North American News
Dow Hits Record High, S&P Nears All-Time Peak; NASDAQ Breaks 5-Day Win Streak
Market Summary: The US major stock indices closed the day with mixed results. The Dow Jones Industrial Average reached a new record closing level, while the S&P 500 ended the session less than 1% away from its all-time high, extending its winning streak to six consecutive days. Conversely, the NASDAQ index fell, ending its five-day streak of gains.
Final Numbers:
- Dow Jones Industrial Average: Up 228.30 points, or 0.55%, closing at 41,622.08.
- S&P 500: Increased by 7.07 points, or 0.13%, finishing at 5,623.09. The index is now less than 0.6% from its record closing level.
- NASDAQ Composite: Declined by 91.85 points, or -0.52%, settling at 17,592.13.
- Russell 2000: Rose 6.68 points, or 0.31%, closing at 2,189.16.
Notable Movers:
- Apple: Shares fell by -2.78% following reports of weaker-than-expected orders for the new iPhone.
- Intel: Shares surged 8.46% to $22.60 after announcing an expanded strategic collaboration with Amazon AWS and plans to establish an Intel foundry as an independent unit. Despite this gain, Intel’s share price is down approximately -58% year-to-date and is at its lowest level since 2013, compared to the end-of-year 2023 level of $50.25.
Summary: The market saw the Dow achieve a new record, with the S&P 500 nearing its all-time high, reflecting strong performance despite a dip in the NASDAQ. Intel’s significant move higher on news of a new partnership provided a bright spot, although its year-to-date performance remains poor. Apple’s decline, due to disappointing iPhone order reports, was a notable drag on the market.
Empire Fed Sept manufacturing survey +11.5 vs -4.75 expected
- The September New York Fed manufacturing survey
- General business conditions 11.5 versus -4.7 prior
- Best reading since April 2022
- New orders 9.4 versus -7.9 prior
- Shipments 17.9 versus 0.3 prior
- Unfilled orders 2.1 versus -7.4 prior
- Delivery times -1.1 versus -3.2 prior
- Inventories 0.0 versus -10.6 prior
- Prices paid 23.2 versus 23.4 prior
- Prices received 7.4 versus 8.5 prior
- Number of employees -5.7 versus -6.7 prior
- Average employee workweek 2.9 versus -17.8 prior
- Supply availability -2.1 versus -2.1 prior
- Future business conditions 30.6 versus 22.9 prior
- Future new orders 39.9 versus 24.8 prior
- Future capital expenditures -2.1 versus 8.5 prior
Six-months ahead expectations:
- Future business conditions 30.6 versus 22.9 prior
- Future new orders 39.9 versus 24.8 prior
- Future capital expenditures -2.1 versus 8.5 prior
“New York State manufacturing activity in September grew for the first time in nearly a year, with shipments increasing strongly. However, employment continued to decline modestly. Firms grew more optimistic that conditions would improve in the months ahead, though capital spending plans were weak,” said Richard Deitz, Economic Research Advisor at the New York Fed in the release.
WH Brainard: It is now important to safeguard progress in US labor market
WH economic advisor Lael Brainard is no the news wires saying:
- It is now important to safeguard progress in US labor market.
- US economy has reached important turning point in fight against inflation.
- Inflation is coming back down close to normal levels.
- It is critical to continue work to address affordability challenges and create opportunities for working families.
- Inflationary expectations have proved to be much more strongly anchored today than they were in the 1970s.
- Extending tax cuts without paying for them and boosting deficit by $5 trillion is not acceptable.
- US needs to ensure that there is clean energy infrastructure for AI development
Former NY Fed Pres Dudley says it’s time for 50 basis points
- Op-ed from the New York Fed President
The two objectives of the Fed’s dual mandate — price stability and maximum sustainable employment — have come into much closer balance, suggesting that monetary policy should be neutral, neither restraining nor boosting economic activity. Yet short-term interest rates remain far above neutral. This disparity needs to be corrected as quickly as possible.
He cites the 0.8 percentage point rise in the unemployment rate and fading inflation and argues the downside risks to employment outweigh the upside risks to inflation.
“I expect the Fed will do 50,” Dudley writes. “Monetary policy is tight, when it should be neutral or even easy. And a bigger move now makes it easier for the Fed to align its projections with market expectations, rather than delivering an unpleasant surprise not warranted by the economic outlook.”
UBS on the data ahead of the FOMC meeting – what could trigger a 50bp interest rate cut
- UBS like a lower USD and higher gold
The key us data this week is on Tuesday, with the Federal Open Market Committee (FOMC) announcement following the next day.
UBS are eyeing the retail sales and industrial production data, saying that weakness in these could potentially influence the Fed to cut its Fed Funds rate by 50bp instead of 25bp.
UBS says inflation has softened enough for a rate cut. UBS outline their ‘base case’ as 100bp of cuts ahead for the balance of the year, and another 100 in 2025. UBS add that as rate cuts gather pace the US dollar will fall further, and gold will rise further.
BoA analysts are not expecting much clarity from the FOMC this week
- SEP and Powell won’t be much help on the outlook
Analysts at Bank of America are not expecting clarity on the Federal Reserve’s rate path ahead from the Summary of Economic Projections that’ll be published on Wednesday alongside the rate cut decision.
Nor are they expecting much guidance from Federal Reserve Chair Powell’s press conference.
BoA say that there is much uncertainty over the outlook and thus the Fed will remain in data watching mode.
Canada July manufacturing sales +1.4% vs +1.1% expected
- Canada July 2024 manufacturing sales data
- Prior was -2.1%
- Manufacturing sales ex-autos +1.6% vs -1.6% prior
- Sales at $71.0 billion vs $69.6 billion prior
- Sales -1.1% y/y vs -1.8% y/y prior
- Total inventory levels +0.9% vs +0.1% prior
- Inventory to sales 1.73
- Unfilled orders +0.6% vs -0.8% prior
Weekend – Bank of Canada governor raises prospect of faster rate cuts, FT reports
- Bank of Canada Governor Tiff Macklem spoke via the Financial Times
Bank of Canada Governor Tiff Macklem spoke in an interview with the Financial Times.
FT is gated, but in very brief Macklem expressed concern about the labor market:
- “labor market is pointing to some downside risks”
- “As you get closer to the target … You become more concerned about the downside risks”
Snippets via Reuters.
Commodities
Gold Surges as Fed Rate Cut Expectations Climb
Market Overview: Gold prices climbed on Monday, buoyed by increasing expectations of a significant rate cut by the Federal Reserve. The yellow metal rose over 0.18% during the North American session, trading at $2,582, following a daily low of $2,579. The gains were supported by a weaker US Dollar and falling Treasury yields.
Daily Market Movers:
- Fed Rate Cut Expectations: The likelihood of a 50-basis-point (bps) cut by the Fed has risen to 59%, up from 50%, as indicated by the CME FedWatch Tool. This increase in rate cut odds has exerted downward pressure on the US Dollar, which fell 0.36% to 100.74 on the US Dollar Index (DXY). Expectations for a 25 bps cut are currently at 41%.
- Geopolitical Risks: The Greenback’s decline was also influenced by geopolitical tensions, including the potential escalation of the Middle East conflict and a reported assassination attempt against former US President Donald Trump.
- Upcoming Data: Traders are awaiting key US economic data, including August Retail Sales and housing data, which will provide insight into the Fed’s upcoming decision. The results will also be crucial for the Federal Reserve’s policy direction and Jerome Powell’s press conference later in the week.
Technical Outlook: Gold prices have managed to hold steady above $2,580, with traders closely monitoring economic indicators and the Federal Reserve’s policy announcements. The market will be attentive to the Summary of Economic Projections (SEP) and the Dot Plot for future interest rate guidance.
Summary: Gold’s rise reflects growing anticipation of a larger Fed rate cut, driven by weakening US Dollar and falling Treasury yields. As traders brace for upcoming economic data and Fed decisions, gold remains a key focus, with significant implications for broader financial markets.
Crude Oil Futures Settle at $70.09
Market Overview: WTI crude oil futures settled at $70.09, maintaining a position above a crucial technical level. The day’s trading saw a low of $68.68 and a high of $70.66.
Technical Insights:
- Key Levels: The price of crude oil found support near its 200-hour moving average, currently at $68.62. The low of the day approached this average before the price rebounded.
- Retracement Level: Crucially, the settlement above the 38.2% retracement level of the decline from the August 26 high ($77.56), which stands at $69.94, suggests bullish potential. This retracement level was briefly tested but ultimately held, providing support for further gains.
- Upside Targets: Traders will focus on the high from September 5 at $70.78 as the next target. Beyond that, the 50% midpoint retracement of the August 26 move, located at $71.40, will be a key level to watch, as it also aligns with the high from September 4.
Fundamental Drivers:
- Supply Disruptions: Oil prices have been bolstered by ongoing disruptions due to Hurricane Francine, which has impacted nearly 20% of crude oil production in the Gulf of Mexico.
- Market Positioning: Extreme bearish positioning, as indicated by recent data, has likely contributed to a short squeeze, driving prices higher despite the prevailing negative sentiment.
Outlook: The market’s ability to hold above key technical levels and the influence of supply disruptions suggest potential for further gains, though the extent will depend on subsequent price action and broader market conditions.
UBS says gold is its “Most Preferred” in its global asset allocation
- Target’s price of $2,700/oz
UBS analysts have reaffirm their bullish outlook on gold, pointing to its value as a hedge against macroeconomic and geopolitical uncertainties:
- maintains a target price of $2,700/oz by mid-2025
In brief from the UBS report:
- Gold has jumped by 23% in 2024, to its highest ever price, due to lower US yield expectations and diversification out of US dollars by central banks.
- Gold has once again outperformed equities during times of high volatility, reaffirming this historical tendency
- has been supported by the European Central Bank’s rate cuts, although trimmed expectations of the scale of Fed cuts has been been a bit of a counter to this
- support also from flows into physically-backed gold ETFs, August marked the fourth consecutive month of inflows
- safe-haven demand
EU News
European equity close: A tad on the soft side
- Closing changes in the main European indexes
- Stoxx 600 -0.2%
- German DAX -0.4%
- Francis CAC -0.3%
- UK’s FTSE 100 flat
- Spain’s IBEX +0.4%
- Italy’s FTSE MIB flat
Eurozone July trade balance €21.2 billion vs €22.3 billion prior
- Latest data released by Eurostat – 16 September 2024
- Prior €22.3 billion
Comparing to last year, the euro area trade balance is showing a surplus of roughly €128 billion from January to July. And that compares to the roughly €4 billion surplus only in the same period last year. Energy price developments are of course a big factor, leading to a drop in imports. And that in turn helping with the overall picture above.
Italy August final CPI +1.1% vs +1.1% y/y prelim
- Latest data released by Istat – 16 September 2024
- Prior +1.3%
- HICP +1.2% vs +1.3% y/y prelim
- Prior +1.6%
SNB total sight deposits w.e. 13 September CHF 466.8 bn vs CHF 455.9 bn prior
- Latest data released by the SNB – 16 September 2024
- Domestic sight deposits CHF 458.2 bn vs CHF 447.3 bn prior
Switzerland August producer and import prices +0.2% vs 0.0% m/m prior
- Latest data released by the Federal Statistics Office – 16 September 2024
- Prior 0.0%
Looking at the breakdown, producer prices rose by 0.6% on the month but was offset by a 0.5% drop in import prices.
UK house price indicator has its biggest September m/m rise since 2016
- UK’s Rightmove House Price Index
Data via property website Rightmove in the UK
September average asking prices for homes increased by 0.8%, double the average for the time of year in the series and the biggest for the month since 2016.
- -1.5 August
For the y/y +1.2%
- prior +0.8%
Rightmove cited the market getting a boost from a new government and the first rate cut from the Bank of England since 2020.
- “still uncertainties ahead, including the timing of a second Bank Rate cut, and which segments of the market could be affected by announcements in October’s Autumn Statement”
ECB’s Lane: Incoming data on wages and profits have been in line with expectations
- Comments from the ECB chief economist
- Negotiated wage growth will remain high and volatile over the remainder of the year
- A gradual approach to dialing back restrictiveness will be appropriate if the incoming data are in line with the baseline projection
- We should retain optionality about the speed of adjustment
ECB’s de Guindos: Our projections show inflation will hover around 2% by end of 2025
- Remarks by ECB vice president, Luis de Guindos, in Madrid
- Services inflation is still resisting for now
- Our main concern is services inflation as such
- We don’t have a pre-determined path for rates
- We will decide on a meeting by meeting basis
ECB’s Kažimír: Will almost surely wait until December for next rate cut
- Remarks by ECB policymaker, Peter Kažimír
- It would take a significant shift in the outlook for the ECB to cut in October
- Very little new information in the pipeline before October meeting
- There is no rush to cut rates
- The safest approach is to wait for the outlook to become clearer
Asia-Pacific-World News
Reminder – there is no reference rate setting for the yuan today (CNY) – China on holidays
- China is closed for holiday on Monday and Tuesday
China will also be closed tomorrow, Tuesday, September 17, 2024.
We’ll not be getting a USD/ CNY reference rate setting from the People’s Bank of China today or tomorrow.
Weekend Data – China August: Retail sales +2.1% y/y (expected +2.5) Industrial production +4.5% y/y (4.8)
- Key Chinese economic data for retail sales, industrial output, investment in August 2024
China retail sales, industrial output, investment data for August 2024 – another round of disappointing results.
- Retail Sales +2.1% (YoY) (Aug)
- expected 2.5%, prior 2.7%
- Industrial Production +4.5% (YoY) (Aug)expected 4.8%, prior 5.1%
- Fixed Asset Investment +3.4$(YTD) (YoY) (Aug)expected 3.5%, prior 3.6%
- Unemployment 5.3%
- expected 5.2%, prior 5.2%
Also published were home prices data, which fell at their sharpest rate in 9 years, at -5.3% y/y in August, compared with the previous month’s -4.9%.
- For the m/m, down 0.7% (July was also -0.7% m/m)
China has a growth target of ‘around 5%’ this year. China invariably hits its growth target.
China’s National Bureau of Statistics (NBS) painted an upbeat picture.
- In August, under the strong leadership of the Central Committee of the Communist Party of China (CPC) with Comrade Xi Jinping at its core, all regions and departments strictly implemented the decisions and arrangements made by the CPC Central Committee and the State Council. All regions and departments adhered to the general principle of pursuing progress while ensuring stability, fully and faithfully applied the new development philosophy on all fronts, strengthened macro-regulation and strove to promote high-quality development. As a result, the production and demands sustained a recovery, employment and prices were basically stable, and high-quality development continued to move ahead. The national economy maintained stability in general while making steady progress.
These are the main headings from the statement:
1. Industrial Production Increased Steadily with Fast Growth in Equipment Manufacturing and High-Tech Manufacturing.
2. Service Sector Continued to Recover and Modern Services Developed Well.
3. Market Sales Kept Increasing and Online Retail Sales Grew Rapidly.
4. Investment in Fixed Assets Scaled up and Investment in High-Tech Industries Grew Fast.
5. Imports and Exports of Goods Grew Fast and Trade Structure Continued to Optimize.
6. Employment Was Generally Stable and Urban Surveyed Unemployment Rate Increased Slightly.
7. Increase of Consumer Price Expanded and Producer Prices for Industrial Products Declined.
RBNZ says material monetary policy surprises are relatively rare.
- Reserve Bank of New Zealand statement on policy shocks
The Reserve Bank of New Zealand has published a new ‘Analytical Note’ that seeks to assess monetary policy surprises and how they impact on financial market instruments.
Material monetary policy surprises are defined as instances where market pricing for the OCR immediately prior to an announcement is more than 5 basis points different from the announced rate. And they RBNZ says such occurrences “are relatively rare.”
Since 2006, fewer than 1 in 5 OCR announcements resulted in a material monetary policy surprise (see red dots in Figure 1, below).
New Zealand Services PMI August 2024: 45.5 (prior 45.2)
- New Zealand Performance Services Index
BNZ – BusinessNZ Performance of Services Index (PSI) for August 2024 is 45.4
- prior 45.2
- remains in contraction, now for 6 months in a row – longest period since the global financial crisis
- average over the history of the survey is 53.2
BNZ’s Senior Economist Doug Steel:
- smoothing through monthly volatility, the PSI’s 3-month average remains deep in contractionary territory at 43.9
Chinese and Japanese markets are closed today, Monday, September 16, 2024, for holidays
- New Zealand, Australia, Singapore and Hong Kong all open
Japanese markets are closed today for Respect for the Aged Day.
Chinese markets are closed today, and tomorrow, for the Mid-Autumn Festival.
Cryptocurrency News
Ethereum Falls 4% Amid Foundation Sales and ETF Outflows
Market Overview: Ethereum (ETH) experienced a 4% decline on Monday, largely influenced by ongoing sales from the Ethereum Foundation and sustained ETF outflows. Despite the price drop, Ethereum Layer 2 networks are setting record highs in activity.
Daily Market Movers:
- Ethereum Foundation Sales: The Ethereum Foundation sold 100 ETH for $226,868 worth of DAI. This recent sale is part of a broader trend, with the Foundation having sold a total of 650 ETH over the past few weeks. The sales have often coincided with price peaks, which may contribute to market sentiment and price movement.
- ETF Outflows: Global Ethereum ETFs saw net outflows totaling $19 million last week, according to CoinShares. US-based spot ETFs, particularly Grayscale’s ETHE, accounted for over 67% of these outflows, exacerbating the pressure on ETH prices.
Layer 2 Network Activity:
- Record Highs: Ethereum Layer 2 networks have reached new highs, with total value locked (TVL) surpassing $10 billion, more than double that of Solana. The number of active Layer 2 addresses also surged over 35 times in a week, hitting more than 10 million.
Technical Outlook:
- Price Movement: ETH is approaching support around the symmetry triangle. The recent rejection at a key descending trendline raises the possibility of further decline toward this support level.
Summary: Ethereum’s price decline is attributed to significant sales by the Ethereum Foundation and continued outflows from ETFs, despite record-breaking activity on Layer 2 networks. Investors are closely watching technical levels for potential further declines and the impact of ongoing market dynamics.
Ripple, Aptos Labs, and Hedera Forge MiCA Crypto Alliance; XRP Steady at $0.56
Market Overview: Ripple (XRP) experienced a slight correction on Monday but maintained stability around $0.5600. The cryptocurrency space saw significant news with the launch of the MiCA Crypto Alliance by Ripple, Aptos Labs, and Hedera.
Daily Market Movers:
- MiCA Crypto Alliance Launch: Ripple, Hedera, and Aptos Labs, all founding members of the DLT Science Foundation, announced the formation of the MiCA Crypto Alliance. This initiative aims to enhance compliance with the European Union’s Markets in Crypto-Assets (MiCA) regulation. The alliance seeks to foster better coordination and regulatory navigation within the EU, focusing on transparency and climate impact disclosures for crypto firms.
Technical Outlook:
- XRP Movement: XRP has managed to hold steady above $0.5600 after recent volatility. The current stability follows a slight correction, with market participants closely watching the implications of the new crypto alliance.
Summary: Ripple’s involvement in launching the MiCA Crypto Alliance, along with Hedera and Aptos Labs, marks a significant step towards improved regulatory compliance in the EU crypto market. Despite the slight correction in XRP’s price, the alliance’s formation is expected to impact the broader crypto landscape positively by addressing regulatory challenges and fostering industry cooperation.
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