Round up of today’s market news

North American News

Stocks Pull Back Slightly Ahead of Close; S&P and Nasdaq Lower for the Week

Summary: The Dow and Russell 2000 ended the week on a positive note, closing higher both for the day and the week, while the S&P and Nasdaq remained in negative territory for the week.

Key Points:

1. Daily Market Movement:
   • Indices Performance:
     • Dow Industrial Average: Rose 654.27 points (+1.64%) to 40,589.35.
     • S&P Index: Rose 59.86 points (+1.11%) to 5459.09.
     • NASDAQ Index: Rose 176.16 points (+1.03%) to 17,357.88.
     • Russell 2000: Rose 37.08 points (+1.67%) to 2260.06.
2. Weekly Market Performance:
   • Dow Industrial Average: Up 0.75%, marking the fourth consecutive week of gains.
   • S&P Index: Down 0.83%, falling for the second consecutive week.
   • NASDAQ Index: Down 2.08%, also marking its second consecutive weekly decline.
   • Russell 2000: Up 3.466%, posting gains for the third consecutive week.
3. Market Influences:
   • Economic Data: Positive reaction to the June Personal Income and Spending report, which aligned with market expectations regarding inflation.
   • Earnings Reports: Favorable earnings reports since the previous day contributed to market gains.
   • Sector Performance: Buying in mega-cap and semiconductor stocks bolstered the market’s upward momentum.
4. Notable Performances:
   • Meta Platforms: +2.75%
   • Amazon: +1.47%
   • Alphabet: -0.17%
   • Apple: +0.22%
   • Microsoft: +1.64%
   • Tesla: -0.20%
   • Nvidia: +0.71%
5. Outlook for Next Week:
   • Earnings Reports: Major companies including Amazon, Apple, Meta Platforms, and Microsoft are scheduled to release their earnings, which could significantly influence market movements.

Conclusion: Despite a slight pullback ahead of the close, the Dow and Russell 2000 ended the week on a high note, while the S&P and Nasdaq remained lower for the week. Positive economic data and earnings reports have provided some support, but the focus now shifts to next week’s earnings releases from major tech giants.

US Core PCE YoY for June 2.6% versus 2.5% estimate

• US PCE data for June 2024 along with US personal income and personal consumption

• Prior month core PCE 2.6%
• Core PCE MoM 0.2% versus 0.1% estimate. Unrounded was lower than the 0.2% gain at 0.188%
• Core PCE urine year 2.6% versus 2.5% estimate. Last month 2.6%
• PCE MoM 0.1% vs 0.1% estimate. The unrounded was lower than 0.1% at 0.0788%
• PCE YoY 2.5% versus 2.5% estimate and 2.6% prior
• Personal income +0.2% versus 0.4% estimate. Prior month revised down to 0.4% from 0.5%. Wages and salaries were up 0.3%.
• Personal spending 0.2% versus 0.4% last month (revised from 0.3%).
• Savings rate came in at 3.4% versus 3.5% last month

Other views:

• Annualized 3-month inflation rate 2.3% versus 2.9% prior.
• Annualized 6-month rate for core PCE 3.4% versus 3.3% prior.

The core PCE was a bit higher than expectations which is congruent with the core PCE data released yesterday through the GDP report.

University of Michigan consumer sentiment for July 66.4 versus 66.0 estimate (and prelim)

• University of Michigan consumer sentiment and inflation sentiment for July 2024

• Prior month 68.2
• Current condition 62.7 versus 64.1 preliminary and 65.9 last month.
• Expectation 68.8 versus 67.2 preliminary, and 69.6 last month
• 1 year inflation expectations 2.9% versus 2.9% preliminary and 3.0% last month.
• 5 year inflation expectations 3.0% versus 2.9% preliminary and 3.0% last month

A mix of the details compared to the preliminary.

• Sentiment higher employment area
• Current conditions lower employment area
• Expectations higher than preliminary

In an interesting study chart of the consumer sentiment within the survey, those surveyed with the Top tercile of stock holdings had higher confidence, while those who did not hold stocks has a much more negative view on the consumer sentiment. That is not too surprising given the relative rise in US stock markets over the last year and a half.

Atlanta Fed GDPNow growth tracker comes in at 2.8%

• The Atlanta Fed Q2 growth estimate was 2.6%. That was close to the 2.8% reported yesterday

The Atlanta Fed GDPNow growth tracker for Q3 is out with its initial estimate. It sees Q3 growth at 2.8%.

In their own words:

The initial GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 2.8 percent on July 26. The initial estimate of second-quarter real GDP growth released by the US Bureau of Economic Analysis on July 25 was 2.8 percent, 0.2 percentage points above the final GDPNow model nowcast released on July 24.

For Q2, the Atlanta forecast growth at 2.6%. The initial advanced estimate for GDP growth was released yesterday at 2.8%. The economists estimate on Reuters had a median at 2.0%. 

Morgan Stanley says stock rotation turned in deleveraging, eye US$45bn to sell

• One of the largest risk-unwinding events in a decade

Reuters with the report, citing a Morgan Stanley said in commentary to institutional clients on Thursday:

• Computer-driven macro hedge fund strategies on Wednesday sold $20 billion in equities
• set to shed at least more $25 billion over the next week
• one of the largest risk-unwinding events in a decade
• “The volatility of the last two weeks started out being very rotational,”
• “But that has now morphed into a broad index deleveraging (on Wednesday).”
• If volatility persists in the coming days, the sell-off would rapidly increase
• An additional 1% day-drop in global equities could spark sales of $35 billion and macro hedge funds could dump up to $110 billion in a 3% day fall

Bank of America says strong economic growth in the US means the FOMC ‘can afford to wait’

• BoA continue to expect the Fed to start cutting in December

In brief from their note:

• 2Q US GDP growth … even stronger than our above-consensus forecast of 2.3%, and our final tracking estimate of 2.4%
• upside surprise on growth was supported by strong consumption growth of 2.3%
• Overall, the economy continues to disprove skeptics. Growth has certainly cooled relative to last year, but it has done so at a gradual pace. The risk of a sharp slowdown is low, in our view.
• the headline print is a clean signal of where underlying momentum is in the economy. Again, we are cooling but gradually.
• The Fed can afford to wait
• We continue to expect the Fed to start cutting in December
• September has moved closer to the baseline given recent incoming data that point to cooling in labor markets and a return to disinflation

Yellen says market should determine exchange rates

• Yellen was speaking in regard to Trump’s policy preference for weakening the USD, but I imagine Japan, who want a stronger yen, might have been listening too

Treasury Secretary Janet Yellen spoke from a new conference Brazil, where she is attending a meeting with central bankers and finance ministers from Group of 20 nations.

• Trump said he hears from manufacturers that “nobody wants to buy our product because it’s too expensive”
• and that other countries try to keep their currencies “weak all the time”
• “Over the last several years, the United States has had tight monetary policy,”
• “That’s induced capital inflows that have strengthened the dollar — that’s really something to be expected”
• “We believe that’s how the system should work.”

Commodities

Gold Rebounds from Two-Week Lows Amid Mixed Inflation Data

Summary: Gold prices rebound from daily lows of $2,353, trading at $2,385, as mixed US inflation data fuels speculation that the Federal Reserve may lower interest rates at its September meeting.

Key Points:

1. Gold Price Movement:
   • Daily Lows and Rebound: Gold initially dipped to a two-week low of $2,353 before rebounding by 0.80% to $2,385.
   • Market Sentiment: The bounce is attributed to market expectations of a potential interest rate cut by the Federal Reserve, following softer inflation data.
2. Inflation Data Insights:
   • PCE Data: The US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, rose by 0.1% month-over-month (MoM) and 2.5% year-over-year (YoY) in June, aligning with expectations.
   • Core PCE: Core PCE, which excludes food and energy, increased by 0.2% MoM and 2.6% YoY, slightly above forecasts.
   • Consumer Sentiment: The University of Michigan Consumer Sentiment survey showed a slight increase to 66.4, missing projections, with inflation expectations for one year decreasing to 2.9%.
3. Market Reactions:
   • Rate Cut Speculation: Reuters sources suggest that the mixed-to-weaker inflation data indicates waning inflationary pressures and economic activity, paving the way for the Fed to cut rates, potentially twice this year.
4. Implications for Gold:
   • Safe Haven Appeal: Despite the mixed inflation data, gold’s status as a safe haven asset has been bolstered by expectations of easing monetary policy.
   • Future Outlook: Traders are currently pricing in 55 basis points of easing towards the end of the year, as indicated by the December 2024 fed funds rate futures contract.

Conclusion: Gold has rebounded from its recent lows amid mixed US inflation data, with market participants speculating on potential rate cuts by the Federal Reserve. This anticipation has reinforced gold’s appeal as a safe haven, contributing to its recent price recovery.

Baker Hughes oil rig count +5 to 482

• The weekly Baker Hughes rig count

The Baker Hughes rig count for the current week is showing:

• Oil rigs +5 to 482
• Gas -2 to 101
• Total rigs, +3 to 589

Citi outline bearish and bullish risks for oil under Trump

• Citi says the main risk is bearish

Reuters have the piece from a Citi report on politics / oil.

In brief:

Trump presidency could be net bearish for oil prices

• combination of factors including tariffs and oil-friendly policies, and pushing the Organization of the Petroleum Exporting Countries and allies (OPEC+) to release more oil into the market

The main bullish risk for oil markets under a Trump presidency would be would be pressure on Iran, though this could have a limited impact.

• a “maximum pressure” campaign on Iran, the market could see a 500-900 thousand barrel per day impact on Iranian oil exports

More immediately, Citi enumerate known risks:

• hurricane season is far from over
• Mideast tensions remain high … pressure has also been mounting for a push for a ceasefire, which could conceivably be forthcoming this summer

Goldman Sachs say still forecast a Brent range of USD75 – 90

Reuters reporting remarks from Goldman Sachs:

• Estimates a peak hit to 2025 oil prices of $11/bbl as a result of weaker GDP and oil demand in scenario where US imposes across-the-board tariff of 10% on goods imports
• We still forecast a $75-90 range for Brent given our base cases of trend-like growth in GDP and oil demand (under steady US policies), and OPEC+ market balancing”
• “The next US president will have limited tools to significantly boost 2025 oil supply”

EU News

European indices bounce back

The major European indices have bounced back in trading today with all the indices higher. A snapshot of the closing levels shows:

• German DAX, +0.68%
• France CAC +1.22%
• UK FTSE 100 +1.21%
• Spain’s Ibex +0.18%
• Italy’s FTSE MIB +0.12%

For the trading week, most of the indices were higher with the exception of Italy’s FTSE MIB

• German DAX +1.38%
• France CAC, -0.22%
• UK FTSE 100, +1.59%
• Spain’s Ibex, +0.71%
• Italy’s FTSE MIB, -1.09%

In the European debt market yields move lower today, Looking at the benchmark 10 year yields:

• Germany, -3.0 basis points at 2.403%. For the trading week, yields fell -6.3 basis here.
• France, -2.5 basis points at 3.11%. For the trading week, yields fell -1.9 basis points
• UK -3.7 basis points at 4.11%. For the trading week, yields fell 3.0 basis points.
• Spain -4.0 basis points at 3.232%. For the trading week, yields fell -2.8 basis points.
• Italy, -2.3 basis points at 3.762%. For the trading week, yields fell -2.4 basis points

Eurozone consumers see inflation at 2.8% in the next 12 months – ECB survey

• The ECB releases the findings from its latest consumer expectations survey – 26 July 2024

• Median expectations for inflation over the next 12 months seen at 2.8% (unchanged vs May)
• Median expectations for inflation three years ahead seen at 2.3% (unchanged)
• Median rate of perceived inflation over the previous 12 months seen at 4.5% (previously 4.9%)
• Economic growth expectations for the next 12 months seen at -0.9% (previously -0.8%)

France July consumer confidence 91 vs 90 expected

• Latest data released by INSEE – 26 July 2024

• Prior 89; revised to 90

Household confidence improved in July but remains well below the long-term average of 100 still. Expectations for future inflation eased further while the outlook for the financial situation improved slightly, though still remaining in negative territory.

ECBs Schnabel: Services inflation showing last mile in inflation fight especially difficult

• ECBs Schnabel is speaking according to Faz

• services inflation is showing that the last mile inflation fight is especially difficult
• Some data was not quite in line with projections.
• The ECB is not on a predetermined path. A first cut does not imply a series of cuts.
• Freight costs, protectionism could drive inflation.
• Pace and extent of ECB rate cuts will depend on the data
• Closely watching sticky services prices

UK finance Minister Reeves promises to fix the ‘fiscal mess’

• Will issue more info on Monday

Rachel Reeves is the new UK government’s Chancellor of the Exchequer:

• Says there is still more work to do on ‘Pillar 1’ tax agreement, optimistic for agreement by Autumn
• Wants tax burden on working people to be lower, but will not make unfunded commitments
• Will make statement on Monday about the state of public finances, public spending pressures
• I want taxes to be lower, not higher, but won’t make commitments without being able to say where the money is coming from
• I am going to fix fiscal mess that the tories left us
• Wants fairer, sustainable tax on wealthy but need to strike right balance
• Labour wants to be pro-growth, pro-wealth creation

Asia-Pacific-World News

PBOC sets USD/ CNY reference rate for today at 7.1270 (vs. estimate at 7.2229)

• PBOC CNY reference rate setting for the trading session ahead

In open market operations:

• PBOC injects 358bn via 7-day RR, sets rate at 1.7%
• 59bn yuan mature today
• net injection of 299bn yuan

New Zealand July consumer confidence 87.9 (prior 83.2)

• NZ data

ANZ Roy Morgan Consumer Confidence for July 2024 in NZ. Improved to 87.9 in July:

• from June’s 83.2
• still at low levels

As part of the survey is a question on inflation expectations. These fell to 3.7%, the lowest since September 2020.

ANZ comments:

• light at the end of the tunnel is getting a little brighter
• last month brought a decent fall in CPI inflation, a general expectation that the RBNZ will cut the official cash rate earlier than previously expected, and even drops in fixed mortgage rates

The RBNZ’s guide for members of its Monetary Policy Committee (MPC)

• Reserve Bank of New Zealand insider info in brief:

The Reserve Bank of New Zealand have updated its Monetary Policy Handbook on the RBNZ website.

• Handbook is intended to support the New Zealand public’s understanding of monetary policy and to support new members of the MPC to establish themselves in their roles
• explains New Zealand’s monetary policy framework, outlines some of the concepts and tools we use to understand New Zealand’s economy and monetary policy, and sets out the processes through which the Monetary Policy Committee (MPC) makes its decisions.

Tokyo area July inflation data: Headline 2.2% y/y (prior 2.3%)

• Tokyo CPI data leads the national result by about three weeks

Tokyo CPI for July 2024

Excluding Fresh Food & Energy 1.5% y/y

• expected 1.6%, prior 1.8%

Excluding Fresh Food 2.2% y/y

• expected 2.2%, prior 2.1%

Headline CPI 2.2%

• expected 2.3%, prior 2.3%

Japan’s Kanda says told G20 that excessive FX volatility has negative impact on economy

• Kanda reminding the market that the threat of intervention remains

Kanda is in Brazil for the meeting of central bankers and finance ministers from Group of 20 nations.

• says told G20 that excessive FX volatility has negative impact on economy
• chance of a soft landing for the global economy increasing

• told G20 need to respond appropriately in markets based on group’s fx agreement
• told G20 must be increasingly vigilant to excessive, speculative fx fluctuation

Bank of Japan meet next week, a 0.1% rate hike is around 65% priced

• Bank of Japan meet on July 30 and 31

The appreciation of the yen this month, and especially this past week, has taken some of the pressure off the Bank of Japan. The partial unwind of carry trade has, on the other hand, been accompanied by selling pressure on other FX and financial assets, such as global equities.

The Bank have already announced they’ll be providing more detail on their plans to reduce their buying Japanese Government Bond. But markets are also keen on a rate hike, ‘pricing in’ around a 65% probability .

Singapore central bank says no change to policy, as expected

• The Monetary Authority of Singapore is the country’s central bank

Monetary Authority of Singapore:

• The Singapore economy is expected to strengthen over the rest of 2024
• MAS will therefore maintain the prevailing rate of appreciation of the S$neer policy band. There will be no change to its width and the level at which it is centred

• The sequential pace of price change is expected to be lower in the second half of 2024 compared to H1
• Both upside and downside risks to the outlook in 2024 remain
• Core inflation should fall further to around 2% in 2025
• CPI-all items inflation is now projected to average 2.0-3.0% this year
• Core inflation should step down more discernibly in Q4
• Core inflation should step down more discernibly in Q4, and fall further to around 2% in 2025
• MAS core inflation is expected to step down more discernibly in Q4 this year and into 2025 Q1
• Prevailing rate of appreciation of the policy band will keep a restraining effect on imported inflation
• GDP growth is likely to come in closer to its potential rate of 2-3% for the full year
• Current monetary policy settings remain appropriate
• For 2024 MAS core inflation is expected to average 2.5-3.5%.
• Singapore economy is expected to strengthen over the rest of 2024

Cryptocurrency News

Ethereum ETFs Surge in Demand, Analyst Predicts Strong Growth Ahead

Ethereum ETFs are experiencing a surge in demand and are poised for significant growth in the coming week, according to Bloomberg analyst Eric Balchunas. Despite heavy outflows from the Grayscale Ethereum Trust (ETHE), the inflows and trading volumes for Ethereum ETFs remain robust.

Key Insights:

1. Healthy Inflows and Volume:
   • Ethereum ETFs have maintained strong trading volumes, exceeding $800 million daily for four consecutive days since their debut.
   • Balchunas notes that these inflows are largely new demand, not just reallocations from ETHE.
2. Market Speculation and Analyst Commentary:
   • Some speculated that inflows into the “New Eight” Ethereum ETFs were merely outflows from ETHE. However, Balchunas debunked this, suggesting that two-thirds of the inflows are new demand.
   • He emphasized that outflows from ETHE are likely hedge funds taking profits from arbitrage opportunities and not indicative of long-term investor sentiment.
3. Impact of Ethereum Options Expiry:
   • Ethereum options expiry may introduce weekend volatility, but long-term prospects appear positive.
   • Balchunas suggests that Ethereum’s price could respond more rapidly to ETF demand compared to Bitcoin, which might see steeper short-term declines post-ETF launch.

Market Movers:

• Bitwise Ethereum ETF (ETHW):
  • Made a significant impact with its debut at the New York Stock Exchange.
  • Inflows and trading volumes have been substantial, marking a successful launch week.
• Ethereum’s Performance:
  • Ethereum (ETH) is up nearly 5% on Friday amid positive sentiment around ETF inflows.
  • The altcoin’s price movement reflects optimism about long-term growth driven by ETF investments.

Conclusion:

Ethereum ETFs are attracting significant new demand, with strong inflows and trading volumes despite concerns about ETHE outflows. Bloomberg analyst Eric Balchunas emphasizes the healthy growth trajectory for Ethereum ETFs, projecting robust performance in the coming weeks. As Ethereum options expire, market participants should prepare for potential short-term volatility but remain optimistic about the long-term outlook.

Crypto Market Stands Firm Amid Options Expiry; BlackRock Dampens XRP ETF Hopes

Summary: Bitcoin and Ethereum maintain key support levels ahead of significant options expiry, while Solana extends gains and XRP remains stable despite BlackRock’s comments on the lack of interest in ETFs beyond Bitcoin and Ethereum.

Key Points:

1. Major Cryptocurrencies:
   • Bitcoin: Hovers close to $67,000 with $4.3 billion in Bitcoin options expiring on Friday. The put/call ratio is 0.61, with twice as many long contracts expiring as shorts.
   • Ethereum: Trades near $3,200 support, struggling to rally despite the success of the Ethereum Spot ETF and consistent institutional demand. Ethereum options worth $1.6 billion expired on July 26.
2. Altcoins:
   • XRP: Remains steady above the $0.60 psychological support level. Investor optimism is buoyed by the approval of the Spot Ether ETF.
   • Solana: Gains 5% and trades around $179. Solana has potential resistance at $183.76 and $188.89, with a target of $210.18. Support levels are at $155 and $148.56. The MACD indicates positive momentum in Solana’s uptrend.
3. Market Updates:
   • Options Expiry:
     • Bitcoin: 61,000 Bitcoin options expired with a put/call ratio of 0.62 and a notional value of $4.1 billion.
     • Ethereum: 490,000 Ethereum options worth $1.6 billion expired early on July 26.
   • US Presidential Candidate: Robert F. Kennedy Jr. stated he would encourage the federal government to buy Bitcoin until its holdings matched the value of the US gold reserves if elected.
   • BlackRock Statement: BlackRock’s head of digital assets noted minimal investor interest in ETFs beyond Bitcoin and Ethereum, despite other ETF issuers and asset managers disagreeing.
4. Technical Analysis:
   • Solana: The MACD shows green histogram bars indicating positive momentum. Solana’s support and resistance levels are detailed, with potential upward targets identified.

Conclusion: Bitcoin and Ethereum hold steady amidst significant options expiry, while Solana shows potential for further gains. Despite optimism around Ethereum’s Spot ETF, BlackRock’s comments cast doubt on the immediate future of XRP and other altcoin ETFs. The market remains influenced by key economic indicators and statements from influential figures.

BlackRock Unlikely to Launch Solana, XRP ETFs Amid Limited Interest Beyond Bitcoin and Ethereum

Summary: Despite crypto traders’ optimism following the approval of spot Ether ETFs, BlackRock’s head of digital assets indicates minimal client interest in crypto ETFs beyond Bitcoin and Ethereum. This dampens expectations for ETFs involving assets like Solana and XRP.

Key Points:

1. Market Sentiment:
   • Optimism Post-Ether ETF Approval: Crypto traders initially believed the approval of spot Ether ETFs could pave the way for other crypto asset ETFs.
   • BlackRock’s Stance: BlackRock’s head of digital assets, Robert Mitchnick, has expressed that there is little client interest beyond Bitcoin and Ethereum.
2. BlackRock’s Position:
   • Client Interest: Mitchnick highlighted that clients’ interest is overwhelmingly focused on Bitcoin first, followed by Ethereum.
   • Future of Crypto ETFs: Mitchnick’s comments suggest that a long list of crypto ETFs is unlikely, dampening expectations for ETFs involving other assets like Solana and XRP.
3. Current Crypto Market Performance:
   • Bitcoin: Sustains above $67,000.
   • Ethereum: Hovers above $3,200.
   • Solana: Gains nearly 5% on the day, reaching $179.
   • XRP: Hovers close to psychological support at $0.60.
4. Impact of BlackRock’s Statement:
   • Market Reaction: The statement has created uncertainty among crypto traders about the future availability of ETFs for assets beyond Bitcoin and Ethereum.
   • Focus on Leading Cryptos: BlackRock’s focus on Bitcoin and Ethereum highlights the dominant position of these two assets in the eyes of institutional investors.

Conclusion: While the approval of spot Ether ETFs was seen as a potential gateway for other crypto ETFs, BlackRock’s current stance suggests that client interest remains heavily skewed towards Bitcoin and Ethereum. This implies that ETFs for other cryptocurrencies, such as Solana and XRP, may not be forthcoming in the near future. The market remains focused on Bitcoin and Ethereum, with both holding steady, while Solana shows notable gains.

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