economy fell back into contraction territory, dragged down by a steep and dramatic fall in manufacturing output. The hope that this sector could benefit from a better global economic climate is vanishing into thin air. With the composite PMI now below 50, our GDP Nowcast predicts that economic output will shrink by 0.4% in the third quarter compared to the second quarter. While it is still early days and many data points are yet to come, the second half of the year is starting on a very weak note.”

“Improvement is not in sight in the manufacturing sector as new orders fell at the quickest rate in three months. This aligns with the accelerated declines in the backlog of orders and the volume of purchased materials. The weakness in the manufacturing sector appears to be persistent, with a potential rebound not expected until at least the fall of this year.”

“The elephant in the room is the various structural issues. With respect to the manufacturing sector, the main structural challenges include labour market shortages, an investment backlog in infrastructure, a lack of digitalization, and relatively high energy prices. However, the most significant factor impacting the German manufacturing sector is the increasing loss of global market share of German car and machinery producers to competitors in China. Unfortunately, this problem is here to stay.”

“Germany’s economic downturn is somewhat buffered by a still-growing service sector. However, the situation there is far from comfortable. Firms have even cut jobs, and outstanding business declined faster than in the previous month. Moreover, it appears that the mini boom in tourism, which could be associated with the European football championships, was already over in July as new export business in services shrank.”

Germany August GfK consumer sentiment -18.4 vs -21.0 expected

• Latest data released by GfK – 24 July 2024

• Prior -21.8; revised to -21.6

German consumer morale recovers significantly going into August as income expectations for households hit the highest in over two years. That comes amid stronger wage increases and slightly lower inflation, according to GfK. That said, the institute does warn that while the signs are promising, “it can also as quickly disappear again”.

France July flash services PMI 50.7 vs 49.8 expected

• Latest data released by HCOB – 24 July 2024

• Prior 49.6
• Manufacturing PMI 44.1 vs 45.8 expected
• Prior 45.4
• Composite PMI 49.5 vs 49.0 expected
• Prior 48.8

Both the services and composite readings are 3-month highs but the manufacturing reading is a 6-month low. That once again speaks to the contrast in the two sectors, not just for France but across the euro area as well. The good news at least is that services activity has returned to growth, albeit marginally. That likely owes in part to the Paris Olympics.

However, price pressures did intensify on the month and that will be something that could bite at the ECB’s plans to cut rates in September if the trend persists across the region. HCOB notes that:

“The Olympic Games are fuelling the French economy. Business activity increased for French service providers for the first time in three months. According to anecdotal evidence, this is partially due to the Olympic Games. Additionally, companies reported higher output due to the end of the election period, which led to more certainty.

“The French economy seems on track for a recovery in the second half of the year, a recovery led by the service sector, but both input and output prices remain a challenge for the French economy as inflation rates accelerated. Higher raw material prices drove up input prices and led to the fastest increase in selling prices over the last three months.

“The French economy is projected to grow by 0.3% in the third quarter, according to our HCOB GDP Nowcast, due to the service sector expansion being signalled by the HCOB Flash PMIs. On the other hand, the industrial sector is expected to fall by almost 1% compared to the previous quarter.

“Lower demand and higher input prices appear to have worsened French manufacturers’ outlook for the next 12 months. The corresponding index for future output expectations dropped by almost three index points. Demand overall and from abroad weakened due to delays from customers.”

UK July flash services PMI 52.4 vs 52.5 expected

• Latest data release by S&P Global – 24 July 2024

• Services PMI 52.4 vs. 52.5 expected and 52.1 prior.
• Manufacturing PMI 51.8 vs. 51.1 expected and 50.9 prior.
• Composite PMI 52.7 vs. 52.6 expected and 52.3 prior.

Key Findings:

• Flash UK PMI Composite Output Index(1) at 52.7 (Jun: 52.3). 2-month high.
• Flash UK Services PMI Business Activity Index(2) at 52.4 (Jun: 52.1). 2-month high.
• Flash UK Manufacturing Output Index(3) at 54.4 (Jun: 53.3). 29-month high.
• Flash UK Manufacturing PMI(4) at 51.8 (Jun: 50.9). 24-month high.

Comment:

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“The flash PMI survey data for July signal an encouraging start to the second half of the year, with output, order books and employment all growing at faster rates amid rebounding business confidence, while price pressures moderated.”

“The first post-election business survey paints a welcoming picture for the new government, with companies operating across manufacturing and services having gained optimism about the future, reporting a renewed surge in demand and taking on staff in greater numbers. Prices have meanwhile risen at their lowest rate for three and a half years, further raising the prospect of a summer rate cut.”

“However, policymakers will likely take a cautious approach to loosening policy amid signs of inflationary pressures pivoting away from services towards manufacturing, where Red Sea shipping delays and higher freight prices are adding to costs again. The renewed hiring trend could also add to pay pressures, sustaining some stickiness of inflation in the coming months.”

Germany reportedly to hold general elections on 28 September next year

• This according to German press agency, dpa

The newswire says that the date had been decided by the German cabinet. It has to be held at the latest by 26 October 2025 and no earlier than 31 August 2025. So, this is right smack in the middle of the expected period in autumn.

This will be the elections for the federal parliament, with 630 seats up for grabs in the Bundestag (as of now). For some context, the last election in 2021 resulted in a “traffic light” coalition taking charge between the SPD, FDP, and Greens. That broke the previous “grand coalition” between the SPD and CDU/CSU.

The ECB wants to cut rates further but it still hasn’t gotten the green light yet

• If it were just based on the economy, the PMI data today would reaffirm expectations for a cut in September

But alas, the ECB has to keep their focus on inflation pressures first and foremost. If growth expectations were the main argument, there would be a strong reason to push with a rate cut in September after the PMI data earlier. Instead, the situation now presents a bit of a headache for the central bank.

The economy is starting to slow down again after a resilient showing in Q1, followed by marginal growth in Q2. However, there hasn’t been too much progress on the inflation front over the last two to three months especially.

 From the PMI data today, HCOB noted that:

“Prices data did not provide hope for relief. Input prices in the services sector increased at a faster rate and selling prices rose at a similar pace to the previous survey period. To make things worse, input prices in manufacturing, which fell for more than a year between March 2023 and May 2024, have now increased for two months straight. Output prices fell only fractionally, which may make it more difficult for overall inflation to make the necessary progress towards the 2% target. Our conclusion is that while a September rate cut will most probably be exercised, it will be much trickier to follow this path in the months thereafter, unless the downturn morphs into a deep recession.”

UK data shows continued strong wage growth

• Bank of England meet next week – will publish new inflation forecasts

Reuters with the info, on a survey covering wage negotiations:

• data based on 145 pay settlements covering 370,000 employees
• employers offered average annual pay settlements of 4.9% in the three months to June, unchanged from the previous month

The implication:

• strong wage growth that may sustain the Bank of England’s inflation worries

More here

Asia-Pacific-World News

Five factors that will drive global equites higher in H2 of 2024 – HSBC

Snippet via HSBC on likely potential tailwinds for stock markets globally in this second half the year.

Analysts at the bank say their discussion with clients indicate to much attention being paid to downside risks, and overlooking 5 key potential triggers for higher prices yet to come:

• Earnings reports remain positive
• The ‘Goldilocks macroeconomic landscape to underpin valuations
• Ongoing momentum in artificial intelligence developments
• Market breadth improvement
• Little sign of clear sell signals

PBOC sets USD/ CNY mid-point today at 7.1358 (vs. estimate at 7.2795)

• PBOC CNY reference rate setting for the trading session ahead

In open market operations:

• PBOC injects 66bn yuan via 7-day RR, sets rate at 1.7%
• 270 billion yuan mature today
• and thus it’s a net drain of 204bn yuan

Australian flash PMI (July): Manufacturing 47.4 (prior 47.2) Services 50.8 (prior 51.2)

• S&P Global / Judo Bank flash Australian PMIs for July 2024

Judo Bank S&P Global PMI Flash / Preliminary for July 2024

While manufacturing is up a touch, services is down. Composite (reflecting both) is down. 

Comments from the report, Warren Hogan, Chief Economic Advisor at Judo Bank, in brief:

• Flash PMI report is an early read on Australia’s economy in July and probably doesn’t capture the impact of tax cuts and cost-of-living support measures on household budgets and consumer spending. This will take some time to flow through to business conditions but should be expected to provide a boost over the months ahead.
• Employment continued to soften in July, with the composite employment index just above the 50 index level.
• Official data show that most of the job creation in Australia over the past year has come from the public sector and related industries, with the so called market sector employment trends slowing rapidly in 2024
• while the demand for labour in many businesses is holding up, it’s weakest since the start of the pandemic in 2020.
• Weaker activity results are not translating into a notable fall in inflation pressures across the business community.

Australia Q2 CPI preview – “June CPI should not close the door on a rate cut”

• RBA meet a week after the CPI report

Main points made by Westpac in thier CPI preview, saying “June CPI should not close the door on a rate cut”:

• Westpac confirms its June quarter CPI forecast of 1.0%qtr/3.8%yr which we first released on June 18 and left unchanged at our July 2 update.
• Our Trimmed Mean forecast is also unchanged at 0.9%qtr/4.0%yr.
• For June, our forecast for a 0.3% rise in the month, which would see the annual pace ease from 4.0%yr in May to 3.5%yr in June (we did have 3.6%yr in early July). June will provide a critical update on some services, including: rates & property charges, water & sewerage, child care, dental services, veterinary & other services for pets, and other financial services.
• As our Chief Economist Luci Ellis recently expressed “we not that special” and it is unlikely Australia would move in the opposite direction to global disinflationary forces.

Japan flash PMIs (July): Manufacturing 49.2 (prior 50.0) Services 53.9 (prior 49.4)

• S&P Global / Jibun Bank preliminary Japanese PMIs for July 2024

Jibun Bank S&P Global PMI Flash / Preliminary for July 2024 for Japan

Manufacturing PMI 49.2, first time under 50 (and into contraction) in 3 month

• expected 50.5, prior 50.0
• sub indexes show that output and new orders fell slightly, higher prices weigh on margins (input cost inflation to the highest since April 2023)
• new orders weakest since February

Services 53.9, to a 3 month high

• prior 49.4

Composite 52.6

• prior 49.7

BOJ rate hike next week reportedly to be a “close call”

• Reuters cites four sources familiar with the BOJ’s thinking, in saying that the Japanese central bank is likely to debate whether to raise interest rates at their meeting next week

The decision on whether to hike rates will be a “close call” and a “hard one to make”, according to one of the sources. Another said that it will be more of a “judgment call” in terms of whether to act this month or wait until later in the year. But one thing is for sure is that they will unveil plans of tapering bond purchases at a gradual pace, with the thinking to halve it in the coming years.

Going back to the rate decision, the sources say that while the BOJ board agrees on the need to raise interest rates in the short-term, there is no consensus on when that might take place.

Cryptocurrency News

Ethereum ETFs Surpass Expectations After Impressive First-Day Launch

Summary: Ethereum ETFs are off to a strong start, attracting significant investor interest and net inflows on their first day. Despite a slight dip in Ethereum’s price, the launch has been a milestone, potentially setting the stage for continued success and surpassing initial expectations.

Key Points:

1. Impressive First-Day Performance:
   • ETH ETFs captured $107 million in net inflows on the first day.
   • Total assets across the nine ETFs reached $10.2 billion, with over $1.1 billion in trading volume.
2. Comparison with Bitcoin ETFs:
   • ETH ETFs managed to attract 16% of BTC ETFs’ $655 million first-day net flows.
   • Adjusted for outflows from Grayscale’s ETHE, ETH ETFs captured 79% of BTC ETF flows.
   • ETH ETFs might exceed the anticipated $3 billion to $5 billion net flows within the first six months.
3. Market Reaction and Dynamics:
   • Ethereum’s price is down 1.8% on Wednesday, trading at $67,000.
   • Outflows from ETHE have offset some of the positive impact from new inflows.
   • ETH ETFs ended BTC ETFs’ 12-day streak of consecutive net inflows, drawing investor attention away from Bitcoin.
4. Future Prospects:
   • Analysts remain optimistic about ETH ETFs’ potential to drive further gains.
   • Options data suggests a possible brief decline before a bullish reversal in Ethereum’s price structure.

The successful launch of Ethereum ETFs highlights strong investor interest and may significantly influence Ethereum’s market dynamics in the coming months. Despite initial price fluctuations, the long-term outlook for ETH remains positive as institutional demand continues to grow.

Bitcoin Whales Accumulate Rapidly, Exchange Supply Hits Lowest Point Since 2021

Summary: Bitcoin is experiencing a significant accumulation phase, with whales and institutional investors driving demand. On-chain data indicates a substantial shift of Bitcoin to permanent holder addresses and custodial wallets, reducing the supply on exchanges to its lowest level since November 2021. This trend supports BTC’s recent price stability around $67,000.

Key Points:

1. Accumulation Phase:
   • 358,000 BTC has moved to permanent holder addresses in the past month.
   • Bitcoin Spot ETFs recorded a 53,000 BTC inflow, indicating strong institutional demand.
2. Exchange Supply:
   • Supply on exchanges has hit its lowest level since November 2021.
   • Despite Mt.Gox creditors receiving and transferring Bitcoin to centralized exchanges, the selling pressure remains low.
3. Market Conditions:
   • BTC is sustaining recent gains, hovering around $67,000 amidst widespread market optimism.
   • Whale accumulation and institutional demand are significant drivers of Bitcoin’s current price action.
4. Custodial Wallet Trends:
   • Bitcoin is moving to custodial wallets, indicating long-term holding and reducing circulating supply.
   • Rising reserves in custodial wallets combined with declining exchange supply lower the likelihood of a mass sell-off event.
5. Future Outlook:
   • Consistent institutional demand and whale accumulation are expected to drive further gains.
   • Net positive flows to Spot Bitcoin ETFs suggest ongoing support for BTC’s price.

These factors collectively support Bitcoin’s current price stability and hint at potential future gains as the supply on exchanges remains low and demand from institutional and whale investors continues to rise.

Bitcoin Consolidates Between Key Moving Averages

Summary: Bitcoin is currently consolidating between its 100-hour and 200-hour moving averages, with traders waiting for the next significant move. After reaching a high of $68,364 on July 22 and retesting this level on July 24, Bitcoin has settled in a narrow range, trading at $66,300.

Key Points:

1. Recent Price Action:
   • Bitcoin reached a high of $68,364 on July 22 and retested this level on July 24.
   • Following the retest, Bitcoin dipped below its rising 200-hour moving average but found limited downward momentum.
2. Current Trading Range:
   • 100-hour Moving Average: Currently at $66,945.
   • 200-hour Moving Average: Currently at $65,992.
   • Current Price: Trading at $66,300, between these two key levels.
3. Market Sentiment:
   • Buyers and sellers are settled within this range, awaiting the next significant movement.
   • A break above or below these moving averages is expected to bring momentum in the direction of the break.

Bitcoin traders are closely monitoring these levels, as a decisive move beyond the current range could indicate the next directional trend for the cryptocurrency.

Follow our recently launched pages. Join our community and never miss a beat in the dynamic world of trading.

https://www.facebook.com/BilalsTechLtd

https://www.linkedin.com/company/bilals-tech/

https://t.me/Market_Moving_News