Round up of today’s market news

North American News

S&P Index Sees Best Day Since November 2022 Amid Economic Optimism

In a dramatic turnaround from recent declines, the S&P 500 had its best day since November 2022, buoyed by positive economic data and renewed investor confidence. Following a dismal performance earlier in the week, the major indices rebounded significantly on Thursday, reflecting optimism in the markets.

Market Highlights:

• S&P 500 Surge: The S&P 500 soared by 119.79 points, or 2.30%, closing at 5,319.30. This marks its most substantial daily gain since November 2022, coming after Monday’s sharp drop.
• NASDAQ Rally: The NASDAQ Composite climbed 464.22 points, or 2.87%, reaching 16,660.02. This represents its best daily performance since February of this year, reversing a -3.43% slide on Monday.
• Dow Jones Industrial Average: The Dow Jones Industrial Average added 683.04 points, or 1.76%, ending the day at 39,446.50.
• Russell 2000 Rise: The small-cap Russell 2000 gained 49.31 points, or 2.42%, closing at 2,084.42.

Economic Data Boost:

• Initial Jobless Claims: The positive shift in the markets was driven by Initial Jobless Claims data, which came in at 233,000, better than the anticipated 250,000. This report eased concerns about a weakening labor market and provided a boost to investor sentiment.

Weekly Performance:

Despite today’s gains, the major indices remain down for the week, with one trading day left:

• Dow Jones Industrial Average: -0.73%
• S&P 500: -0.51%
• NASDAQ Composite: -0.69%

Market Sentiment:

Today’s rally underscores the market’s sensitivity to economic data and its impact on investor sentiment. While the indices rebounded strongly, the week’s overall performance reflects ongoing uncertainty and the challenges ahead. As investors await further economic indicators and developments, today’s gains offer a glimmer of optimism amid recent volatility.

US Treasury auctions off $25 billion of 30 year bonds at a high yield of 4.314

• WI level at the time of the auction 4.283%

• High yield 4.314%
• WI Level at the time of the auction 4.283%
• Tail 3.1 basis points vs 6 month average of -0.5 basis points
• Bid to cover 2.31X vs 6 month average of: 2.41X
• Dealers 19.18% vs 6 month average of 15.2%
• Directs 15.5% vs 6-month average of 18.4%
• Indirects 65.32% vs 6-month average of 66.4%

Atlanta Fed GDPNow growth estimate for Q3 at 2.9% unchanged from its prior estimate

• Atlanta Fed maintains its solid 2.9% growth estimate for Q3, with private investment on the rise.

In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 2.9 percent on August 8, unchanged from August 6 after rounding. After this morning’s wholesale trade release from the US Census Bureau, the nowcast of third-quarter real gross private domestic investment growth increased from 2.8 percent to 2.9 percent.

US initial jobless claims 233K vs 240K expected

• Weekly initial jobless claims for the week ending August 3, 2024

• Prior week 249K (revised to 250K)
• initial jobless claims 233K versus 240K estimate.
• 4-week moving average of initial jobless claims 240,750 vs 238,250 last week
• Continuing claims 1.875M versus 1.870M expected
• Prior week continuing jobless claims 1.877M (revised to 1.869m)
• 4-week moving average of continuing claims 1.862M vs 1.855M last week

US June wholesale sales -0.6% vs +0.3% expected

• June 2024 US wholesale sales and inventories data

• Prior was +0.4% (revised to +0.3%)
• Inventories +0.2% vs +0.2% expected
• Prior inventories +0.2%

Richmond Fed Pres Barkin: Hearing from people, that companies are not hiring but not firing

• Richmond Fed Pres Barkin (2024 voter) is speaking

• What I am hearing from people on the ground is that in the labor market, people are cutting back on hiring, but not firing.
• Job growth has settled down, but still adding jobs
• Theis is a lot more labor supply than thought a year or two ago.
• The math of that suggests unemployment rate goes up.
• What would make you more worried is if job growth started to disappear
• Wages are coming down, suggesting normalization in the labor market
• You’ve got some time to figure out if the economy is steadily normalizing, or do you have to lean into it
• Closing in on a set of economic numbers that look normal
• Equity markets don’t feel like there’s a cataclysmic event that just happened
• Financial markets are looking not just at modal outlook but also the tails

Trump and Harris to debate on Fox on September 4 and September 10 on ABC

• ABC will be on September 25

JP Morgan Dimon says odds of a “soft landing” are around 35% to 40%, recession more likely

• Says consternation in markets

Via an interview with JPMorgan Chase CEO Jamie Dimon on CNBC:

• still believes that the odds of a “soft landing” for the economy are around 35% to 40%
• making recession the most likely scenario
• Dimon added he was “a little bit of a skeptic” that the Federal Reserve can bring inflation down to its 2% target because of future spending on the green economy and military
• “There’s a lot of uncertainty out there”
• “I’ve always pointed to geopolitics, housing, the deficits, the spending, the quantitative tightening, the elections, all these things cause some consternation in markets.”
• “I’m fully optimistic that if we have a mild recession, even a harder one, we would be okay. Of course, I’m very sympathetic to people who lose their jobs. You don’t want a hard landing.”

Goldman Sachs say a stock market plunge could reduce US GDP growth, hit Fed policy

• Every 10% stock market decline estimated to cut GDP growth by 45bp

In summary from a Goldman Sachs note on stock market gyrations.

• Goldman warns stock market selloff may affect GDP growth
• A 5% equity drop and 21bp fall in 10-year Treasury rate could reduce GDP growth by 12bp over next year
• Every 10% stock market decline estimated to cut GDP growth by 45bp
• Including other asset moves, the total impact could be around 85bp
• A 20%+ selloff would be needed to push the economy into recession, given current GDP growth above 2%
• GS says the ‘wealth effect’ is a key driver, consumers may reduce spending as investment values fall
• A further market decline could influence Fed’s monetary policy decisions
• Goldman says the Fed is unlikely to intervene with current 7% S&P 500 drawdown from record high
• Some commentators calling for emergency rate cuts, but Goldman says no serious market disruptions yet
• “While market stress is noticeably higher than a week ago, our FSI suggests that there are no serious market disruptions to date that would force policymakers to intervene”

Mexico cuts rates by 25 basis points vs expectations of a split

• Rate is cut to 10.75% from 11.0%

The Mexico central bank lowered their benchmark interest rate to 10.75% from 11%.

The expectations were split between unchanged and a 25 basis point cut.

• Banco de México’s Governing Board lowered the target for the overnight interbank interest rate by 25 basis points to 10.75%, effective August 9, 2024.
• Economic activity remained heterogeneous across countries in Q2 2024.
• The US economy grew faster than other advanced economies; headline and core inflation continued decreasing in most advanced economies.
• Some central banks of advanced economies cut their reference rates; the Federal Reserve left its rate unchanged, and the Bank of Japan raised it.
• Global financial markets experienced volatility due to the Bank of Japan’s rate hike and lesser dynamism in the US labor market.
• Key global risks include geopolitical turmoil, prolonged inflationary pressures, financial market volatility, and challenges to financial stability.
• Mexican financial markets were affected by international volatility; the Mexican peso depreciated, and the yield curve for government bonds decreased.
• Mexico’s economic activity grew at a low rate in Q2 2024, continuing the weakness observed since the end of 2023.
• Annual headline inflation rose to 5.57% in July due to a significant increase in the non-core component; core inflation, which better reflects the inflation trend, was 4.05%.
• Expectations for headline inflation for the end of 2024 were revised upwards; expectations for core inflation decreased, remaining stable for longer terms above target.
• Forecasts for headline inflation were revised upwards for the short term; core inflation anticipated to be 3.7% annualized in Q3 2024.
• Headline inflation is expected to converge to the target in Q4 2025, subject to various risks.
• The Governing Board considered the behavior of inflation and its determinants, projecting the dissipation of non-core component effects on headline inflation over the next quarters.
• The Board decided by majority to lower the target interest rate, estimating that the outlook for inflation allows for reducing the level of monetary restriction.
• Looking ahead, the Board foresees discussing reference rate adjustments based on global shocks, economic activity weakness, and the monetary policy stance.
• The Board remains committed to achieving an orderly and sustained convergence of headline inflation to the 3% target.
• Victoria Rodríguez, Galia Borja, and Omar Mejía voted in favor of lowering the rate; Irene Espinosa and Jonathan Heath voted to maintain the target at 11.00%.

Commodities

Gold Surges Above $2,400 Amid Geopolitical Tensions and US Economic Data

Gold prices surged past the $2,400 mark on Thursday, defying the strength of the US Dollar and rising bond yields. As of the latest update, the precious metal is trading at $2,419, reflecting a gain of over 1.40% during the North American session.

Key Drivers:

• US Economic Data: The US Bureau of Labor Statistics reported a drop in Initial Jobless Claims to 233,000 for the week ending August 3, better than the forecasted 240,000. However, Continuing Claims rose to their highest level since November 2021, reaching 1,875,000, exceeding expectations.
• Dollar Strength: Despite the positive US jobs data bolstering the Greenback, the US Dollar Index (DXY) saw a modest rise of 0.10%, reaching 103.28.
• Geopolitical Risks: Tensions in the Middle East, particularly the potential for retaliation from Iran and Lebanon against Israel, continue to heighten Gold’s appeal as a safe-haven asset.

Market Reaction:

Gold’s rally comes amidst a backdrop of geopolitical uncertainty and shifting economic indicators. The market is increasingly focused on the potential for escalating conflict in the Middle East, which supports Gold’s status as a secure investment.

Daily Market Movers:

• US Economic Indicators: The decrease in Initial Jobless Claims suggests a robust labor market, while the rise in Continuing Claims indicates a growing number of people staying on unemployment benefits.
• Gold Demand: Despite the strong US Dollar and rising yields, Gold has maintained its upward trajectory. Notably, China’s central bank has refrained from buying physical Gold for three consecutive months, but this has not deterred the metal’s recent gains.
• FedWatch Tool: Expectations for a 50-basis-point rate cut by the Federal Reserve in September have decreased slightly, from 63.5% on Wednesday to 57.5%, reflecting ongoing market speculation about future monetary policy adjustments.

Gold’s recent performance underscores its resilience amid economic and geopolitical pressures, reinforcing its role as a critical asset in times of uncertainty.

Markets expect selling exhaustion in Copper markets – TDS

The Red Metal may now be nearing local lows. CTAs may still have some dry-powder to sell, but are unlikely to do so unless prices break below the $8440/t range, TDS senior commodity strategist Daniel Ghali notes.

A local low may be forming in Copper markets

“The combination of a full-blown capitulation from macro funds and the effective end to algorithmic selling activity suggest that the Red Metal may now be nearing local lows. After all, CTAs may still have some dry-powder to sell, but are unlikely to do so unless prices break below the $8440/t range.”

“While Copper would not be insulated from subsequent pain in global markets tied to a deleveraging event, vulnerabilities are mitigated as it is no longer a crowded trade. Further, our simulations of future price action reveal that CTAs may even return to the bid over the coming week, even in a range-bound trading environment.”

“A local low may now be forming in Copper markets. Still, upside asymmetries in systematic trend follower positions are most extreme in Aluminium, where we would expect large-scale buying activity to hit the tapes in the event that base metals stage a recovery.”

US oil output rose to record high last week

• 13.4 mn bpd

U.S. crude oil output rose to a record high of 13.4 million bpd in the week ended August 2

• that’s about 100,000 barrels per day (bpd) more than a week earlier
• and 800,000 barrels more than a year ago

The data is from the US Energy Information Administration, published on Wednesday

EU News

European indices close mostly lower

• European stock markets see mixed results: Germany’s DAX up, France CAC and UK FTSE 100 down, Spain’s Ibex and Italy’s FTSE MIB decline

• German (DAX): Closed at 17,680.41, up by 65.25 points or +0.37%).
• France CAC: Ended at 7,247.46, down by 18.56 points or -0.26%).
• UK FTSE 100: Finished at 8,144.98, decreasing by 21.91 points or -0.27%).
• Spain’s Ibex: Ended at 10,557.99, down by 41.02 points or -0.39%).
• Italy’s FTSE MIB: Finished at 31,741.92, decreasing by 89.71 points or -0.28%).

Services production up by 0.4% in the euro area and by 2.1% in the EU (Eurostat)

An empty economic calendar in Europe today

Hungary: Budget deficit narrows by 16.9% y/y to HUF 2,443.3bn in Jan-Jul

Deutsche Telekom ADR $DTEGY

• EPS. vs Forecast
• 0.5466 / 0.45

• Rev. vs Forecast
• 31.04B / 30.53B

Market Cap: 131.57B

Swiss business lobby urges Swiss National Bank to act fast against franc strength

• Concern over export sales

ICYMI, Bloomberg (gated) with the report, on Swissmem (the country’s biggest lobby group for manufacturers):

• The Swiss National Bank must do something fast to keep the franc’s strength from hurting exporters
• sudden appreciation in the currency is threatening a vulnerable recovery for overseas sales seen in recent months
• didn’t offer a view on what tools the SNB should deploy

Asia-Pacific-World News

PBOC sets USD/ CNY reference rate for today at 7.1460 (vs. estimate at 7.1821)

• PBOC CNY reference rate setting for the trading session ahead

In open market operations:

• PBOC injects 7bn via 7-day RR, sets rate at 1.7%
• 10n yuan mature today
• net 3bn yuan drain today

RBA Governor Bullock: Don’t expect to be back in 2-3% target range until end of 2025

Reserve Bank of Australia Governor Bullock, in a speech in her home town of Armidale, NSW:

• Vigilant to inflation risks, will not hesitate to hike if needed.
• Repeats, board judged current rates still meet its inflation mandate.
• Don’t expect to be back in 2–3% target range until end of 2025.
• Won’t hesitate to raise cash rate if needed.
• Investment in renewable energy in regions should bring significant economic benefits.
• Renewables needed to mitigate the risks posed by climate change.
• Increasing volatility in weather, rising temperatures pose challenges for farmers.
• Volatility in financial markets does effect sentiment, but not the economy
• Based on what board knows now, don’t see rates coming down quickly
• We do not react to one economic number
• If economy does turn down quicker than thought, would cut rates

New Zealand 2-year inflation expectations have dropped to 2.03% (prior2.3%)

• Reserve Bank of New Zealand inflation expectations survey

Reserve Bank of New Zealand:

2-year Inflation Expectations Q3 2.03%

• prior 2.33%
• The two year horizon is the important one for the Reserve Bank of New Zealand, it views this as a reasonable time frame over which its policy changes impact.

1-year 2.4%

New Zealand Inflation Expectations (QoQ)

• Actual: 2.0%
• Previous: 2.3%

BOJ Summary – one monetary policy board member suggested the neutral rate is at least 1%

• Good luck with that

Bank of Japan Summary of Opinions at the Monetary Policy Meeting on July 30 and 31

• Several members view economic activity and prices developing in line with BOJ outlook
• Some see room to raise “significantly low” policy rate, citing negative real rates at 25-year lows
• Opinions divided on timing – some want more data, others ready to move now
• Agreement on need for gradual approach to avoid rapid rate hikes
• Members eye neutral rate of “at least around 1%” as medium-term goal
• Plans to reduce JGB purchases seen as promoting market function, not tightening
• Careful monitoring of JGB market needed as BOJ cuts purchases
• Government reps stress need for clear communication on policy changes
• Ongoing debate on sustainability of inflation/wage growth cycle

Japan finance minister Suzuki says no comment on BOJ Uchida’s remarks

Japan finance minister Suzuki:

• Monetary policy specifics are up to the BOJ to decide
• No comments on Bank of Japan Deputy Governor Uchida’s comments
• Closely watching market developments
• Aim to support wage growth outpacing inflation through various policies

• Stock market determined by economic situations, forex, corporate activities and various others
• Algorithm trading one of various factors, not a single reason for market rout
• Closely watching volatile stock moves but not in phase of making actual action

Japan data – June Current Account surplus smaller than expected, shrinks from May

Japan Economy Watchers Current Index (Jul)

• Actual: 47.5
• Expected: 47.4
• Previous: 47.0

Japan 30-Year JGB Auction

• Actual: 2.230%
• Previous: 2.190%

Japan Bank Lending (YoY) (Jul)

• Actual: 3.2%
• Expected: 3.2%
• Previous: 3.2%

Japan Foreign Bonds Buying

• Actual: 669.7B
• Previous: -694.7B

Japan Foreign Investments in Japanese Stocks

• Actual: -641.7B
• Previous: -612.9B

Japan Current Account n.s.a. (Jun)

• Actual: 1.534T
• Expected: 1.790T
• Previous: 2.850T

Japan Adjusted Current Account (Jun)

• Actual: 1.78T
• Expected: 2.34T
• Previous: 2.41T

Cryptocurrency News

Binance Reclaims $73 Million in Stolen Crypto Amid Market Rebound

Binance, a leading cryptocurrency exchange, has successfully recovered over $73 million in stolen crypto assets this year, surpassing its previous record of $55 million recovered in 2023. This achievement highlights Binance’s ongoing commitment to securing user funds and combating crypto theft.

Key Highlights:

• Recovered Funds: Binance has reclaimed $73 million in stolen assets in 2024, a 33% increase from the $55 million recovered in 2023.
• Security Success Rate: The exchange has managed to return nearly 80% of the funds lost to external exploits, demonstrating effective measures in freezing and recovering stolen assets.
• BNB Performance: Binance’s native token, BNB, saw a notable rally of 5%, trading around $505 early Thursday.

Market Impact:

The broader cryptocurrency market is experiencing a rebound, with the total market capitalization climbing back above $2.154 trillion. The top 30 cryptocurrencies are showing signs of recovery following recent downturns. Binance’s proactive recovery efforts contribute positively to market confidence, reflecting in BNB’s price increase and overall market sentiment.

Binance’s Approach:

Binance’s security team employs advanced measures to track and reclaim stolen funds, working to ensure that users who fall victim to theft or hacks can recover their assets. By freezing stolen funds that are transferred to its platform, Binance has been able to mitigate losses and restore approximately 80% of the stolen crypto.

As the crypto market continues to recover, Binance’s success in recovering stolen assets reinforces its role as a major player in enhancing security within the industry.

Bitcoin is on pace for its largest percentage gain since March

• Up over 8% in trading today

Bitcoin’s price surged over 8% today, marking its largest gain since March 2023. Currently trading at $59,819, up $4,666 for the day, the digital currency has experienced significant volatility over the past 10 trading days. It reached a high of $70,016 on July 29 and a low of $49,577 on Monday, a 29.19% decline over seven days.

On the hourly chart, Bitcoin is trading near the 50% midpoint of this range at $59,768, with the 200-hour moving average close by at $59,585. This area will be a crucial indicator for both buyers and sellers. Moving above the aforementioned technical levels and the natural resistance at the $60,000 level would provide buyers with added confidence. Conversely, if sellers resist at this level, we will likely see some profit-taking following today’s sharp upward move.

It’s still a long way back to the recent highs near $70,000 but this tone underscores some resilience in crypto and the potential for the same in highly-correlated trades like the Nasdaq and chipmakers.

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