Round up of today’s market news

North American News

US Equities Surge with Strong Buying Momentum, Nasdaq Leads the Rally

US equities finished strong today, with steady buying throughout the session and a late surge driving major indices to their highs of the day. The S&P 500 and Nasdaq both extended their winning streaks to eight consecutive sessions, marking one of the best runs since the early pandemic days.

Market Performance:

• S&P 500: +1.0%
• Nasdaq Composite: +1.4%
• Dow Jones Industrial Average (DJIA): +0.6%
• Russell 2000: +0.9%

This impressive performance has pushed the S&P 500 within 60 points of its all-time high. The strong rejection of lower levels is a bullish sign, especially with the Federal Reserve poised to cut rates and the economy showing resilience.

Market Movers:

• U.S. Steel (X): Dropped 3.5% to $40.35 after former President Trump reiterated his intention to block Nippon Steel’s acquisition of the company.
• Microsoft (MSFT): Gained 0.2% to $419.35, recovering from earlier losses.
• Amazon.com (AMZN): Added 0.4% to $177.80, also bouncing back from earlier declines.

The broader market also saw gains, with the equal-weighted S&P 500 rising 0.8%. Semiconductor stocks, which had been down as much as 1.4%, managed to turn around, with the PHLX Semiconductor Index (SOX) closing up 0.9%.

Market Sentiment:

• The positive bias in the market was supported by upside momentum, despite some caution ahead of key events later this week, including the FOMC Minutes on Wednesday and Fed Chair Powell’s speech on Friday.

Investors continue to navigate mixed signals, balancing strong market momentum with upcoming events that could influence market direction.

Fed’s Waller doesn’t comment on economy or monetary policy

• Nothing from Fed’s Waller today.

Fed’s Waller does not comment on the economy or monetary policy in his welcoming remarks at the 2024 Summer Workshop on Money, Banking, Payments, and Finance, Washington, D.C.

Fed’s Kashkari: It is appropriate to have debate on whether to cut rates in September

• Remarks by Minneapolis Fed president, Neel Kashkari, to the Wall St Journal

• Balance of risks have shifted more towards labour market and away from inflation
• Inflation is making progress
• But labour market is showing some concerning signs

Federal Reserve Chair Powell to retain optionality, more data to come before Sept meeting

• Federal Reserve Chair Powell speaking on Friday at Jackson Hole

Via Reuters a snippet from the Commonwealth Bank of Australia on Powell speaking at Jackson Hole:

• “Markets will be laser focused to what Powell has to say at the end of this week, and on that, I think it will be a great opportunity for Powell to either endorse or push back market pricing,”
• “I think he’ll at least greenlight a rate cut at the September meeting. If anything, I think he’ll try to retain optionality because we do have some more data before the next meeting.”

JP Morgan says recent sharp equity market sell-off a ‘dress rehearsal’ for what’s to come

• JPM says it won’t be a carry trade unwind the next time

A note from JPM analysts says a shock market meltdown could be a scenario that happens again.

“Many market participants are dismissing the recent blowup of various crowded trades as a fluke or flash cash, but we see it as more of a dress rehearsal for what’s to come”

JP Morgan are referring to early August, when the Nikkei collapsed 12.4% in a single day, its worst day since “Black Monday” in 1987. The domino effect triggered global sell offs. The Japanese collapse, the analysts say, was triggered by the small Bank of Japan rate hike and the unwinding of the yen “carry trade.” JPM says that while carry trades could become a problem again but they shouldn’t trigger another market meltdown:

• “Looking ahead, until the Sharpe ratios on the carry trades get high, we would not think these would be the catalyst for the next major correction”

JPMorgan said, though, that concerns about an economic slowdown could resurface:

• “Instead, we see the reemergence growth risk as the likely trigger.”

Fed’s Daly says its time to consider trimming rates

• Time for adjusting borrowing costs says the San Fran Fed President

Federal Reserve Bank of San Francisco President Mary Daly says the Federal Open Market Committee (FOMC) needs to take a gradual approach to lowering borrowing costs.

The FT is gated, but in (very) brief from the report on the interview:

• Daly calls for “prudent” approach to lowering rates
• pushes back on concerns of sharp economic slowdown
• recent data gives “more confidence” inflation is under control
• no need for dramatic response to weakening labor market

Commodities

Gold Rebounds Above $2,500

Gold has rebounded strongly, trading back above $2500 after a brief dip to $2486. This recovery suggests a resilient bullish sentiment despite recent profit-taking. Key factors driving this move include:

• China’s Influence: Market focus is on China, particularly the potential resumption of gold purchases by the People’s Bank of China (PBOC) after earlier halts. With domestic investor sentiment shifting towards gold due to economic instability and currency depreciation, demand is strong, contributing to gold’s rally.
• Market Attention: Surprisingly, gold’s new all-time highs are receiving minimal attention compared to other market stories, such as AI advancements and volatility. This lack of fanfare could indicate underlying strength in gold’s current rally.
• Fed Policy and Dollar Dynamics: Gold’s performance above $2500 before the Fed’s first expected rate cut is significant. A potential decline in the US dollar, driven by future Fed rate cuts and reduced US spending, could further bolster gold. The USD’s recent softness since last week’s retail sales report supports this view.
• Powell’s Jackson Hole Speech: The upcoming speech by Fed Chair Jerome Powell at Jackson Hole is highly anticipated. While no major surprises are expected, dovish comments suggesting confidence in the inflation path and a potential rate cut could influence gold’s trajectory. However, any stern comments against a 50 basis point cut could create volatility.

Outlook: Gold appears poised for further gains, driven by strong demand from China and potential shifts in US monetary policy. The next leg of gold’s rally will likely depend on developments in the US dollar and broader economic policies.

Oil Falls for Fourth Time in Five Trading Days

Oil prices are experiencing a rough stretch, with WTI crude down $2.12 to $74.49, marking the fourth decline in five trading days. This negative trend follows a brief rally last Monday, driven by short-covering in an overcrowded market. However, key factors contributing to the recent price drop include:

• Weak Chinese Demand: Concerns over soft demand from China continue to weigh on oil prices. The market is reacting to signs of reduced consumption, exacerbating the downward pressure on oil.
• US Production Growth: There are expectations that US production growth may disappoint this year, and prospects for 2025 are also uncertain, particularly with WTI prices around $75. This adds to the bearish sentiment in the market.
• OPEC+ Actions: OPEC+ has been actively working to support oil prices by managing production levels. However, with 3 million barrels per day in reserve scheduled to return late this year, there’s a risk that these reserves may need to be permanently curtailed to maintain price stability. OPEC’s ability to manage this balance is critical to future price movements.
• Middle East Dynamics: While geopolitical tensions in the Middle East, particularly involving Iran and Israel, have influenced oil price fluctuations, the lack of immediate conflict has dampened the impact. The market seems to have priced in the current geopolitical risks.

Outlook: Oil prices are approaching the lower end of their trading range, and a further drop to $73 could trigger verbal intervention from OPEC to support the market. Weekly US supply data, scheduled for release soon, has not been a significant market mover recently, so attention will remain on OPEC+ actions and broader demand signals.

Aluminium continues to rally amid CTA buying activity – TDS

Downside asymmetry is building, but it will take a big downtape to spark large-scale selling activity, TD Securities Senior Commodity Strategist Daniel Ghali notes.

Large-scale CTA buying activity continues

“We have reiterated the set-up in aluminium markets has been superior to that of the complex, with extreme asymmetries in algorithmic positioning still contributing to large-scale CTA buying activity. We expect that trend-following algos are now likely to cover their remaining shorts and build a net long position, resulting in a buying program totaling +11% of their max size this session.”

“That being said, this will likely mark the peak in algo buying for the time being, with our simulations of future prices now suggesting that the upside asymmetries in positioning risks that have supported the rally have likely completely dissipated.”

“Downside asymmetry is now building, but it will take a big downtape to spark large-scale selling activity. In this scenario, zinc appears most vulnerable to large-scale selling activity.”

EU News

European bourses closes up

• Closing changes for the main European bourses

• Stoxx 600 +0.6%
• German DAX +0.6%
• Francis CAC +0.8%
• UK’s FTSE 100 +0.8%
• Spain’s Ibex +1.4%
• Italy’s FTSE MIB +0.7%

SNB total sight deposits w.e. 16 August CHF 464.9 bn vs CHF 463.1 bn prior

• Latest data released by the SNB – 19 August 2024

• Domestic sight deposits CHF 457.2 bn vs CHF 455.5 bn prior

UK house asking prices dip, but buyer interest picks up, after Bank of England cut

• UK Rightmove House Price Index for August 2024

UK estate agents are reporting more buyer interest following the Bank of England interest rate cut

• The Bank of England began cutting interest rates from a 16-year high on August 1

Rightmove survey showed:

Rightmove house MoM: -1.5%

Prior: 0.4%

YoY: 0.8%

Prior: 0.4%

• buyer enquiries in August were 19% higher than a year earlier, compared with an 11% annual increase in July

Rightmove director Tim Bannister (via Reuters report):

• “While mortgage rates aren’t yet substantially lower since the rate cut, the fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment”

Asia-Pacific-World News

China – the idea of government-issued consumption vouchers are back into the spotlight

• Cautious consumers holding back on spending are fueling the renewed interest in cash vouchers

China’s latest economic data is confirming that the world’s second-largest economy continues to struggle. Hitting its 5% growth target may require more drastic measures, fueling expectations for further government intervention.

July’s data showed:

• home prices dropping at the fastest rate in nine years
• industrial output slowing
• rising unemployment
• even where data beat forecasts, underlying issues persist, such as inflation driven by bad weather and frontloaded chip imports due to looming US tech restrictions
• Analysts are now speculating that Beijing might be forced to ramp up fiscal support, possibly widening the budget deficit to 4% of GDP (from currently 3%) and even issuing shopping vouchers to boost consumer spending. Also, a top policy adviser hinted that China could bring forward next year’s bond issuance if growth doesn’t rebound soon

Skepticism about issuing vouchers remains:

• similar measures during the pandemic had limited success
• while some see vouchers as a quick fix, many believe sustained economic recovery hinges on a rebound in the property and stock markets

PBOC sets USD/ CNY reference rate for today at 7.1415 (vs. estimate at 7.1548)

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

In open market operations:

• PBOC injects 52bn via 7-day RR, sets rate at 1.7%
• 75bn yuan mature today
• net 23bn yuan injection today

New Zealand services PMI for July 2024: 44.6 (prior 40.2)

• The June report was titled a troubling ‘Sinking’, the July report an upgraded ‘Relative progress’

BNZ – BusinessNZ Performance of Services Index for June 2024, via BusiznessNZ, comes in at 44.6

• prior 40.7 (revised a touch higher)

The report, in summary:

• Activity in New Zealand’s services sector for July showed some improvement after a horrible June result
• 44.6 is the highest result since May
• has averaged 46.5 so far for 2024, compared with 53.2 over the history of the survey

BNZ’s Senior Economist Doug Steel:

• “to get some perspective on how challenging the current environment is for service sector firms, it’s notable the increase in the PSI does not even get the index back to the level it was during the depths of the GFC back in 2008/09”

The Composite comes in at 44.3

• prior 40.9

Japan Machinery orders for June 2024: 2.1% m/m (expected +1.1%)

• A leading indicator of capital spending in the coming six to nine months

For the April to June quarter machinery orders fell 0.1% q/q

The outlook for the July to September quarter is for +0.2% q/q

Japan seeking a 700 billion yen valuation for Tokyo Metro, listing as early as end-October

• US$4.7 billion valuation for Tokyo Metro, subway operator

Japan’s national and Tokyo governments are seeking a 700 billion yen valuation for Tokyo Metro

• Preparing to list the subway operator as early as October-end

Info via Reuters citing three unnamed sources

• would be Japan’s biggest IPO in roughly six years
• the two governments own 100% of Tokyo Metro
• meeting of brokerages planned within a week
• half the company to be sold

Japan’s LDP will hold its leadership election on September 27

• Incumbent PM Kishida is not standing

A diary note for politics in Japan.

It’ll be interesting to get the new PM’s take on Bank of Japan policy.

Fuji News Network (FNN) with the info.

Cryptocurrency News

Crypto Investment Products Record Weak Inflows Amid Mixed Behavior

Digital asset products saw modest net inflows of $30 million last week as the crypto market attempted a recovery, with significant variation in inflows and outflows across different assets.

Key Highlights:

• Overall Inflows: Digital asset products recorded $30 million in net inflows last week. This recovery follows a period of market drawdown and concerns that the Fed may not cut interest rates as anticipated in September.
• Bitcoin ETFs: Bitcoin ETFs led the inflows with a net total of $42 million. This renewed interest in Bitcoin may be linked to accumulation behavior among large Bitcoin miners, such as Marathon Digital, which has raised $250 million through convertible note offerings to acquire more Bitcoin.
• Ethereum ETFs: Ethereum ETFs saw a modest net inflow of $4.2 million. Notably, new providers in the US spot ETH ETF market attracted $104 million, while Grayscale experienced $118 million in outflows.
• Solana ETFs: Solana ETFs experienced their largest-ever weekly outflow, totaling $38.9 million. This outflow could be attributed to a decrease in the meme coin market capitalization and trading volume, which previously supported Solana’s demand.
• Geographic Distribution:
  • US: Dominated with $62 million in net inflows.
  • Canada and Brazil: Recorded net inflows of $9.2 million and $7.2 million, respectively.
  • Switzerland: Saw outflows of $29.7 million, the first instance in over a month.
  • Hong Kong and Germany: Experienced outflows of $14.3 million and $6.1 million, respectively.

Market Dynamics:

The weak inflows reflect cautious sentiment among investors, possibly influenced by uncertainty around the Fed’s monetary policy. The significant outflows from Solana ETFs and the mixed performance across different crypto assets suggest a divergence in investor confidence and behavior within the crypto market. As the market navigates through these dynamics, the varying responses to different cryptocurrencies highlight ongoing shifts in investor focus and sentiment.

Ethereum Gas Fees Hit Record Lows Amid Weak ETF Flows

Ethereum gas fees have plunged to an all-time low, hitting 1.06 Gwei on Saturday, a significant drop that coincides with a broader downtrend in ETH prices. Despite Ethereum ETFs seeing minor global inflows of $4.2 million last week, US spot ETH ETFs experienced substantial outflows, totaling $14.1 million.

Key Points:

• Gas Fees and Burn Rate: Ethereum’s gas fees have reached record lows, leading to a drop in the burn rate to 115 ETH on Saturday. This low gas fee environment, while historically indicative of a price bottom, may be affected by the recent Dencun upgrade. The upgrade, implemented on March 13, introduced blobs that allow Layer 2 networks to post data on the main chain at lower costs, contributing to a decrease in the ETH burn rate.
• Supply Trends: Between April and August 2024, Ethereum’s total supply has increased by over 220,000 ETH, and its price has fallen more than 30%. The rising supply, coupled with declining prices, suggests that if demand does not increase, it may put additional downward pressure on ETH’s price.
• ETF Flows: Ethereum ETFs recorded a small global net inflow of $4.2 million, but US spot ETH ETFs saw a net outflow of $14.1 million. This discrepancy highlights cautious sentiment among investors, reflected in the ETH Fear and Greed Index, which currently stands at 34, indicating a state of fear or uncertainty in the market.
• Historical Context: ETH’s current price action and low gas fees may be attempting to replicate past historical price moves. However, the ongoing changes in supply and the impact of the Dencun upgrade could affect whether ETH follows previous patterns.

Outlook: The combination of record-low gas fees and weak ETF flows presents a mixed picture for Ethereum. While historical patterns suggest potential price bottoms, the current increase in ETH supply and changing market dynamics could influence future price movements. The market remains cautious, with investor sentiment and ETF flows indicating a wait-and-see approach.

Follow our recently launched pages. Join our community and never miss a beat in the dynamic world of trading.

https://www.facebook.com/BilalsTechLtd

https://www.linkedin.com/company/bilals-tech/

https://t.me/Market_Moving_News