Round up of today’s market news

North American News

US Stock Market Struggles Amid Tech Sell-Off; Dow Edges Higher

Summary: US stock markets faced continued declines with significant setbacks for tech giants such as Meta Platforms and Alphabet. Despite an initial rally, the S&P 500 and Nasdaq ended the day lower, while the Dow and Russell 2000 managed modest gains.

Key Points:

1. Market Performance:
   • Tech Decline: Major tech stocks experienced substantial losses, contributing to the overall market downturn.
   • Dow and Russell 2000 Gains: The Dow Jones Industrial Average and the small-cap Russell 2000 indices saw gains as funds shifted from tech to other sectors.
2. Indices Performance:
   • Dow Jones Industrial Average: Rose by 81.20 points or 0.20%, closing at 39,935.08.
   • S&P 500 Index: Fell by 27.89 points or 0.81%, closing at 5,399.23.
   • Nasdaq Index: Dropped by 160.69 points or 0.93%, closing at 17,181.72.
   • Russell 2000 Index: Gained 27.60 points or 1.26%, closing at 2,222.98.
3. Tech Giants’ Performance (Magnificent 7):
   • Meta Platforms: -1.70%
   • Amazon: -0.54%
   • Nvidia: -1.72%
   • Alphabet: -3.10%
   • Apple: -0.48%
   • Microsoft: -2.45%
   • Tesla: +1.97% (bucking the trend)
4. Major Losers:
   • Ford Motor (F): -18.36%
   • Stellantis NV (STLA): -7.70%
   • Western Digital (WDC): -7.67%
   • General Motors (GM): -5.08%
   • Boston Scientific (BSX): -4.50%
   • AMD (AMD): -4.39%
   • Stryker (SYK): -3.81%
   • Intuitive Surgical (ISRG): -3.81%
   • Qualcomm (QCOM): -3.16%
5. Market Volatility:
   • Early Rally: The S&P 500 and Nasdaq saw significant intraday gains before reversing course.
   • Overall Trend: Both indices ended lower despite early positive momentum.

Conclusion: The US stock market remains volatile, with tech stocks leading the decline. While the Dow and Russell 2000 saw gains, the broader indices faced challenges due to continued selling pressure in the technology sector. Investors are shifting focus from tech to underperforming sectors, reflecting broader market uncertainty.

US treasury auctions off $44 billion of the 7 year notes at a high yield of 4.162%

• WI level at the time of the auction 4.166%

• High-yield
• WI level at the time of the auction 4.166%
• Bid the cover 2.64X vs six-month average of 2.54X.
• Tail -0.4 basis points vs six-month average of 0.0 basis points
• Dealers 8.87% vs six-month average of 14.2%
• Directs (domestic buyers) 16.76% vs six-month average of 17.5%
• Indirects (international buyers) 74.38% vs six-month average of 68.3%

US initial jobless claims 235K vs. 238K expected

• The weekly US initial and continuing jobless claims

• Initial jobless claims 235K vs. 238K expected and 243K prior.
• Continuing Claims 1851K vs. 1860K expected and 1867K prior.

US GDP Advanced for Q2 2.8% vs 2.0% estimate

• The US GDP first look at the 2Q (it will be revised 3 or so times)

• Prior quarter 1.4%
• GDP Q2 2.8 % vs 2.0% estimate. The Atlanta Fed GDP now estimate was at 2.6%
• GDP sales 2.0% versus 1.9% estimate. Prior 2.0%
• GDP consumer spending 2.3% vs 1.5% prior
• GDP deflator 2.3% versus 2.6% estimate. Prior 3.1%
• GDP core PCE prices 2.9% versus 2.7% estimate. Prior 3.7%
• PCE prices advanced 2.6% vs 3.4% prior
• PCE ex food and energy and housing 2.5% vs 3.3% prior
• PCE services ex Energy and housing 3.3% vs 5.1% prior

Primarily consumer spending from increases in services and goods (up 2.3%). Also inventory increased this month (last quarter the inventories subtracted from GDP). The change in inventory added 0.8% vs a decline of -0.4% last quarter.

US advanced durable goods for June -6.6 % versus 0.3% expected

• US advance durable goods for June 2024

• Prior 0.1%
• Durable goods -6.6% versus +0.3% expected. Worst since April 2020
• Durable goods ex transport +0.5% versus +0.2% estimate. Prior 0.1%
• Durable goods ex Defense -7.0% versus unchanged last month (revised from -0.2%)
• Nondefense capital goods ex air +1.0% versus +0.2% expected. Prior month -0.9% versus -0.6% previously reported

$AAL American Airlines Q2 2024 Earnings:

— Adj EPS $1.09, est. $1.06
— Load Factor 86.6%, est. 85.5%
— Passenger Rev $13.2B, est. $13.21B
— Available seat miles 75.26B, est. 75.32B
— Sees FY Adj EPS $0.70 to $1.30, saw $2.25 to $3.25
— Sees Q3 Adj EPS about breakeven, est. $0.49
— Sees Q3 Capacity about +2% to +4%
— Sees Q3 TRASM about -2.5% to -4.5%
— Sees Q3 CASM ex-fuel about +1% to +3%
— Sees Q3 Adj Operating Margin about 2% to 4%

Former Fed Pres. Bullard: Fed is likely to signal they are ready to go in September

• Former St. Louis Fed Pres. James Bullard on CNBC

• Growth in the first half a year near 2%
• that is likely to begin to signal they may be ready to go in September
• These numbers are not pointing to a recession at this time
• Productivity increases not really there yet
• The economy is slowing but is slowing to the trend pace of growth. That’s a soft landing

ICYMI: Former NY Fed President Dudley says FOMC needs to cut next week, September too late

• “Waiting until September unnecessarily increases the risk of a recession.”

Dudley’s long held previous view was for a rate cut later this year, but:

• “The facts have changed, so I’ve changed my mind. The Fed should cut, preferably at next week’s policy-making meeting,”

The Fed meet on July 30 and 31.

Duds cites:

• the Fed’s efforts to cool the economy are having a visible effect
• signs of slowing growth are appearing in the the labor market
• three-month average unemployment rate rising 0.43% from its low point in the prior 12 months to a rate that could spark a recession, the rate is now very close to “the 0.5% threshold that, as identified by the Sahm Rule, has invariably signaled a US recession”
• inflation continues to slow, not “far above the central bank’s 2% objective”

Canada Average Weekly Earnings (YoY) (May)

• Actual: 4.20%
• Previous: 3.69%

Canadian Business Barometer

• Actual 55.4 (Forecast -, Previous 56.28)

David Rosenberg says more Bank of Canada rate cuts are needed, “still too high “

• The Bank of Canada cut by 25bp on Wednesday

From noted economist David Rosenberg, calling for plenty more to come:

The Bank of Canada’s decision to lower its key interest rate to 4.5% is the right move, and I predict more cuts are coming soon. Despite the recent dovish tone of BoC, current rates are still too high for an economy with such excess supply. I believe rates will eventually drop to 2%, and wouldn’t be surprised if we go lower.

Commodities

Gold Extends Weakness After Release of Robust US GDP Data

Summary: Gold continues its downward trend, trading in the $2,370s following the release of strong US GDP data. The precious metal is experiencing technical selling and broader market declines despite its traditional role as a safe haven during global growth concerns.

Key Points:

1. US GDP Data Impact:
   • Robust Data: The release of strong preliminary Q2 US GDP data has contributed to the sell-off in Gold.
   • PMI Data: Preliminary US S&P Global Purchasing Managers Index (PMI) data for July further supported the positive economic outlook.
2. Market Reaction:
   • Commodity Sell-Off: Gold’s decline is part of a broader sell-off in commodities, driven by global growth concerns.
   • Stock Market Declines: Widespread declines in stocks have also influenced Gold’s price movement.
3. Technical Factors:
   • Predicted Downward Movement: Gold’s weakness is partly due to technical selling within its predicted trading range.
   • Trading Range: The metal is trading over a percentage point lower, currently in the $2,370s.
4. Safe Haven Dynamics:
   • Growth Fears Ignored: Despite global growth fears, which typically drive investors to hoard Gold, the metal is underperforming.
   • Stagflation Concerns: The robust US economic data may have eased fears of stagflation—a scenario where Gold usually performs well due to economic weakness coupled with high inflation.

Conclusion: Gold’s continued sell-off, despite its safe haven status, highlights the impact of robust US economic data and technical selling. Investors are reacting to favorable GDP and PMI data, contributing to the broader market’s decline. As Gold trades in the $2,370s, market participants are closely monitoring further economic indicators and their potential effects on Gold’s price trajectory.

Copper: Demand expectations melt down – TDS

Prices are more likely to overshoot to the downside, notwithstanding the likely overly pessimistic sentiment surrounding demand, TDS senior commodity strategist Daniel Ghali notes.

Demand sentiment may be nearing a local bottom

Our gauge of demand sentiment embedded within the cross-section of commodities prices is now nearing its lowest levels of the year. These levels are now quantitatively inconsistent with recent history, and considering macro vol has been fairly muted, commodity demand sentiment now appears oversold.

This is a massive shift from just a few short months ago when demand sentiment appeared extremely overbought, contributing to the speculative fervor that catalyzed a momentous rally in Copper prices. Today, we now estimate that 80% of discretionary length in the red metal has already been liquidated, and we now see signs that the top traders in Shanghai are notably covering their shorts.

That being said, CTA trend followers still hold a substantial amount of dry-powder to sell and now have only a narrow margin of safety against selling programs. In fact, our simulations of future prices also suggest that a flat tape can now spark large-scale CTA selling activity over the next week. Overall, this suggests that prices are more likely to overshoot to the downside, notwithstanding the likely overly pessimistic sentiment surrounding demand.

Platinum is under a threat of a sell-off – TDS

Acute pressures on the precious metals complex may finally push prices beyond the range where algo traders are likely to be whipsawed, TDS senior commodity strategist Daniel Ghali notes.

Prices are set to go beyond the range

“Following a whipsaw in positioning, CTAs are returning to the offer in Platinum with large-scale selling activity potentially hitting the tapes.

“Under the hood, prices have been hovering near a cluster of thresholds that could catalyze a change in trend signals, but the acute pressures on the precious metals complex may finally push prices beyond the range where algo traders are likely to be whipsawed.”

Saudi Arabia: Trade surplus rises 12.8% y/y to USD 9.2bn in May on higher oil revenues

UBS bullish on commodities & maintain year-end Brent target at USD 87

• Recovery ahead

UBS are projecting a recovery for commodity prices, including oil, gold and more.

In a note analysts say that concerns over sluggish Chinese demand have weighed on commodity prices in recent weeks. But prices will recover due to “solid demand and limited supply”.

• lower crude exports could help tighten the oil market
• copper prices have held up
• gold has more room to rally

On gold, UBS cite:

• drivers for the rally remain in place, including strong central bank buying, ongoing geopolitical uncertainty, and the likely Federal Reserve move to cut interest rates in the coming months

EU News

European major indices close mixed

• FTSE 100 rises by 0.40%

The major European indices are closing mixed thanks to the UK FTSE 100 which rose by 0.40%. The majority of the indices, however, did close lower.

A snapshot of the closing levels shows:

• German DAX, -0.48%
• France CAC -1.15%
• UK FTSE 100 +0.40%
• Spain’s Ibex -0.56%
• Italy’s FTSE MIB -2.03%

Eurozone June M3 money supply 2.2% vs. 1.8% y/y expected

• The latest data on the money supply from the ECB – 25 July 2024

• M3 Money Supply Y/Y 2.2% vs. 1.8% expected and 1.6% prior.
• Loans to Households Y/Y 0.3% vs. 0.5% expected and 0.3% prior.
• Loans to Companies Y/Y 0.7% vs. 0.3% prior.

Germany July Ifo business climate index 87.0 vs 88.9 expected

• Latest data released by Ifo – 25 July 2024

• Prior 88.6
• Current conditions 87.1 vs 88.5 expected
• Prior 88.3
• Expectations 86.9 vs 89.0 expected
• Prior 89.0; revised to 88.8

France July business confidence 94 vs 99 prior

• Latest data released by INSEE – 25 July 2024

• Services confidence 95
• Prior 101
• Manufacturing confidence 95
• Prior 99

UK July CBI trends total orders -32 vs -18 prior

• Latest data released by CBI – 25 July 2024
• Prior -18

The manufacturing order book balance worsened again in July but the good news at least is that the expectations balance increased from 13 in June to 25 this month. The latter is the highest reading since March 2022. However, quarterly business optimism declined to -9 from +9 in April, marking the softest such reading since October last year.

Asia-Pacific-World News

ING: “PBOC surprises markets with an off-schedule 20bp cut to the MLF”

• MLF cut of 20bp was larger than similar rate reductions earlier this week

ING say the decision today was a surprise for two reasons:

1. The timing

• After keeping the MLF unchanged earlier this month, most had assumed monetary policy would likely remain unchanged this month.
• Most were expecting the MLF to be lowered at next month’s decision, but given the broader direction of monetary policy easing, as well as needs from the real economy, there was no need to wait.

2. The scale of the cut

• a 20bp cut instead of a 10bp cut to the 7-day reverse repo rate, and 10bp reductions of bank LPRs
• A larger cut to the MLF relative to the LPR could also provide some support to banks’ interest margins, though it is possible that the LPR may be further lowered as an immediate impact from the MLF cut instead.

ING summary of the cuts:

People’s Bank of China reduces 1 year Medium-term Lending Facility (MLF) rate to 2.3%

• Previously at 2.5%

Last week the PBOC left the MLF rate at 2.5%

Cuts today, to 2.3%

• injects 200bn yuan in a 1 year MLF

PBOC sets USD/ CNY central rate at 7.1321 (vs. estimate at 7.2706)

• PBOC CNY reference rate setting for the trading session ahead

In open market operations:

• PBOC injects 235bn via 7-day RR, sets rate at 1.7%

Chinese bank (one of the world’s largest banks) cuts time deposit rates

• Bank of China (Note- this is NOT the People’s Bank of China)

Bank of China have announced a 10bps-20bps cut in time deposit rates. Agricultural Bank, China Construction Bank & Bank of Communications cuts as well.

China’s slowing economy – liquidity trap

• Similarities between China today and Japan three decades ago are unmissable.

This is a useful read from Reuters on the difficulties China is facing, pushing on a string.

• China is awash with money and its growth is slowing.
• To avert a prolonged stagnation, President Xi Jinping’s administration may need to spend its way out of the problem.
• Yet this and other classic remedies to such a malaise may not be effective in Beijing’s “socialist market economy”.
• China’s condition may be seen as what economists call a liquidity trap, though the term means different things to different people.

More here.

Australia yield curve steepens as 3-year yield drops by 5 basis points

Japan government maintains economic assessment for the month of July

• The assessment is unchanged as the government releases its monthly economic report – 25 July 2024

The economy is seen as “recovering moderately, although it recently appears to be pausing”. Besides that, the government downgraded their view on exports to say that the situation is moving sideways. In June, they noted that the recovery in exports was stalling instead. On consumption, the government held their view that the pickup in the sector is still stalling as well.

Japan Services PPI (June) +3% y/y (expected +2.6%, prior +2.5%)

• Japanese data, though this tends not to move JPY much upon release

Corporate Service Price Index (CSPI) is Japan’s Services PPI.

From the BOJ report:

Japan’s Nikkei index is more than 10% down from its recent high

• Sharp drop again today, a 10% correction from its recent top

BlackRock forecasts the Bank of Japan not to hike rates at the July 30 / 31 meeting

• BlackRock says the BOJ will likely hold until the end of the year

BlackRock’s comments on the Bank of Japan are in the context of the firm holding a ‘high conviction’ view on higher Japanese stocks:

• Japan’s economic revival — and the return of inflation — “makes its equity market one of our strongest convictions,” the BlackRock Investment Institute said in its mid-year outlook.

The firm expect the BoJ not to hike rates next week:

• BOJ probably needs to wait until price trends are confirmed near the end of 2024 before hiking
• “We expect an accommodative environment to continue in Japan,”
• stocks have more room to rise because the BOJ is likely to take a cautious approach to normalizing policy amid an extension of subsidies for power and gas bills for several more months
• This puts the benchmark Topix index on course to set fresh record highs this year

Info comes via Bloomberg (gated)

South Korean GDP contracted in Q2 – eyes on the Bank of Korea for a rate cut

• Advance Q2 GDP fell 0.2% q/q (expected +0.1%, prior +1.3%)

The contraction for South Korea’s economy in the second quarter was unexpected:

Advance Q2 GDP -0.2% q/q, the sharpest contraction in six quarters

• expected +0.1%, prior +1.3% (this 1.3% growth in Q1 was the fastest since Q4 2021)
• strong exports
• consumer spending fell

For the y/y, came in at +2.3%

• expected +2.5%, prior +3.3%

Attention now turns to the Bank of Korea meeting on August 22. Market expectations have been for a cut in Q4.

Cryptocurrency News

Grayscale Ethereum Trust Outflows Send ETH Crashing

Summary: Ethereum (ETH) plummets by 8% on Thursday amid significant outflows from Grayscale Ethereum Trust and general market downturn. The recent net outflows from Ethereum ETFs and rumors of substantial transfers by the Ethereum Foundation contribute to the bearish sentiment.

Key Points:

1. ETF Outflows:
   • Net Outflows: Ethereum ETFs recorded $133.16 million in net outflows on their second trading day.
   • Impact of ETHE: Grayscale Ethereum Trust (ETHE) experienced $326.86 million in outflows, overshadowing the $193.69 million inflows from the new Ethereum ETFs.
   • Total Net Outflows: Resulted in a total net outflow of $26.38 million for ETH ETFs.
2. Trading Volume:
   • Volume: ETH ETFs saw a total trading volume of $1.05 billion on Wednesday.
   • Analyst Insight: Flows typically slow down after the initial excitement of ETF launches.
3. Market Factors:
   • Stock Market Decline: Broader declines in the US stock market may have contributed to the slowdown in ETF flows.
4. Regulatory Concerns:
   • Staking Discussion: BlackRock’s head of digital assets mentioned that the SEC is not currently considering staking within ETH ETFs.
   • Application Adjustments: ETF issuers have removed staking-related language from their applications.
5. Political Landscape:
   • Pro-Crypto Shift: Politicians increasingly support pro-crypto policies, influencing future staking discussions within ETFs.
6. Ethereum Foundation Rumors:
   • Large Transfer: Rumors suggest that an Ethereum Foundation-related wallet moved 92,000 ETH (approx. $289 million) after seven years.
   • Market Interpretation: Such transfers are often seen as potential sales, historically leading to price declines for ETH.
7. Price Impact:
   • Current Price: Ethereum is down by 8% on Thursday.
   • Support Level: ETH may test support around $2,800 due to the combined pressure from ETHE outflows and the rumored large transfer.

The convergence of substantial outflows from Grayscale Ethereum Trust, overall market decline, and potential sales by the Ethereum Foundation has created a challenging environment for Ethereum. Traders and investors are watching closely for further developments that could impact ETH’s price stability.

SEC vs. Ripple Lawsuit Nears Resolution, XRP Steadies at $0.62

Summary: The Ripple (XRP) vs. SEC lawsuit could soon see a resolution following a closed-door meeting scheduled for July 25. With XRP maintaining its price around $0.62, traders are optimistic about a favorable outcome by the end of July.

Key Points:

1. Scheduled Meeting:
   • Date: July 25
   • Nature: Closed-door meeting between Ripple and the SEC.
   • Expectation: Potential progress on settlement or resolution talks.
2. Market Reaction:
   • XRP Price: Currently hovering around $0.62, sustaining recent gains.
   • Key Support Level: XRP remains above the critical support at $0.62 as traders await the outcome.
3. Legal Insights:
   • Attorney Fred Rispoli: Predicts that the Ripple lawsuit could end by July 2024.
   • Judge Analisa Torres: Expected to rule on the case by the end of July, with potential fines for Ripple.
4. Ripple CEO’s Statement:
   • Brad Garlinghouse: In a recent Bloomberg interview, hinted at an expected resolution soon but refrained from commenting on a specific settlement.
5. Historical Context:
   • Partial Victory: Ripple scored a partial win in July 2023 when Judge Torres ruled that XRP was not a security.
   • Future Uncertainty: It remains unclear if the SEC will appeal Judge Torres’ ruling.

The upcoming closed-door meeting and anticipated resolution could significantly impact XRP’s price and the broader cryptocurrency market. Traders and investors are closely monitoring the situation, hoping for a favorable outcome that could provide regulatory clarity for Ripple and XRP.

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