Round up of today’s market news

North American News

US Stock Markets End the week on a High Note

The US stock markets managed to close with gains once again, marking their best week since October 2023. Despite starting the day lower, markets found support early on and gradually climbed throughout the session. While the day was marked by lower overall volatility and minimal news, the positive close, particularly in smaller caps, is a promising sign for bullish investors.

Daily Closing Changes:

• S&P 500: +0.2%
• Nasdaq Composite: +0.2%
• Dow Jones Industrial Average (DJIA): +0.2%
• Russell 2000: +0.35%

Weekly Performance:

• S&P 500: +3.9%
• Nasdaq Composite: +5.3%
• DJIA: +2.9%
• Russell 2000: +2.9%

This performance reflects a strong week for the major North American equity markets, with the Nasdaq leading the charge with a significant 5.3% gain over the week.

Atlanta Fed GDPNow Q3 estimate +2.0% vs +2.4% prior

• Second cut this week

In their own words:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 2.0 percent on August 16, down from 2.4 percent on August 15. After this morning’s housing starts report from the US Census Bureau, the nowcast of third-quarter real gross private domestic investment growth decreased from 0.0 percent to -2.4 percent.

US August prelim UMich consumer sentiment 67.8 vs 66.9 expected

• Consumer survey from the University of Michigan

• July final was 66.4
• Current conditions 60.9 vs 62.7 prior
• Expectations 72.1 vs 68.8 prior
• 1-year inflation 2.9% vs 2.9% prior
• 5-10 year inflation 3.0% vs 3.0% prior
• Overall, expectations strengthened for both personal finances and the five-year economic outlook (highest reading in four months)

Yesterday’s retail sales report was strong and Walmart executives repeatedly described a stable and resilient consumer so I have a hard time putting any weight on this survey, which is more about politics and gasoline prices than consumer spending. Along those lines, the survey noted:

With election developments dominating headlines this month, sentiment for Democrats climbed 6% in the wake of Harris replacing Biden as the Democratic nominee for president. For Republicans, sentiment moved in the opposite direction, falling 5% this month.

US July housing starts 1.238M vs 1.330M expected

• US July 2024 housing starts and building permits data

• Prior was 1.353M
• Starts -6.8% vs +3.0% prior
• Building permits +1.396M vs 1.429M expected
• Permits -4.0% vs +3.9% prior

Fed’s Goolsbee: You don’t want to tighten any longer than you have to

• Remarks by Chicago Fed president, Austan Goolsbee

• This is not what an overheating economy looks like to me
• Small business defaults are up, now it’s getting a little cautionary
• Unemployment is up and that’s a caution sign
• IF we move to less restrictiveness, it will ease some of these credit conditions
• Credit conditions seem tight

JP Morgan still tipping 100bp of Federal Open Market Committee (FOMC) rate cuts in 2024

• A 100bp lower Fed Funds rate is still restrictive

JPMorgan chair of global research Joyce Chang, spoke on Bloomberg TV Thursdauy. Says despite the strong retail sales report on in the US she still sees the Federal Open Market Committee (FOMC) cutting rates by 100bp over the course of the rest of this year.

• the path is clearer now for the next 6 months
• disinflation trends, employment trends means the Fed feels more confident being aggressive now
• expect messaging on this at Jackson Hole

Adds that even with 100bp of rate cuts the Fed is still restrictive:

• policy is currently set for a meaningfully higher inflation rate & and a meaningfully lower unemployment rate
• but those two measures have now moved

July Canada housing starts 279.5K vs 245.0K

• Housing starts data data from the CMHC

• Prior was 241.7K (revised to 241.6K)
• Multi-unit starts +21% vs -12% prior
• Single-detached +2% vs -2% prior

Canada June manufacturing sales -2.1% vs -2.6% expected

• Canada June 2024 manufacturing sales data

• Prior was +0.4%
• Sales at $69.6 billion in June on declines in 17 of 21 subsectors
• Declines led by the transportation equipment (-2.9%), chemical product (-5.8%) and primary metal (-2.7%) subsectors
• Total sales fell 0.3% in the second quarter of 2024 in third consecutive quarterly decline
• Sales down 1.8% y/y
• Total inventory levels +0.1%
• Unfilled orders -0.8%

Bank of Canada to cut by 25 bps in September and October. Eyes on next week’s CPI

• The latest forecast from Canada’s largest bank

RBC continues to see the Bank of Canada lowering rates by 25 basis points on Sept 4 and again on Oct 23. The market sees a very small chance of 50 bps at one of those meetings but this forecast is generally in line with what’s expected.

The highlight next week is Canada’s CPI report on Tuesday but RBC notes that the bar for a shift from the BOC is high, given that Macklem has flagged “there could be setbacks along the way.”

Commodities

CTA selling activity hits crude oil markets – TDS

Large-scale CTA selling activity is hitting the tapes in crude oil markets, TDS Senior Commodity Strategist Daniel Ghali notes.

CTAs to shed their entire position long in Brent crude

“We expect CTAs to shed their entire position long in Brent crude this session and build a net short position, with additional scope to sell WTI crude over the coming week in a downtape scenario for prices.”

“Our statistical analysis of energy supply risks also suggest that supply risk premia is seeping out of energy markets once again, suggesting traders are curiously disregarding the risk of geopolitical aggressions ahead of the weekend.”

Baker Hughes Rig Count: Weekly Update

U.S. Rig Count:

• Total Rigs: Down 2 to 586
  • Oil Rigs: Down 2 to 483
  • Gas Rigs: Up 1 to 98
  • Miscellaneous Rigs: Down 1 to 5
• Year-over-Year Comparison: Down 56 rigs from 642 last year
  • Oil Rigs: Down 37
  • Gas Rigs: Down 19
  • Miscellaneous Rigs: Unchanged

U.S. Offshore Rig Count:

• Total Rigs: Unchanged at 19
  • Year-over-Year Comparison: Up 2 from last year

Canada Rig Count:

• Total Rigs: Unchanged at 217
  • Oil Rigs: Up 4 to 151
  • Gas Rigs: Down 3 to 66
  • Miscellaneous Rigs: Down 1
• Year-over-Year Comparison: Up 28 from 189 last year
  • Oil Rigs: Up 32
  • Gas Rigs: Down 4
  • Miscellaneous Rigs: Unchanged

China issues new gold import quotas after pause — Reuters report

• Gold touched a record high today

The rally in gold earlier today may have been underpinned by the issue of new gold import quotas to Chinese banks.

Reuters is now reporting about the new quotas, citing four sources.

“The quotas have been issued but the local premium to offshore is low so there is no guarantee that the quotas will be used until things improve,” one of the sources said. “Jewelry demand is still weak but investment demand is healthy.”

• July CPI expected to remain at 2.7% y/y, core at 2.9% y/y
• Shelter costs still main driver, but slowing due to lower mortgage rates
• BoC’s preferred core measures likely ticked higher on 3-month basis
• Economic weakness points to further inflation easing

“There was concern that initial interest rate cuts from the BoC could reignite rapid house price growth, but the response in housing markets to the 25 basis point cuts in June and July has been muted with signs that rent price growth has also begun to slow.”

EU News

European equity close: Finishes off the week strongly

• Closing changes for the main European bourses

On the day:

• Stoxx 600 +0.3%
• German DAX +0.8%
• Francis CAC +0.4%
• UK’s FTSE 100 -0.4%
• Spain’s Ibex +0.6%
• Italy’s FTSE MIB +2.0%

On the week:

• Stoxx 600 +2.4%
• German DAX +3.4%
• Francis CAC +2.7%
• UK’s FTSE 100 +5.0%
• Spain’s Ibex +2.9%
• Italy’s FTSE MIB +4.0%

Eurozone June trade balance €22.3 billion vs €13.9 billion prior

• Latest data released by Eurostat – 16 August 2024

• Prior €13.9 billion

Looking at the first half of the year, euro area exports totaled to €1,430.1 billion from January to June this year. That is down by 0.8% compared to the same period last year. Meanwhile, imports during that period totaled to €1,322.6 billion. And that is down 8.4% compared to the same period in 2023.

UK July retail sales +0.5% vs +0.5% m/m expected

• Latest data released by ONS – 16 August 2024

• Prior -1.2%
• UK retail sales +1.4% vs +1.4% y/y expected
• Prior -0.2%; revised to -0.3%
• UK retail sales (ex autos, fuel) +0.7% vs +0.8% m/m expected
• Prior -1.5%; revised to -1.3%
• UK retail sales (ex autos, fuel) +1.4% vs +1.4% y/y expected
• Prior -0.8%

It’s one of those few times that UK retail sales does meet estimates, reaffirming a slight bounce back after the drop in June.

Looking at the details, there were increases in department store sales (+4.0%), other non-food store sales (+2.5%), and non-store retailing (+0.7%). But that is offset by declines in clothing store sales (-0.6%), household goods store sales (-0.6%), and automotive fuel sales (-1.9%). Food store sales were flat on the month.

Asia-Pacific-World News

China premier Li says will resolutely achieve economic and social development goals

• Remarks by China premier, Li Qiang

• Will make great efforts to enhance the sustained upward trend of the economy
• It is necessary to stick to goals and not to take a relaxed approach
• Need to expand domestic demand more vigorously, focus on boosting consumption
• Will explore new growth points for foreign trade
• To make differentiated policy support based on the needs of different groups of people

The People’s Bank of China has switched up its main policy rate to watch

• This was confirmed by the delay to the MLF announcement yesterday

It’ll conduct the MLF on August 26. This is after the setting of Loan Prime Rates (LPRs) due on the 20th. The PBOC did similar last month. Both the series of rate cuts, and their sequence, indicated its policy framework had changed. Yesterday was more confirmation of this.

The PBOC has now shifted to the 7 day repo rate as being the main signal of policy.

Yesterday the Bank lent 577.7 billion yuan ($80.9 billion) through these seven-day reverse bond repurchase agreements at 1.7% in an open market operation.

The Banks said this cash injection was meant to counteract factors including

• maturing medium-term lending facility (MLF) loans
• tax payments
• government bond issuance

Via Reuters follow up on this change:

• “The central bank has informed primary dealers of the arrangement and reminded them to utilise the seven-day reverse repo operation on Thursday to smooth the liquidity gap between MLF maturing day and rollover,”
• “This would be consistent with the policy direction to gradually fade MLF as a guidance to market rates, so is the change of the MLF date to be after loan prime rate (LPR) decision,” said Frances Cheung, head of FX & rates strategy at OCBC Bank.
• “The chance remains for replacement of some or all of MLF liquidity with that released from an reserve requirement ratio (RRR) cut, later this month or in September.”

PBOC sets USD/ CNY reference rate for today at 7.1464 (vs. estimate at 7.1739)

• PBOC CNY reference rate setting for the trading session ahead follows the huge surge for the US dollar on Thursday

In open market operations:

• PBOC injects 138n via 7-day RR, sets rate at 1.7%
• 13bn yuan mature today
• net 125bn yuan injection today

China to toughen rules monitoring movement of people and goods from regions with monkeypox

• Info incoming from around the place re a Chinese customs announcement:
• China to intensify monitoring of individuals and goods coming from monkeypox-affected regions
• new measures mandate that travelers from outbreak regions must declare any contact with symptomatic individuals and report any symptoms they have

China has built the world’s largest offshore oil platform

China has built the world’s largest offshore oil platform that will be used at the Marjan field in Saudi Arabia.

• Chevron company announced last week it had successfully tested a new high-pressure extraction technology at a deepwater well in the Gulf of Mexico

RBA’s Bullock says underlying inflation remains too high

• Reserve Bank of Australia officials appearing in parliament today

Reserve Bank of Australia Governor Bullock opening statement:

• Board is of the view that it currently has the balance right between reducing inflation in a reasonable timeframe
• Our full employment goal is not served by letting inflation stay above target indefinitely.
• The board remains focused on the potential upside risks to inflation.
• Board is trying to bring inflation back to target in a reasonable timeframe while preserving as many of the gains in the labour market that we have seen in the past few years
• There has been further progress on inflation, but it has been very slow
• The economic outlook remains highly uncertain.
• Underlying inflation remains too high
• Based on what the board knows at present, it does not expect that it will be in a position to cut rates in the near term.
• The board’s message, though, was that it is premature to be thinking about rate cuts.
• While goods price inflation has declined substantially, it has not been enough to offset continued high services price inflation

Reserve Bank New Zealand Governor Orr: Strong confidence inflation is back in 1 – 3% range

• RBNZ on a rate cut cycle now

Orr is speaking in Wellington, New Zealand.

• Says the Bank’s Monetary Policy Committee has achieved a very strong level of confidence that low and stable inflation is back within 1 – 3 % range
• I want to see inflation expectations and pricing intentions continue to remain anchored

RBNZ’s Silk says the Bank is taking a measured approach to rate cuts

• RBNZ Assistant Governor Silk

RBNZ Assistant Governor Silk speaking in an interview:

• Bank is taking a measured approach to rate cuts
• its uncertain how quickly inflation will fall
• the behaviour of price inflation is crucial for the cash rate path ahead

New Zealand Q2 PPI Output +1.1% q/q (expected 0.6%) and inputs +1.4% q/q (expected 0.5%)

• Wholesale level prices surge in Q2.

New Zealand July Manufacturing PMI 44.0 (prior 41.1)

• Business NZ Manufacturing PMI

Business NZ Manufacturing PMI for July 2024 records its 17th consecutive month of contraction.

• some small signs of improvement
• still significantly below its long-term average of 52.6

Business NZ’s Director, Advocacy Catherine Beard:

• sector continuing to strugglee

BNZ’s Senior Economist Doug Steel:

• manufacturing activity will turn when the broader economy turns
• Easing monetary conditions will help in this regard, but it will take time for the likes of a lower OCR to generate a general pick up in sales

Economists expect Japan’s CPI to have ticked higher in July

• Higher inflation supports the Bank of Japan raising rates

Reuters poll of economists show expectations for further rising inflation in Japan.

In brief:

• Expectations from the survey are that core CPI is forecast to rise 2.7% y/y in July vs 2.6% in June
• This would register inflation above the BOJ 2% target for the 28th straight month
• End of energy subsidies likely boosted headline figure

Singapore Non-oil Domestic Exports (NODX) July 2024: +12.2% m/m vs. +2.2% expected

• Singapore’s non-oil domestic exports (NODX) for July 2024

+12.2% m/m

• vs. +2.2% expected and -0.4% in June

+15.7% y/y

• expected +1.2%, prior -8.7%

Electronics and non-electronics exports growing. Non-oil exports to the United States +28.9% y/y

• to China +21.1% y/y
• to the European Union, Japan, Hong Kong and South Korea fell

Cryptocurrency News

Ethereum ETFs See $39 Million in Outflows as BlackRock Surpasses Grayscale in Crypto ETF Dominance

Ethereum Market and ETF Update

Ethereum ETF Outflows:

• Outflows: Ethereum ETFs experienced net outflows of $39.2 million, ending a three-day streak of inflows. The majority of these outflows came from Grayscale’s ETHE product, which saw an exodus of $42.5 million.

BlackRock vs. Grayscale:

• BlackRock’s Lead: BlackRock’s crypto ETF holdings have surpassed those of Grayscale, making it the new leader in the crypto ETF space.

Donald Trump’s Ethereum Holdings:

• Trump’s Crypto Portfolio: According to Arkham Intelligence, former President Donald Trump holds over $2 million in Ethereum, including $1.29 million worth of Ethereum and $986,000 worth of Wrapped Ethereum. These assets may have been acquired through the sale of his NFT collection rather than direct investment.

Ethereum Technical Outlook:

• Price Movement: Ethereum is currently up more than 2%, but its rally is constrained by a key trendline within a three-year symmetrical triangle. A break below the lower rising trendline could strengthen bearish momentum for ETH.

Market Sentiment:

• The recent outflows from Ethereum ETFs, coupled with BlackRock’s rise in the ETF space, highlight shifting investor sentiment and positioning in the crypto market. Meanwhile, Trump’s substantial Ethereum holdings add an intriguing layer to the broader crypto narrative as the 2024 U.S. presidential election approaches.

XRP Falls Below $0.57 Support as Ripple CLO Hints SEC Appeal Faces Tough Odds

XRP Technical and Legal Update

XRP Price Action:

• Current Price: $0.55
• Support Level: XRP has dropped below the key support level of $0.57, currently trading at $0.55. This breach raises concerns about further declines.

Ripple Legal Update:

• Ripple CLO Comments: Stuart Alderoty, Ripple’s Chief Legal Officer, recently spoke with CryptoLaw and indicated that the SEC is less likely to win an appeal against Ripple.
  • Appeal Statistics: Alderoty shared that less than 10% of appeals result in a ruling reversal.
  • Legal Confidence: Alderoty is optimistic about Ripple’s position, arguing that the SEC is less likely to overturn Judge Analisa Torres’ July 2023 ruling, which provided legal clarity that XRP is not a security in secondary market transactions.
  • Potential Appeal: The SEC may be more inclined to appeal the July ruling by Judge Torres, which significantly impacted the legal standing of XRP.

Market Reaction:

• Traders’ Sentiment: XRP traders are currently focused on the legal developments and how they might affect XRP’s price trajectory. The technical breach of the $0.57 support level adds to the uncertainty.

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