Round up of today’s market news

North American News

US Stocks End Mixed: Dow Drops, S&P Flat, Nasdaq Up

Market Summary:

• Dow Jones: The Dow Industrial Average fell by 140.55 points, or 0.36%, closing at 39,357.00.
• S&P 500: The S&P 500 remained virtually unchanged, inching up by 0.23 points to 5,344.38.
• Nasdaq: The Nasdaq Composite gained 35.31 points, or 0.21%, ending the day at 16,780.61.
• Russell 2000: The small-cap Russell 2000 dropped 18.83 points, or 0.91%, to close at 2,062.08.

Daily Market Movers:

• Sector Performance: The mixed performance reflected divergence in sector activity, with large-cap stocks showing resilience while small-cap stocks faced headwinds.
• Investor Sentiment: The day’s mixed results highlight ongoing investor caution amid fluctuating economic indicators and corporate earnings reports.

Outlook:

• Market Trends: The contrasting movements across major indices underscore market volatility and sector-specific dynamics.
• Economic Calendar: Upcoming economic data and corporate earnings releases will be critical in shaping future market direction.

US stocks displayed varied performance, with the Dow struggling, the S&P 500 stable, and the Nasdaq inching higher, reflecting a complex market environment.

US federal budget deficit for July -$244.00 billion versus -$242.00 billion estimate

• US federal budget deficit for July comes in near expectations

• U.S. July budget deficit: $244 billion, up 10% from a year earlier.
• Adjusted deficit would be $45 billion narrower due to calendar differences.
• Deficit increase mainly due to lower benefits outlays last July.

Receipts and outlays

• July receipts: $330 billion, up 20% year-over-year; adjusted increase: 12%.
• July outlays: $574 billion, up 16%; adjusted outlays would be 1% lower.
• Interest on debt: $89 billion, up 21%; average interest rate: 3.33%. Interest costs are 32% higher than last year
• Spending on Social Security are up 6%

Year-to-date:

• Fiscal 2024 year-to-date deficit: $1.517 trillion, down 6% from fiscal 2023.
• Year-to-date receipts: $4.085 trillion, up 11%.
• Year-to-date outlays: $5.602 trillion, up 6%.

NY Fed survey of its inflation expectations: 1 year 3%. 3 year 2.3% lowest since 2013

• 5-year inflation expectations comes in unchanged at 2.8%

The New York Fed survey of consumer expectations for July 2024 showed

Inflation:

• Median one- and five-year-ahead inflation expectations remained unchanged at 3.0% and 2.8%, respectively.
• Median three-year-ahead inflation expectations fell sharply by 0.6 percentage points to 2.3%, the lowest since the survey’s inception in June 2013.
• Decline in three-year inflation expectations was most significant among respondents with a high-school education or less and those with annual household income under $50,000.
• Disagreement among respondents decreased at the one- and five-year horizons, and remained unchanged at the three-year horizon.
• Median inflation uncertainty was unchanged across all three horizons.
• Median home price growth expectations remained steady at 3.0%.
• Year-ahead commodity price expectations declined for gas (down 0.8 percentage points to 3.5%) and food (down 0.1 percentage point to 4.7%), but increased for medical care (up 0.2 percentage points to 7.6%), college education (up 1.9 percentage points to 7.2%), and rent (up 0.6 percentage points to 7.1%).

Labor Market:

• Median one-year-ahead expected earnings growth declined by 0.3 percentage points to 2.7%.
• Mean unemployment expectations decreased by 1.0 percentage point to 36.6%.
• Mean perceived probability of losing one’s job in the next 12 months decreased by 0.5 percentage points to 14.3%.
• Mean probability of leaving one’s job voluntarily increased by 0.2 percentage points to 20.7%, the highest since February 2023.
• Mean perceived probability of finding a job if current employment was lost decreased by 0.9 percentage points to 52.5%.

Household Finance:

• Median expected growth in household income remained unchanged at 3.0%.
• Median household spending growth expectations fell by 0.2 percentage points to 4.9%, the lowest since April 2021.
• Perceptions of credit access worsened, with more households reporting it harder to obtain credit than a year ago. However, expectations for future credit availability improved.
• Average perceived probability of missing a minimum debt payment over the next three months increased by 1.0 percentage points to 13.3%, the highest since April 2020.
• Median expectation regarding year-ahead change in taxes decreased by 0.3 percentage points to 4.0%.
• Median year-ahead expected growth in government debt remained unchanged at 9.3%.
• Mean perceived probability that average interest rates on savings accounts will be higher in 12 months decreased by 0.2 percentage points to 25.1%.
• Perceptions of households’ current financial situations improved slightly, while year-ahead financial expectations deteriorated.
• Mean perceived probability that U.S. stock prices will be higher in 12 months increased by 0.1 percentage points to 39.3%.

UBS hold steady forecasting S&P 500 to 5,900 by year end, and higher to 6,200 by June 2025

• Strong fundamentals, Fed rate cut tailwinds

Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management spoke on Friday, says upside ahead for equities.

Citing:

• Federal interest-rate cut ahead
• solid growth backdrop
• “Because of this, I think the markets can be supported”
• “There are also some contrarian buy signals that are emerging.”
• “With economic and earnings fundamentals still good and the Fed likely to cut interest rates, our base-case scenario is still for the S&P 500 to end the year around 5,900 and 6,200 by June 2025”

Bank Credit Analyst still forecasting S&P 500 collapse to 3,750

• BCA predicts the S&P 500 will drop to 3,750 sometime next year

The firm reiterated this forecast in a report published late last week:

• expects stocks to stabilize in the near term
• says though that the medium-term direction is to the downside
• continue to expect the US to enter a recession in late-2024 or early-2025
• sees the S&P 500 collapsing sometime in 2025
• sees the 10-year Treasury note yield down to 3%

ICYMI on the weekend Fed’s Bowman: Cautious on rate cuts, eyes upside inflation risks

• Fed Governor Michelle Bowman spoke on Saturday

• “I am not confident that inflation will decline in the same way as in the second half of last year.”
• Inflation still “uncomfortably above” 2% target
• Labor market showing signs of cooling, but uncertainties remain
• Upside risks to inflation persist, including housing and geopolitical factors
• Calls for patience in monetary policy decisions
• Critical of rapid regulatory changes in banking sector
• Advocates for thoughtful M&A framework in banking

Canada July building permits -13.9% vs +6.6% expected

• Canadian building permits for July 2024

• Prior was -12.2% (revised to -12.7%)
• Permits at $9.9 billion vs $11.6 billion prior
• residential permits decreased 11.5% to $6.5 billion, led by multi-unit
• single-family homes +4.0% m/m
• non-residential sector permits decreased 18.1% following a 21.3% increase in May

These are back-to-back monthly drops of 12.7% and 13.9% in Canadian building permits.

Adjusted for inflation, spending is well-below 2019 levels.

Commodities

Gold Surges as Middle East Tensions Escalate

Market Overview:

• Gold’s Uptrend: Gold prices jumped 1% to $2,467 on Monday, driven by retreating US Treasury yields and escalating geopolitical tensions.
• Middle East Tensions: Persistent unrest in the Middle East, with no progress towards a ceasefire between Israel, Lebanon, and Iran, has heightened demand for gold. This environment of uncertainty bolsters gold’s role as a refuge during geopolitical turmoil.

Economic Data Anticipation:

• Upcoming Reports: Traders are closely watching the US economic calendar, anticipating key reports on inflation and retail sales. The Consumer Price Index (CPI) for July is expected to show a decrease to 2.9% YoY, while core CPI is projected to drop to 3.2% YoY. July’s Producer Price Index (PPI) is anticipated to edge down from 0.2% to 0.1% MoM. Retail Sales are expected to rise from 0% to 0.3% MoM.
• Federal Reserve Sentiment: Federal Reserve Governor Michele Bowman has adopted a neutral stance, diverging from her previous hawkish outlook. She acknowledged some progress in inflation, aligning with a broader cautious optimism on disinflation.

Market Dynamics:

• Gold’s Safe-Haven Appeal: The ongoing geopolitical strife has fueled a flight to safety, driving gold’s price higher. This comes despite reports of China’s central bank refraining from gold purchases for the third consecutive month.
• Interest Rate Expectations: The CME FedWatch Tool indicates a 47.5% probability of a 50-basis-point rate cut by the Fed in September, a decrease from 52.5% last Friday, reflecting shifting market expectations.

Outlook:

• Gold Price Action: Gold’s rally reflects investor anxiety and anticipation of upcoming economic data. Continued geopolitical instability and US economic reports will be critical in shaping gold’s trajectory.
• Market Sentiment: Watch for potential volatility as market participants digest inflation data and Federal Reserve commentary in the coming days.

Gold’s ascent amidst rising geopolitical risks and shifting economic forecasts underscores its role as a vital asset in uncertain times.

Crude Oil Market Update

Crude Oil Futures:

• Settlement Price: $80.06, up $3.22 or 4.19%

Market Overview:

• Price Movement: Crude oil futures have settled above $80 for the first time since July 18. The significant rise of $3.22 or 4.19% was driven by ongoing geopolitical risks.
• Geopolitical Factors: Tensions involving Iran and Israel are contributing to the increased crude oil prices, as geopolitical risks typically add a premium to oil prices.
• Technical Indicators:
  • 200-Day Moving Average: The price has moved above the 200-day moving average, which is a bullish sign.
  • 100-Day Moving Average: The day’s high tested the 100-day moving average near $80.16. Maintaining a position above this level is necessary to strengthen the bullish technical outlook.

Technical Outlook:

• Support Levels: The price needs to stay above the 100-day moving average to bolster the bullish sentiment.
• Resistance Levels: The next key resistance level is around the 100-day moving average.

The market remains sensitive to geopolitical developments, with current risks supporting oil prices. Technical indicators suggest a bullish trend if the price can maintain its position above key moving averages.

OPEC slashes 2024 oil demand growth forecast on softer China outlook

• They also cut next year’s demand growth estimate in their latest monthly report

• 2024 world oil demand growth forecast seen at 2.11 mil bpd (previously 2.25 mil bpd)
• 2025 world oil demand growth forecast seen at 1.78 mil bpd (previously 1.85 mil bpd)

Saudi crude oil exports to China are set to fall in September by about 3 million barrels

Reuters conveying the info, citing several trade sources

• Saudi crude oil exports to China are set to fall in September to about 43 million barrels, citing monthly allocations for term buyers.
• September exports to China are estimated to slip about 3 million barrels from about 46 million barrels in August

EU News

European indices close mixed

Major European indices are closing for the day with mixed results:

• German DAX, -0.06%
• France CAC, -0.26%
• UK FTSE 100 +0.52%
• Spain’s Ibex +0.07%
• Italy’s FTSE MIB + 0.46%

Germany July wholesale price index +0.3% vs -0.3% m/m prior

• Latest data released by Destatis – 12 August 2024

Slight delay in the release by the source. Relative to the same month a year ago, wholesale prices are seen down 0.1%. But the decline has eased compared to June, when prices were down 0.6% compared to the same month in 2023.

SNB total sight deposits w.e. 9 August CHF 463.1 bn vs CHF 453.9 bn prior

• Latest data released by the SNB – 12 August 2024

• Domestic sight deposits CHF 455.5 bn vs CHF 445.5 bn prior

Swiss sight deposits rose in the past week but nothing out of the ordinary from the last few months. Here is the trend:

BOE’s Mann says still concerned about upside risks to inflation

• Remarks by BOE policymaker, Catherine Mann, to the FT

• Goods and services prices set to rise again
• Wage growth also still a concern for inflation
• Wage pressures could take years to dissipate

UK employers plan lowest pay rises in two years

• Data dump coming up from the UK this week

The latest survey from the UK’s Chartered Institute of Personnel and Development shows that the country’s employers plan lowest pay rises in two years. Info comes via Reuters.

UK employers are planning to raise wages by just 3% over the coming year

• the lowest planned increase in two years
• a significant drop from the 4% expected three months ago

This result compares with a survey conducted by the Bank of England and published at the start of the month that showed businesses intended to raise pay by 4.1%, also the lowest in at least two years.

Asia-Pacific-World News

PBOC sets USD/ CNY reference rate for today at 7.1458 (vs. estimate at 7.1777)

• PBOC CNY reference rate setting for the trading session ahead. A weak setting for CNY

In open market operations:

• PBOC injects 74bn via 7-day RR, sets rate at 1.7%
• 1bn yuan mature today
• net 73bn yuan injection today

China’s struggling economy overly reliant on exports, 2nd trade war with Trump a nightmare

• China fears another trade war with a second Trump administration

The Wall Street Journal (gated) says Trump’s proposed 60% tariff on imports from China would cause much steeper economic damage to China because the tariffs would be higher and China’s economy is much more vulnerable.

The Journal makes the point that China’s export surge is a bright spot for an otherwise struggling economy.

Other sectors are in dire straits:

• epic property crunch is now in its third year
• burned by the property meltdown and lingering trauma of the pandemic, Chinese consumers are keeping a tight grip on their wallets
• local government finances are under severe strain
• private-sector confidence is in the doldrums

And that:

• reliance on manufacturing and exports leaves China much more sensitive to an escalation in the U.S.-China trade war.

China doubling down on its overcapacity strategy, digging the economy into a deeper hole

This article is concerning, titled:

• China’s Real Economic Crisis – Why Beijing Won’t Give Up on a Failing Model

Here is the link. It’s a long, piece but in summary:

• China’s economy is struggling despite the end of zero-COVID policies, with sluggish GDP growth and sagging consumer confidence.
• The main issue is structural overcapacity in many sectors, resulting from decades of prioritizing industrial production over consumption.
• This overcapacity is causing problems domestically (deflation risks, debt issues) and internationally (trade tensions due to flooding markets with cheap goods).
• The overcapacity stems from China’s economic strategy that incentivizes local governments to invest heavily in priority sectors, often leading to duplicative investments and debt.
• Examples of overcapacity include solar panels, industrial robotics, and AI, where China has built massive production capacity without corresponding demand or innovation.
• Beijing is doubling down on this strategy to achieve technological self-sufficiency, potentially worsening the problem.
• Western countries, particularly the US, are responding with tariffs and their own industrial policies, but this approach has risks.
• The article suggests that instead of isolating China, the West should keep China engaged in the global trading system and use multilateral institutions to negotiate changes.
• It proposes that the US should be open to comprehensive negotiations with China, addressing multiple issues simultaneously, rather than a compartmentalized approach.

RBA’s Hauser says there is a risk the unemployment rate could rise faster than assumed

• Reserve Bank of Australia Deputy Governor Hauser

Reserve Bank of Australia Deputy Governot Hauser, speaking at an Economic Society of Australia (QLD) event:

• Economic forecasts are subject to huge uncertainty.
• Assume inflation stickiness due to weaker supply, labour market tightness.
• But spare capacity could easily be much higher, or much lower than we assume.
• Assume unemployment will rise only slowly, but risk of faster increase.
• Assume household consumption to rise in line with real incomes.
• Risk consumption could rise more strongly, in part due to increase in wealth.
• Uncertain how far and fast savings rate might rise.

Reserve Bank of New Zealand interest rate decision a very close call – why they could cut

• Cut in August, or wait until October?

ING previewing the Reserve Bank of New Zealand meeting on Wednesday 14 August, this the bottom line:

• It is a very close call, and consensus is split between a 25bp cut and a hold by the Reserve Bank of New Zealand on 14 August.
• However, we are inclined to think the RBNZ may still prefer to wait for the Fed to move first amid lingering non-tradable inflation concerns, and perhaps deliver a 50bp cut in October.
• The alternative scenario is probably a “hawkish” cut
• Some analysts see the fact that the next RBNZ meeting is only on 9 October as an incentive to start cutting now, before the Fed delivers its largely anticipated first cut in September. Should this be the case, the RBNZ may however be quite cautious in signalling more cuts ahead. The new rate projections may signal somewhere between one and two more cuts by year-end.

New Zealand – RBNZ shadow board split on Reserve Bank interest rate cut

• On balance, the majority recommend a 25bp rate cut

From their report, in brief:

• The NZIER Shadow Board is divided over whether the Reserve Bank of New Zealand (RBNZ) should decrease the Official Cash Rate (OCR) in the upcoming August Monetary Policy Statement.
• Over half of the Shadow Board members viewed that a 25 basis-point decrease in the OCR is needed now, given the continued slowing in the New Zealand economy and the labour market, and annual CPI inflation is nearing the 1 to 3 percent inflation target band.
• The rest of the members recommended the Reserve Bank keep the OCR at 5.50 percent.
• One member considered that there is still not enough evidence from the economic data indicators to justify a cut in the OCR now.

Former BOJ board member Sakurai says Bank of Japan will not be able to hike again in 2024

• Forecasts a rate hike by March 2025

Makoto Sakurai is a former Bank of Japan monetary board member.

• says the Bank of Japan will not be able to hike again in 2024
• predicts a rate hike by March 2025
• market turmoil
• the low likelihood of a rapid economic recovery

Cryptocurrency News

Ethereum May Set To Surge Amid ETF Buying Frenzy but Faces Key Trendline Resistance

Market Overview:

• ETF Boost: Ethereum (ETH) is showing potential for a 20% rally, driven by substantial buying pressure from ETH ETFs, which recorded a net inflow of $155 million last week.
• Whale Activity: An ICO-era Ethereum whale has moved an additional 5,000 ETH to the OKX exchange, potentially affecting the market with a significant sale.

ETF Impact:

• Strong Inflows: Ethereum ETFs saw impressive net inflows of $155 million last week, reflecting robust buying interest from traditional investors capitalizing on market corrections. Notably, BlackRock’s iShares Ethereum ETF (ETHA) is nearing $1 billion in cumulative net inflows.
• Slowing Outflows: With Grayscale’s ETHE outflows slowing, the positive impact on ETH’s price from ETF inflows is anticipated to continue.

Whale Activity:

• Potential Bearish Pressure: A prominent Ethereum whale deposited 5,000 ETH (worth $13.2 million) to OKX, extending a trend of significant sales. This whale, who received 1 million ETH during Ethereum’s ICO, now holds 303,500 ETH across two wallets and may exert short-term downward pressure on ETH’s price.

On-Chain Metrics:

• MVRV Ratio: The 30-day Market Value to Realized Value (MVRV) Ratio is at -9%, indicating that recent buyers are at an average loss, but this metric also suggests ETH might be in a favorable buy zone.
• Weighted Sentiment: The Santiment Weighted Sentiment stands at -0.2%, reflecting a cautious or negative outlook among investors.

Technical Analysis:

• Current Trading: Ethereum is trading around $2,660, up 1% on Monday. The asset has experienced $55.71 million in liquidations over the past 24 hours, split between long ($35.09 million) and short ($20.62 million) positions.
• Resistance Levels: ETH is testing the $3,723 resistance level, which it has struggled to break through twice recently. This resistance intersects with a descending trendline, posing a significant hurdle for a sustained rally.
• Trendline and SMA: A key trendline suggests potential for a decline to around $2,020 if ETH fails to overcome current resistance. The 100-day Simple Moving Average (SMA) also presents a resistance point following a recent “Death Cross” signal when the 50-day SMA crossed below the 100-day SMA.
• Technical Indicators: The Relative Strength Index (RSI) at 41 indicates increased bullish momentum, with recent upward movement. The Stochastic Oscillator (%K line crossing above %D line) supports the shift towards a bullish sentiment. Futures open interest (OI) has risen over 4% to nearly $11 billion, and the ETH Long/Short Ratio has increased to 1.01, suggesting potential for further growth.

Outlook:

• Bullish Potential: ETH could surge by up to 20% to approximately $3,368 if it successfully navigates current resistance levels.
• Bearish Risks: A decline below the $2,020 support level could invalidate the bullish thesis and indicate a potential downturn.

While Ethereum shows promising signs of recovery supported by ETF inflows and technical indicators, significant resistance levels and whale activities could impact its ability to sustain a rally.

Dogecoin’s Recovery Struggle: Key Resistance Levels and Technical Challenges

Market Overview:

• Recovery Attempt: Dogecoin (DOGE) is striving to bounce back from last week’s downturn, showing a strong 25% rally in recent days.

On-Chain Metrics:

• Accumulation Zone: Significant accumulation of 14.5 billion DOGE tokens around the $0.106 mark may act as crucial support.
• 30-Day MVRV Ratio: Currently at -3%, up from -16% previously, reflecting improving conditions for recent buyers despite remaining losses.
• Santiment Weighted Sentiment: The indicator shows mixed social sentiment with high social volume, impacting market dynamics.

Technical Indicators:

• Descending Trendline: DOGE faces resistance from a descending trendline that has persisted since April, potentially stalling its recovery efforts.
• 200-Day SMA: The recent “Death Cross” with the 200-day Simple Moving Average (SMA) could pose significant resistance.
• Resistance Levels: For a substantial recovery and to counter the bearish sentiment, DOGE needs to surpass the $0.130 resistance level.

Outlook:

• Support Levels: Strong support anticipated around the $0.106 mark due to notable accumulation.
• Resistance Levels: Resistance expected at the descending trendline and the 200-day SMA.
• Recovery Potential: A successful rally beyond $0.130 could challenge the current bearish outlook and signal a stronger recovery.

Despite signs of recovery from on-chain metrics, technical barriers and market sentiment will be critical in determining DOGE’s ability to sustain its upward momentum.

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