Round up of today’s market news

North American News

S&P Gain’s with Modest Closing Increase

Market Overview: The major US stock indices showed mixed results with modest changes following larger gains that were ultimately erased. The S&P 500 managed to secure a small gain, closing higher for the seventh consecutive day, while the Dow and Nasdaq had varied performances.

Index Movements:

• S&P 500: The index reached a new intraday record high of 5669 but closed at 5634.58, up by just 0.03%. After slipping into negative territory, buying pressure at the close pushed the index into positive territory, marking its seventh straight day of gains.
• Dow Jones Industrial Average: Despite trading at a new intraday all-time high, the Dow ended the day lower, falling by 15.90 points, or -0.04%, to close at 41606.18.
• NASDAQ Composite: The Nasdaq climbed as high as 189 points during the session but ended up rising by 35.93 points, or 0.20%, to close at 17628.06.
• Russell 2000: The small-cap index performed the best, increasing by 16.30 points, or 0.74%, closing at 2205.47.

Key Points:

• Intraday Highs: Both the S&P and Dow reached new intraday highs but faced selling pressure, which led to a mixed closing performance.
• Trading Trends: The S&P’s minor increase reflects a continuation of its upward trend, though the modest gain underscores the cautious trading environment.
• Market Sentiment: The market remains volatile with significant intraday swings, indicating that investor sentiment is mixed as major indices approach new highs.

US treasury auctions off $13 billion of 20 year bonds at a high yield of 4.039%

• WI level at the time of the auction 4.019%

High Yield: 4.039%

• Last month: 4.16%
• Six-auction average: 4.512%

WI level at the time of the auction: 4.019%

Tail: +2.0 basis points

• Last month: -0.1bps
• Six-auction average: -1.3bps

Bid-to-Cover: 2.51X

• Last month: 2.54x
• Six-auction average: 2.68x

Dealer Participation: 18.6%

• Last month: 9.7%
• Six-auction average: 8.7%

Direct Bidders: 16.3%

• Last month: 19.3%
• Six-auction average: 17.1%

Indirect Bidders: 65.09%

• Last month: 71.0%
• Six-auction average: 74.2%

Atlanta Fed Q3 GDPNow 3.0% vs 2.5% prior

• The Atlanta Fed GDPNow growth estimate was raised to 3% today from 2.5%.

In their own words:

After recent releases from the Treasury’s Bureau of the Fiscal Service, the US Census Bureau, the US Bureau of Labor Statistics, and the Federal Reserve Board of Governors, the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real gross private domestic investment growth increased from 3.5 percent and 1.2 percent, respectively, to 3.7 percent and 3.2 percent, while the nowcast of the contribution of the change in real net exports to third-quarter real GDP growth increased from -0.40 percentage points to -0.36 percentage points.

US August retail sales control group +0.3% versus +0.3% expected

• US August 2024 data on retail sales from the Census Bureau

• Prior -0.2%
• Retail sales $710.8 billion versus $709.7 billion prior
• Retail sales +0.1% versus -0.2% expected
• Prior m/m sales +1.0% (revised to +1.1%)
• Retail sales YoY +2.1% versus +2.7% prior
• Ex autos +0.1% versus +0.2% expected
• Prior ex autos +0.4% prior
• Control group +0.3% versus +0.3% expected
• Ex autos and gas +0.2% versus +0.4% prior

Some details:

• Food services & drinking places 0.0% versus 0.2% prior
• Nonstore retailers +1.4% versus -0.4% prior
• Gasoline stations -1.2% versus 0.5% prior
• Building materials +0.1% vs +0.8% prior
• Clothing stores -0.7% vs +0.1% prior
• Motor vehicle & parts dealers -0.1% vs +4.4% prior

US July business inventories 0.4% versus 0.3% expected

• The July 2024 US business and retail inventories

• Prior 0.3%
• Business inventories 0.4% vs 0.3% expected
• Retail inventories ex-autos 0.5% vs 0.2% last month

Sales:

• July distributive trade sales and manufacturers’ shipments: $1,880.7 billion
• Increase from June 2024: 1.1%
• Increase from July 2023: 2.9%

Inventories:

• July manufacturers’ and trade inventories: $2,574.9 billion
• Increase from June 2024: 0.4%
• Increase from July 2023: 2.5%

Inventories/Sales Ratio:

• July 2024 ratio: 1.37
• July 2023 ratio: 1.37

US August industrial production +0.8% vs +0.2% expected

• US August 2024 industrial production data

• Prior was -0.6% (revised to -0.9%)
• Capacity utilization 78.0% vs 77.9% expected
• Prior utilization 77.8% (revised to 77.4%)
• Manufacturing output +0.9% vs +0.3% expected
• Prior manufacturing output -0.3% (revised to -0.7%)

US September NAHB home builder sentiment 41 vs 40 expected

• Home builder sentiment from the National Association of Home Builders for September 2024

• Prior was 39
• Current sales 45 vs 44 prior
• Prospective sales 27 vs 25 prior

Goldman Sachs Forecasts September FOMC Decision: 25 Basis Point Rate Cut Expected

Overview: Goldman Sachs projects that the Federal Open Market Committee (FOMC) will opt for a 25 basis point rate cut at its September meeting, scheduled for Wednesday at 2 p.m. ET. This forecast is based on recent Fed communications and a focus on labor market risks. The firm anticipates a cautious approach to rate cuts and expects updated economic projections from the Fed.

Key Expectations:

• Rate Cut Decision:
  • Goldman Sachs forecasts a 25 basis point cut, with a larger 50 basis point cut considered less likely given recent statements from Fed officials.
• Labor Market Focus:
  • The meeting will address risks related to the labor market, particularly whether current labor demand can accommodate new entrants and prevent rising unemployment rates.
• Future Rate Projections:
  • The firm expects three additional 25 basis point rate cuts in 2024, with a terminal rate projected between 3.25% and 3.5%.
  • The median dot plot is likely to reflect a gradual approach, with a target rate of 4.625% in 2024 and 2.875% by 2027.
• Economic Projections:
  • Anticipated updates include higher GDP growth forecasts for 2024, an increased unemployment rate trajectory, and a lower inflation outlook.
• Risks to Forecast:
  • Risks to Goldman Sachs’ forecast are seen as tilted to the downside but less severe than current market expectations.

Conclusion: Goldman Sachs expects the FOMC to implement a 25 basis point rate cut while emphasizing labor market dynamics. The meeting is anticipated to provide updated economic projections and a dot plot reflecting a measured approach to future rate adjustments, aimed at ensuring economic stability amidst evolving labor market conditions.

WSJ: JPMorgan in talks with Apple for credit card business

• A potential take from Goldman Sachs

The WSJ is reporting that JPM is in talks with Apple to take over credit card business from Goldman.

• The program has over 12 million users and roughly $17 billion in outstanding balances.
• Apple has been seeking a new issuer after deciding to part ways with Goldman Sachs, the current issuer, last year.
• JPMorgan is seeking concessions from Apple, including paying less than the full face value of the outstanding balances and changing the billing structure of the card program.
• Apple has signaled that it is open to making changes to the billing structure, which could help to alleviate customer-service issues and regulatory scrutiny.
• A deal between JPMorgan and Apple would further tie together America’s biggest bank and one of the largest technology companies in the world, potentially expanding Apple’s financial services offerings.
• Apple’s credit-card program has been successful, with over 12 million users and a strong brand reputation, making it an attractive asset for JPMorgan to acquire.
• The deal could also help Apple to expand its reach in the financial services sector, potentially leading to new partnerships and offerings.

Blackrock says market pricing for deep Fed rate cuts “overdone”

• Limited Fed cuts due to inflation staying sticky

Via the latest weekly note from BlackRock Investment Institute, says markets overly excited about Fed rate cuts:

• Markets expect the Fed to cut rates sharply – and we think this pricing is overdone.
• U.S. inflation has slowed as pandemic disruptions have faded and due to a temporary immigration boost to the workforce. We see inflation staying sticky due to loose fiscal policy and the impact of mega forces, limiting how far the Fed can cut.
• Yet we think recession fears are overdone and stay overweight U.S. stocks.

BlackRock remain bullish US equities:

Microsoft has announced a new US$60bn share repurchase program

• Increased dividend also

Microsoft (MSFT) has announced a new USD 60bln share repurchase program

Quarterly dividend increase of 10% to US$0.83/share

More details now. In brief:

• increase in quarterly dividend by 8 cents, or 10% @ 83 cents a share
• to shareholders of record as of November 21
• new $60 billion buyback programs the third largest among all U.S. companies this year

Canada August CPI 2.0% vs 2.1% expected

• Canada August 2024 inflation data

• Prior month 2.5%(came in as expected)
• CPI MoM -0.2% vs 0.0% expected
• Prior MoM +0.4%

Core measures:

• CPI Bank of Canada core YoY 1.5% vs 1.7% last month
• CPI Bank of Canada core MoM -0.1% versus +0.3% last month
• Core CPI MoM SA 0.1% versus 0.1% last month
• Median 2.3% versus 2.2% estimate. Last month 2.4%
• Trim 2.4% versus 2.5% estimate. Last month .7%
• Common 2.0% versus 2.2% last month

Other details from the report:

• The deceleration in headline inflation in August was due, in part, to lower prices for gasoline, due to a combination of lower prices and a base-year effect. Excluding gasoline, the CPI rose 2.2% in August, down from 2.5% in July.
• Mortgage interest cost and rent remained the largest contributors to the increase in the CPI in August.
• The monthly decline was led by lower prices for air transportation, gasoline, clothing and footwear and travel tours
• At the national level, prices for electricity fell at a faster pace year over year in August (-1.7%) compared with July (-0.8%). The larger decline was due to a base-year effect in electricity prices in Alberta, following high summer demand in August 2023..
• On a year-over-year basis, consumers paid 2.4% more for food purchased from stores in August after a 2.1% increase in July. This was the result of a base-year effect, notably coming from prices for dairy products (+3.3%) and fresh fruit (+1.5%).
• Prices for clothing and footwear declined 0.6% on a month-over-month basis in August. A drop in prices in the month of August has not been observed since 1971, as this month is typically associated with back-to-school clothes shopping, with stronger demand putting upward pressure on prices. Compared with August 2023, retailers offered more and larger discounts in August 2024 to entice consumer spending amid recent slowing demand.

The changes in major categories showed declines in:

• household operations, furnishings and equipment
• clothing and footwear
• transportation
• recreation, education, and reading

Gains in prices were in

• food
• shelter
• health and personal care
• alcohol beverages, tobacco products and recreation cannabis

Canada August housing starts 217.4K vs 252.5K expected

• Plunging in Canadian housing starts
• Prior was 279.5K (revised to 279.8K)

Commodities

Gold Facing Headwinds as the US Dollar climbs

Gold Price Movements: Gold prices are experiencing a setback, trading at $2,569, down 0.50%, following a strong US economic data release and a rebound in the US Dollar Index (DXY). The rally in gold has stalled as macroeconomic indicators bolster the Greenback and raise expectations for upcoming Federal Reserve policy decisions.

Economic Data Impact:

• US Retail Sales: August retail sales surpassed expectations with a 0.1% increase month-over-month, contrasting with a forecasted decline of -0.2%. Annually, retail sales grew by 2.1%, slightly down from July’s 2.9%.
• Industrial Production: Improved by 0.8% in August, recovering from the previous month’s -0.9% contraction.
• US Dollar Index: The DXY advanced 0.21% to 100.92, adding pressure on gold prices.

Federal Reserve Expectations:

• Rate Cut Probabilities: The CME FedWatch Tool shows a 63% probability of a 50-basis-point cut by the Fed, with a 37% chance for a 25-basis-point cut. This mixed outlook adds uncertainty for gold investors.

Geopolitical Tensions:

• Middle East Conflict: Escalating tensions as Hezbollah blames Israel for recent explosions, adding to market volatility. The US Department of State has stated it is not involved and lacks information on the incident’s perpetrators.

Market Analysis:

• Technical Insight: TDS Senior Commodity Analyst Daniel Ghali suggested that gold’s recent rise might have been driven by speculative positioning, with new shorts being added, leading to a potential stop hunt.
• Looking Ahead: Traders will be closely watching housing data ahead of the Fed’s interest rate decision and Chair Jerome Powell’s press conference on Wednesday.

Daily Market Movers:

• Retail Sales and Production: Retail sales in August grew by 0.1% MoM, exceeding forecasts, while industrial production saw a rebound to 0.8% MoM.
• Fed Rate Cut Projections: Data suggests a significant rate cut could be on the horizon, with expectations of at least 111 basis points cut this year based on the fed funds rate futures contract for December 2024.

Oil private survey of inventory shows a headline crude oil build vs. draw expected

• This is from the privately surveyed oil stock data ahead of official government data tomorrow morning out of the US.

• Crude +1.96 million (exp -100,000)
• Gasoline +2.34 million
• Distillate +2.3 million
• Cushing -1.4 million

US aims to add 6 million barrels for SPR – Reuters report

• US looks to take advantage of low oil prices

The US has been slowly refilling the strategic petroleum reserve but will look to accelerate that with a purchase of 6 million barrels, according to a Reuters report.

The administration will announce the solicitation as soon as tomorrow, according to the report and it will be for delivery in early 2025.

Goldman Sachs once again on 3 reasons for their US$2700 gold forecast

• Reuters reporting on Goldman Sachs reiterating its optimistic outlook on gold prices

GS cite:

• central bank demand
• imminent interest rate cut from the U.S. Federal Reserve
• “While we see some tactical downside to gold prices under our economists’ base case of a 25bp Fed cut on Wednesday, we reiterate our long gold trading recommendation and our price target of $2,700/toz by early 2025”

Goldman Sachs note:

• structurally higher demand from central banks
• changes in interest rates continue to drive fluctuations in gold prices
• exchange-traded funds backed by physical gold are consistently rising as the Federal Reserve’s policy rate diminishes

In the note the GS view reiterates GS noted further:

• Since Russia’s invasion of Ukraine in 2022, central banks have been buying gold at a brisk pace — roughly triple the amount prior. Goldman Sachs Research expects the buying spree to persist amid concerns about US financial sanctions and the growing US sovereign debt burden.
• Higher interest rates tend to make gold, which doesn’t offer a yield, less attractive to investors. The Fed will likely bring Western investors back into the gold market after largely being absent during the metal’s sharp rally over the past two years.
• Potential geopolitical shocks: Gold offers significant value as a portfolio hedge against developments such as Fed subordination risk

EU News

European equity close: Solid gains ahead of the Fed decision

• European stock markets grind higher

On the day:

• STOXX 600 +0.7%
• German DAX +0.5%
• Francis CAC +0.6%
• UK’s FTSE 100 +0.5%
• Spain’s IBEX +1.1%
• Italy’s FTSE MIB +0.6%

Germany September ZEW survey current conditions -84.5 vs -80.0 expected

• Latest data released by ZEW – 17 September 2024

• Prior -77.3
• Economic sentiment 3.6 vs 17.0 expected
• Prior 19.2

ECB’s Villeroy: French goal to cut deficit to 3% of GDP by 2027 is not realistic

• Comments from Villeroy

• Most of the effort on deficits should come from spending reductions but targeted tax hikes needed too
• It would be better to take 5 years to get to 3%, which would remain in line with EU rules
• Sees 2025 GDP growth of 1.2%, unchanged from prior
• Sees 2026 GDP growth of 1.5% vs 1.6% prior
• Still sees 2024 HICP inflation at 2.5%
• Sees 2025 HICP inflation at 1.5% vs 1.7%

Asia-Pacific-World News

BlackRock is wary on Chinese equities – measured policy support is not enough

• Chinese equity valuations are low, but that is not enough either

Blackrock comments on China echoing broader market views:

• The People’s Bank of China has been cutting rates but it’s not in the same boat as the Fed. It’s facing weak consumer demand, excess production capacity and deflation – based on broad measures of inflation – that could become entrenched.
• The lack of fiscal and other policy support casts doubt on if the economy will hit this year’s growth target.
• Export activity has been supporting growth, so it will be key to watch for any signs of weakness.

In Chinese equities:

• valuations are low relative to other regions but given the tough macro outlook, we prefer developed market equities over emerging markets and China.
• We are neutral. We see risks from weak consumer spending, even with measured policy support. An aging population and geopolitical risks are structural challenges.

No PBOC CNY reference rate setting. Chinese markets are closed.

• China is out on holidays

Australian weekly Consumer Confidence survey to an 8 week high @ 84.1

• ANZ-Roy Morgan Consumer Confidence

ANZ-Roy Morgan Consumer Confidence rose 1.8 pts to an 8 week high. ANZ says it was a broad based rise.

New Zealand GDT price index +0.8%

• The latest dairy auction results

• Price index at $3883
• Whole milk powder +1.5%

New Zealand Treasury see more positive data, but no firm sign of a recovery just yet

• Expect a contraction in June quarter GDP

New Zealand Treasury report, in summary:

• Indicators for June quarter GDP point to a drop in economic activity. We anticipate the economy contracted by 0.4% in the quarter, down from a forecast of 0.2% growth at our Budget Update.
• Economic data has been weak despite a period of record migration led population growth. However, with migration levels normalising, weakness is emerging across more services industries.
• House sales continue to drop and, while interest rates are falling, average mortgage rates are still elevated limiting retail spending and house price growth.
• There may be some light at the end of the economic tunnel with two weeks left in the September quarter, more timely indicators signal flat rather than falling activity for that quarter.

Japan finance minister Suzuki says rapid FX moves are undesirable

Japan finance minister Suzuki:

• Forex fluctuations have both merits and demerits on the Japanese economy
• Will respond appropriately after analyzing impact of forex moves
• Rapid fx moves undesirable
• Important for currencies to move a stable manner, reflecting fundamentals

Reuters adds a little more:

• government will continue to analyse the impact of the strengthening yen on the economy and respond appropriately
• said the stronger yen could affect the economy both positively and negatively through various channels, such as overseas sales of exporters and import costs on households and businesses
• noted that the yen has been trading above an average 145 to the dollar that Japanese firms assume for the second half of the fiscal year, but their earnings and financial conditions have been generally healthy

Bank of Japan meeting this week – preview (no rate change expected)

• The BoJ did a surprise rate hike at their last meeting, they won’t do that again this week

The Bank of Japan are meeting on September 19 and 20. The announcement will be some time in the 0230 GMT to 0330 GMT time window on Friday (they’re is no firmly set time):

• 2230 – 2330 US Eastern time

The latest rhetoric we have heard from the BoJ has been hawkish.

Cryptocurrency News

Bitcoin Rallies 6% to Peak for September; Eyes on $70,000 Target

Market Summary: Bitcoin surged to its highest levels for September, rebounding strongly from recent selloffs. The cryptocurrency experienced a significant 6% rally, gaining approximately $3,000 and marking its best performance in a week.

Key Points:

• Bitcoin Performance: Up 5.3% or $3,000, reaching new September highs. This rally comes after a recent period of weakness and a significant turnaround from yesterday’s declines.
• Technical Outlook: Bitcoin’s price action resembles an inverted head-and-shoulders pattern, which is generally considered bullish. This technical formation suggests a potential price target of $70,000. Additionally, Bitcoin has found support above the August spike low, adding to the bullish sentiment.

Market Context:

• Bitcoin had been struggling to keep pace with the improving risk appetite seen in September, lagging behind the summer highs even as US stocks approached record levels. The correlation between Bitcoin and stock markets, particularly chip stocks, has weakened recently, but today’s rally indicates a potential shift in momentum.

Summary: Bitcoin’s recent 6% rise has positioned it at the top of its September range, signaling a strong recovery from earlier setbacks. With bullish technical patterns suggesting a possible move toward $70,000, the cryptocurrency is poised to capitalize on improving market conditions and renewed investor interest.

Ethereum Surges Over 3% Amid Speculation on Fed Rate Cut and Bitwise’s Bullish Outlook

Ethereum’s Rally: Ethereum (ETH) experienced a notable 3% rise on Tuesday, driven by growing anticipation of a 50-basis-point interest rate cut by the Federal Reserve (Fed). This uptick comes as Bitwise’s Chief Investment Officer, Matt Hougan, presents Ethereum as a potential contrarian bet in the crypto market.

Market Dynamics:

• Price Movement: ETH has climbed above $2,360, marking a 3% gain for the day. If Ethereum maintains high volume trading above $2,395, it could potentially rise 17% towards $2,817. However, if resistance at $2,395 holds, ETH may face a pullback to around $2,200.
• Bitwise Analysis: Despite Ethereum’s recent underperformance compared to Bitcoin and Solana, Bitwise’s Hougan believes the altcoin still offers significant upside potential. He highlighted Ethereum’s dominance in key metrics such as stablecoin supply, DeFi TVL, and developer activity. Hougan likened Ethereum to Microsoft in the tech world—while other platforms gain attention, Ethereum remains the foundational giant.

ETFs and Investor Sentiment:

• ETFs Flows: Ethereum ETFs saw a net outflow of $9.4 million on Monday, following larger outflows from Grayscale’s ETHE and Bitwise’s ETHW. However, BlackRock’s ETHA and Grayscale Mini ETH Trust attracted inflows of $4.2 million and $2.3 million, respectively.
• Outlook: Ethereum’s price action and ETF flows suggest a mixed sentiment, with potential for significant gains if the cryptocurrency can sustain its upward momentum and break key resistance levels.

Technical Analysis:

• Resistance and Support: Ethereum is testing resistance at $2,395, a key level for its potential move towards $2,817. A sustained break above this level could signal a bullish trend, while failure to overcome it might lead to a correction towards $2,200.

Overall, Ethereum’s recent gains reflect a growing optimism amidst a broader market context of expected Fed rate cuts, while Bitwise’s perspective offers a strategic view for potential future gains.

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