North American News

US Stocks Surge for Ninth Day in Ten as Buying Momentum Persists

US stock markets extended their winning streak, marking their ninth gain in the past ten trading days. After a brief pause, equities bounced back strongly, driven by renewed buying interest.

Market Performance:

• S&P 500: +0.4%
• Nasdaq Composite: +0.6%
• Dow Jones Industrial Average (DJIA): +0.1%
• Russell 2000: +1.2%

Key Drivers:

• Market Recovery: Today’s gains followed a minor setback yesterday, as investors returned with enthusiasm, pushing major indices higher.
• Sector Performance: The Russell 2000 led the day’s advances, reflecting strong performance in small-cap stocks.

Market Sentiment:

• The positive momentum underscores a resilient market outlook, with continued investor confidence despite recent fluctuations. As we approach the end of the week, the market remains buoyed by favorable economic indicators and investor optimism.

US sells 20-year bonds at 4.160% vs 4.161% WI

• Results of the $16 billion sale of 20-year bonds

• Bid-to-cover ratio 2.54
• High yield 4.160% vs 4.161% pre-sale WI
• Sells $16 billion
• Awards 63.33% of bids at high
• Primary dealers take 9.72%
• Direct 19.27%
• Indirect 71%

US Non-Farm Payrolls Revised Downward by 818,000 Jobs

The recent benchmark revisions for US non-farm payrolls reveal a downward adjustment of 818,000 jobs for the year ending in March 2024. This revision contrasts sharply with earlier figures, which showed an increase of 2.9 million jobs, averaging 242,000 per month.

Economists, including Goldman Sachs, had anticipated a downward revision, estimating potential job losses ranging from 600,000 to 1 million. The revisions are based on a reconciliation with initial jobless claims data, which notably does not account for illegal immigrants. Given the recent surge in border crossings, the revised non-farm payrolls figures may provide a more accurate reflection of actual job creation, encompassing all hiring activities.

Key preliminary revisions by industry sector include:

• – Total private employment: -819,000 jobs (-0.6%)
• – Manufacturing: -115,000 jobs (-0.9%)
• – Professional and business services: -358,000 jobs (-1.6%)
• – Retail trade: -129,000 jobs (-0.8%)
• – Transportation and warehousing: +56,400 jobs (+0.9%)

US MBA mortgage applications w.e. 16 August -10.1% vs +16.8% prior

• Latest data from the Mortgage Bankers Association for the week ending 16 August 2024

• Prior +16.8%
• Market index 225.8 vs 251.3 prior
• Purchase index 130.6 vs 137.7 prior
• Refinance index 754.4 vs 889.3 prior
• 30-year mortgage rate 6.50% vs 6.54% prior

FOMC Minutes: Vast majority said it would likely be appropriate to cut at next meeting

• Minutes of the July 30-31 FOMC meeting

• Vast majority said it would likely be appropriate to cut if data unfolded as expected
• Viewed incoming data as enhancing confidence that inflation headed towards 2%
• “Several observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision.”
• “Almost all participants remarked that while the incoming data regarding inflation were encouraging, additional information was needed to provide greater confidence that inflation was moving sustainably toward the Committee’s 2 percent objective before it would be appropriate to lower the target range for the federal funds rate.”
• “A majority of participants remarked that the risks to the employment goal had increased, and many participants noted that the risks to the inflation goal had decreased.”
• “Many participants noted that reducing policy restraint too late or too little could risk unduly weakening economic activity or employment.”
• Participants noted that growth in economic activity had been solid, there had been some further progress on inflation, and conditions in the labor market had eased
• Participants noted that the recent progress on disinflation was broad based across the major subcomponents of core inflation
• Price inflation in June for housing services showed a notable slowing, which participants had been anticipating for some time
• Some participants noted that the recent data corroborated reports from their business contacts that firms’ pricing power was waning, as consumers appeared to be more sensitive to price increases.

Target’s Shares Surge 15% on Positive Consumer Trends and Profit Forecast Upgrade

Target’s stock surged nearly 15% after the retail giant raised its full-year profit forecast and reported its first increase in quarterly comparable sales in a year. This rise underscores a robust consumer outlook, echoing Walmart’s recent statements about consumer resilience.

Shares hit a four-month high as Target increased its profit forecast range to $9.00-$9.70 per share, up from the previous range of $8.60-$9.60. The company saw a 2% rise in comparable sales for the quarter ending in August and noted improved trends in discretionary categories, especially apparel. However, there’s a note of caution regarding the “Ozempic effect,” as weight loss might be influencing increased clothing purchases.

Target anticipates full-year comparable sales to be flat to +2%, likely on the lower end of this range. Despite this, the company remains optimistic about consumer spending.

In a similar vein, TJX Companies saw its shares climb nearly 6% following an upward revision of its profit forecast and strong revenue performance, indicating a solid start to the recent quarter.

Canada July producer price index 0.0% m/m vs -0.3% expected

• Canadian July 2024 producer price index and raw materials price index

• Prior was 0.0%
• Prices y/y +2.9% vs +2.8% y/y

Raw materials price index:

• m/m % vs -1.4% prior
• y/y % vs +7.5% prior

In the PPI report, higher prices for energy and petroleum products (+2.0%) were offset by lower prices for lumber and other wood products (-3.4%). Excluding energy and petroleum products, it declined 0.2%.

Commodities

Gold Holds Strong Above $2,500 as Fed Minutes Open Door to Rate Cuts

Gold maintained its position above $2,500 on Wednesday, buoyed by the Federal Reserve’s recent minutes suggesting a possible rate cut if economic conditions continue to align favorably.

Market Overview:

• Gold Price: Steady around $2,500
• US Dollar Index (DXY): Down 0.30%
• 10-Year Treasury Yields: Fell to 3.769%

The Federal Open Market Committee (FOMC) minutes revealed that many Fed officials believe a rate cut might be appropriate if upcoming economic data supports this move. The Fed’s growing confidence in managing inflation and concerns about rising unemployment suggest a potential 25-bps rate cut in the near future.

Key Points:

• Fed Minutes Insight: Participants expressed that easing policy could be considered at the next meeting if data remains consistent with expectations.
• Inflation and Employment: The Fed noted progress toward the 2% inflation target and highlighted an increase in unemployment risks.

The weakening US Dollar and declining Treasury yields have supported gold prices, reinforcing its role as a safe-haven asset amid evolving economic signals.

EIA weekly crude oil inventories -4649K vs -2672K expected

• US EIA weekly oil inventories

• Crude oil: -4.6M
• Domestic prod: 13.4MMbpd
• Cushing: -0.6M
• Gasoline: -1.6M
• Mogas supplied: 9.19MMbpd
• Distillates: -3.3M
• Refiner utilization: 92.3%
• Refiner inputs: 16.69MMbpd
• Total exports: 11.35MMbpd

• US crude imports by origin incl w/w changes:
• Canada +298 to 4,083
• Mexico -547 to 167
• Saudi Arabia +24 to 207
• Colombia +142 to 213
• Iraq -28 to 166
• Ecuador +26 to 163
• Nigeria +81 to 190
• Brazil -251 to 177
• Libya +84 to 86

Divergent Fuel Demands: Diesel Declines While Jet Fuel Surges

The current economic landscape presents mixed signals, evident in contrasting trends in diesel and jet fuel demand. While equities soar and retail sectors show strength, the oil market reveals a more complex picture.

Jet Fuel Resilience: Jet fuel demand is at its highest for this time of year over the past five years, indicating robust consumer travel and a positive sign for economic health. Air travel is surpassing pre-pandemic levels, reflecting strong consumer activity.

Diesel Demand Slump: Conversely, diesel demand has dropped to its lowest for this period in the last five years, suggesting weakness in the industrial and transport sectors. This decline in diesel usage signals potential struggles in economic activity beyond consumer spending.

These contrasting trends highlight the challenges in pinpointing a unified economic direction, as equities and oil markets exhibit conflicting signals.

EU News

European equites close up

• Closing changes on the main European bourses

• Stoxx 600 +0.3%
• German DAX +0.5%
• Francis CAC 40 +0.5%
• UK’s FTSE 100 +0.1%
• Spain’s IBEX +0.2%
• Italy’s FTSE MIB +0.7%

Another quiet one on the agenda in Europe again

• There won’t be any major economic data releases in the session ahead

ECB’s Panetta says he hopes the central bank cuts rates in September

• Comment in ANSA

Asia-Pacific-World News

China automaker lobby warns of enormous risks and uncertainty from EU tariffs on EVs

• Risk to Chinese firms’ operations and investment in the EU

China Automobile Manufacturers Association:

• firmly opposes EU Commissions final draft on high tariffs on Chinese made electric vehicles
• hopes EU will adhere to dialogue and cooperation with China, maintain fair non-discriminatory market environment
• tariff decision brings enormous risks and uncertainty for Chinese firms’ operations and investment in EU

PBOC sets USD/ CNY central rate at 7.1307 (vs. estimate at 7.1303)

• PBOC CNY reference rate setting for the trading session ahead

In open market operations:

• PBOC injects 258bn via 7-day RR, sets rate at 1.7%
• 369bn yuan mature today
• net 111bn yuan drain today

China is considering a new funding option for local governments to buy unsold homes

• Special bonds, normally used for infrastructure and environmental initiatives

Via Bloomberg overnight was the report on moves to further prop up, or try to, China’s troubled property sector.

While Bloomberg is gated, the basic gist is that China is considering a new strategy to support its struggling real estate market by allowing local governments to use special bonds to purchase unsold homes.

• Such bonds are typically reserved for projects like infrastructure and environmental initiatives.
• Local governments have already used over half of this year’s 3.9 trillion yuan ($546 billion) bond quota, and it’s uncertain how much of the remaining funds might be redirected toward buying homes if this plan is approved.

Australia approves world’s ‘largest’ solar hub – to export solar energy to Singapore

• This is still years off, but an update

Australia approved plans for a massive solar and battery farm that would export energy to Singapore

• announced environmental approvals for the US$24 billion SunCable project in Australia’s remote north
• project will include an array of panels, batteries and, eventually, a cable linking Australia with Singapore
• hoped that energy production will begin in 2030
• project will provide four gigawatts of energy per hour for domestic use & two more gigawatts sent to Singapore via undersea cable will supply about 15 percent of the city-state’s needs

More info in the report from AFP.

Australian July leading index ticks into positive

• Commentary to the Westpac leading index report is downbeat

From the report:

• The six-month annualised growth rate in the Westpac–Melbourne Institute Leading Index ticked back up to +0.06%.
• The last nine months has seen the Index growth rate hover in the –0.3 to +0.2% range, a clear improvement on the twelve months prior which saw much weaker reads in the –0.5 to –1% range.
• However, outright positives have proven hard to sustain. This is likely to be the case with the July result as well.

WPAC on their view of what’s to come from the Reserve Bank of Australia:

• The Reserve Bank Board next meets on September 23–24. The RBA Governor made it clear following the last meeting in August that the Board was still not confident about the inflation outlook, retaining the position that it was not ruling anything in or out but adding that it was unlikely that the cash rate would be reduced in the short term.
• While the June quarter national accounts (due to be released on September 4) should clarify some questions about the strength of demand, and ease some of the Bank’s concerns about productivity growth as well, the messaging indicates that inflation updates will continue to be key for the Bank’s policy assessments. As such, there is little prospect of a shift either way in September with the next quarterly CPI update not due until October 30.

New Zealand data – July card spending -3.8% y/y (prior -3.1%)

• Data release from the Reserve Bank of New Zealand

Via the RBNZ:

Seasonally adjusted total billings in New Zealand remained at $4.3 billion in July

• -0.4% m/m
• -3.% y/y

Unadjusted total credit card advances outstanding decreased to $6.0 billion in July-24. After seasonal adjustment, total advances outstanding were $6.1 billion, 1.2% lower than in July-23.

• Total credit limits were $21.0 billion (not seasonally adjusted) in July-24, this was similar to June-24. This is the lowest value since January 2015.
• Credit limit utilisation (the ratio of total advances outstanding to total allowable credit limits) decreased to 28.8 percent at the end of July-24.

BOJ expected to raise rates again by the end of this year – poll

• The latest from Reuters’ poll on economists on the BOJ

• 31 of 54 (57%) of economists see the BOJ raising rates again by year-end
• 14 of 22 (64%) of economists forecast the BOJ to raise rates in December
• 8 of 22 economists (36%) forecast the BOJ to raise rates in October

The median prediction for interest rate is to end the year at 0.50%, which is 25 bps higher from currently.

Potential candidate for Japan PM supports BOJ continuing to hike rates

• Katsunobu Kato, interview with Bloomberg

Bloomberg is gated, in brief from the interview with Katsunobu Kato, a potential candidate for the country’s next prime minister:

• Japan should continue to aim for a world where interest rates and prices keep moving
• “It’s clear that we have to head in this direction” where prices and rates aren’t stagnant
• caution is still needed for the immediate future given the market turmoil this month
• years of unmoving prices and rates had been damaging … “That lack of movement created structural distortions. We’re finally getting to a stage where rates can keep moving.”

Japan – July exports +10.3% y/y (expected +11.4%) & imports +16.6% y/y (expected +14.9%)

• Japan trade data for July 2024

While exports did not jump by as much as expected they grew much faster than in June.

• helped by a weak yen and a pickup in the auto sector
• and encouraging sign of sustained economic recovery
• offset though by shipment volumes falling 5.2% y/y, the sixth consecutive month of declines

Exports to:

• China +7.2% y/y
• the EU -5.3% y/y
• the US +7.3% y/y

Cryptocurrency News

BlackRock’s iShares Ethereum Trust Hits $1 Billion in Net Inflows Amid Broader Ethereum ETF Outflows

Despite a challenging environment for Ethereum ETFs, BlackRock’s iShares Ethereum Trust (ETHA) has reached a significant milestone, surpassing $1 billion in cumulative net inflows. This achievement comes against a backdrop of four consecutive days of outflows across the broader Ethereum ETF category.

Ethereum’s market dominance has decreased from 16.8% to 15.2% since the FTX collapse in November 2022, as reported by Glassnode. While Ethereum’s market capitalization has contracted, Bitcoin’s dominance has surged from 38.7% to over 56%, reflecting a shift in investor preference.

BlackRock’s ETHA has managed to attract $26.8 million in net inflows recently, positioning it among the top seven ETF launches. However, the overall trend for Ethereum ETFs has been negative, with recent data showing $6.5 million in net outflows and a continued streak of negative flows. This contrasts with Bitcoin ETFs, which have seen positive inflows over the same period.

Uniswap and Arbitrum Face Potential Securities Classification as Prometheum Integrates Them

Prometheum Capital’s announcement that it will list Uniswap (UNI) and Arbitrum (ARB) tokens as digital securities on its custodial platform has sparked potential controversy within the crypto community. The integration, planned for next month, follows Prometheum’s earlier “soft launch” with Ethereum (ETH) and is aimed at providing institutional and corporate investors with custody services compliant with Securities & Exchange Commission (SEC) regulations.

This move aligns Prometheum with SEC Chair Gary Gensler’s stance that many crypto assets should be classified as securities, a position that has drawn criticism from various sectors of the crypto industry. The SEC’s scrutiny of crypto assets has intensified, exemplified by Uniswap Labs recently receiving a Wells notice from the SEC, indicating potential enforcement actions over allegations that UNI tokens may be considered securities.

The inclusion of UNI and ARB in Prometheum’s platform could bolster transparency and reduce operational costs by eliminating the need for transfer agents. Despite this, the broader crypto community remains divided, with significant pushback against the notion that these tokens should be classified as securities.

In the wake of the announcement, UNI and ARB have seen respective gains of 10% and 1% in the past 24 hours, reflecting market reactions to the evolving regulatory landscape.

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