North American News
Dow’s Record Run Ends, S&P Falls, While Nasdaq Barely Edges Higher
Key Highlights:
- Dow Jones: Drops by -293.47 points (-0.70%) to close at 41,914.75, ending a four-day streak of record highs.
- S&P 500: Falls by -10.67 points (-0.19%) to 5,722.26, snapping a two-day record close streak.
- Nasdaq: Manages a small gain of 7.68 points (+0.04%) to finish at 18,082.21.
- Russell 2000: Sees the steepest decline, dropping -26.54 points (-1.19%) to 2,197.45.
Market Overview:
The Dow Jones Industrial Average had its string of record closes broken today, retreating -0.70%, marking the first decline in five sessions. Similarly, the S&P 500 also ended its two-day record close streak, sliding by -0.19%. On the other hand, the Nasdaq Composite managed to eke out a modest gain of +0.04%, buoyed by strength in some key tech stocks.
The Russell 2000 took the hardest hit, falling -1.19%, as small-cap stocks struggled in the face of broader market uncertainties.
Earnings Report – Micron:
Post-market, Micron posted better-than-expected earnings:
- Earnings Per Share (EPS): $0.18 vs. $1.14 estimated.
- Revenue: $7.75 billion, slightly beating the $7.64 billion forecast.
Following the earnings report, Micron’s stock surged by 9.83%, reaching $105.18, a positive note for investors seeking optimism in an otherwise mixed trading day.
US sells 5-year notes at 3.519% vs 3.519% WI
- Results of the $70 billion sale
- bid-to-cover ratio 2.38
- high yield 3.519% vs 3.519% presale wi
- sells $70 bln
- awards 17.56% of bids at high
- primary dealers take 11.46%
- direct 18.23%
- indirect 70.31%
US new home sales units for August 0.716M vs 0.700M estimate
- US new home sales for August 2024
- Prior month +0.739M revised to 0.751M
- Home sales % change MoM -4.7% versus +10.3% last month
- Home supply 7.8 months versus 7.3 months prior
- Median sale price -4.6% to $420,600
- The 30 year mortgage rate has come down to 6.13%.
US MBA mortgage applications w.e. 20 September +11.0% vs +14.2% prior
- Latest data from the Mortgage Bankers Association for the week ending 20 September 2024
- Prior +14.2%
- Market index 296.1 vs 266.8 prior
- Purchase index 148.2 vs 146.1 prior
- Refinance index 1,132.9 vs 941.4 prior
- 30-year mortgage rate 6.13% vs 6.15% prior
Fed’s Kugler says she strongly supported 50 bps rate cut
- Comments from Fed Governor Adriana Kugler
- Says she will support additional rate cuts going forward
- Fed should keep focus on reducing inflation and also shift attention to maximum employment
- Estimates PCE inflation at 2.2% in August, Core PCE at 2.7% in signs of progress towards goal
- May tame some time to feel that prices are back to normal
- There has been a significant moderation in the labor market recently
- Expects spending to grow at a somewhat more moderate pace moving forward
- Fed must now ‘balance its focus’ to continue to make progress on inflation while avoiding unnecessary pain in the economy
Fed SOMA Manager says markets see 50bp rate cut as good news, not bad
- NY Fed’s Roberto Perli
The New York Federal Reserve branch’s Roberto Perli is manager of the Fed’s System Open Market Account SOMA). He spoke in a speech on Tuesday, saying that markets are not viewing the FOMC 50bp rate cut as an indication of stress in the economy. Reuters with the info:
- market intelligence collected by the New York Fed indicated investors “were likely to interpret a 50-basis-point cut exactly for what it was – a recalibration of the FOMC (Federal Open Market Committee) policy toward a more neutral stance that will help maintain the strength of the economy and the labor market while continuing to enable further progress on inflation,”
More at the link above.
Goldman Sachs predict continued equity buying by CTA systematic traders, in every scenario
- GS forecasts CTA systematic traders to be net buyers for the next 2 weeks, offsetting corporate blackout
Via a note from Goldman Sachs on global equities, they see CTA systematic traders as net buyers for the next 2 weeks.
GS says CTA traders are net long equities, around the 65th percentile, but nevertheless they will continue to be buyers “in every scenario” GS model.GS says this buying will offset a dearth of corporate buying.
Commodities
Silver Holds Gains Near $32
Key Highlights
- Current Price: Silver clings to gains around $32.00, aiming for a decade-high of $32.50.
- Fed Rate Cut Bets: Expectations rise for a 75 bps cut in the remaining meetings of the year.
- Focus on PCE Data: Investors await the upcoming core PCE inflation data for further direction.
Market Overview
Silver prices are holding steady near $32.00 in Wednesday’s New York session, buoyed by increasing speculation that the Federal Reserve may implement significant interest rate cuts in its upcoming policy meetings. The U.S. Dollar Index (DXY), which measures the dollar’s value against six major currencies, hovers close to its yearly low of 100.20, reflecting a weakening dollar that supports precious metal prices.
According to the CME FedWatch tool, market expectations suggest that the Fed could lower interest rates by a total of 75 basis points by the end of the year, with a 59% probability of a 50 bps cut in November—up from 37% a week ago. This shift in sentiment has further fueled interest in silver as a hedge against currency depreciation.
Upcoming Economic Data
Investors are now looking ahead to the core Personal Consumption Expenditure (PCE) price index data for August, set to be released on Friday. This inflation metric is a key indicator for the Fed, and economists predict a slight increase in the annual inflation rate to 2.7%, up from 2.6% in July. The results could significantly influence market expectations for future rate decisions.
Technical Analysis
Silver is inching closer to its decade high of $32.50, having recently broken above a downward-sloping trendline from the May 21 peak. The 20-day Exponential Moving Average (EMA), currently around $30.20, suggests a bullish outlook in the near term.
The 14-day Relative Strength Index (RSI) is attempting to maintain its position within the 60.00-80.00 range. A sustained position in this territory would indicate strong bullish momentum, potentially pushing silver prices higher.
Overall, as silver maintains its grip on the $32 level, market participants will closely monitor both the core PCE inflation data and the evolving narrative surrounding Fed rate cuts to gauge the next moves in this precious metal’s price trajectory.
US crude oil inventories for the current week -4.471M versus -1.354M estimate
- Crude oil inventories data from the EIA for the week of September’s 20th
- Crude oil inventories -4.471M vs -1.354M estimate.
- Gasoline inventories -1.538M vs -0.021M estimate
- Distillates inventories -2.227M vs -1.637M estimate
- Cushing +0.116M vs last week -1.979M
Oil survey of inventory shows huge headline crude oil draw, much greater than expected
- This is from the privately surveyed oil stock data ahead of official government data tomorrow morning out of the US.
API Inventory:
- Crude -4.339 (exp. -1.1 million)
- Gasoline -3.438 million
- Distillates -1.115 million
- Cushing -26,000
- SPR +1.3 million
EU News
European major indices close the day in the red
- Down day for European stocks
The major European indices are closing the day lower. The declines were led by France’s CAC which fell -0.50%:
- German DAX, -0.39%
- France’s CAC, -0.50%
- UK’s FTSE 100 -0.17%
- Spain’s Ibex, -0.38%
- Italy’s FTSE MIB -0.12%
France September consumer confidence 95 vs 92 expected
- Latest data released by INSEE – 25 September 2024
- Prior 92; revised to 93
Switzerland September UBS investor sentiment -8.8 vs -3.4 prior
- Latest data released by UBS – 25 September 2024
Of note, the current conditions reading eased further to 0.0 form 13.3 previously.
BOE’s Greene: Appropriate to take a gradual approach to removing policy restrictiveness
- Remarks by BOE policymaker, Megan Greene
- Cautious approach to easing monetary policy is appropriate
- Looking for incoming data to provide evidence that risk of persistent inflation is diminishing
- Wage growth has fallen but remains above what our suite of models can explain
- Risks to activity are to the upside, which could suggest long run neutral rate is higher
Asia-Pacific-World News
OECD raises global growth outlook for 2024, sees more Fed rate cuts next year
- The OECD shares their latest projections for the global economy following their previous update in May
- 2024 global growth forecast seen at 3.2% (previously 3.1%)
- 2025 global growth forecast seen at 3.2% (unchanged)
- 2024 US growth forecast seen at 2.6% (unchanged)
- 2025 US growth forecast seen at 1.6% (previously 1.8%)
- 2024 China growth forecast seen at 4.9% (unchanged)
- 2025 China growth forecast seen at 4.5% (unchanged)
- 2024 Japan growth forecast seen at -0.1% (previously 0.5%)
- 2025 Japan growth forecast seen at 1.4% (previously 1.1%)
- 2024 Eurozone growth forecast seen at 0.7% (unchanged)
- 2025 Eurozone growth forecast seen at 1.3% (previously 1.5%)
- 2024 UK growth forecast seen at 1.1% (previously 0.4%)
- 2025 UK growth forecast seen at 1.2% (previously 1.0%)
China call on US to stop its “unreasonable suppression” of Chinese firms
- This comes after the US proposed to ban Chinese software and hardware in connected vehicles on its roads amid concerns surrounding national security
- US actions severely impacts cooperation in the connected vehicle sector
- It constitutes as economic coercion
- Urges US to stop “unreasonable suppression” on Chinese firms
- Calls on US to stop generalising national security and to immediately revoke its actions
China Stimulus sparks global growth expectations, but raises inflation risks again
- JP Morgan says to keep an eye on commodities and bond yields amid the positive market outlook.
Via a note from JP Morgan on the China stimulus proposals that hit the headlines on Tuesday:
- The US has been the anchor for global growth, but a China reboot will also benefit the globe
- It may create another inflationary pressure, so keep an eye on commodities and bond yields over the coming weeks
JPM highlights in the note that global growth has gained an additional boost from China, a factor that had been absent in recent years. This development significantly lowers the risk of a recession and is positive for the markets.
Economists says ‘No’ to China’s blitz of economic stimulus measures, its ‘not enough’!
- Further government fiscal intervention needed to boost growth.
The People’s Bank of China and other authorities in China announced multiple stimulus measures on Tuesday, including:
- People’s Bank of China to cut its benchmark interest rate
- PBOC to lower the amount of cash that banks need to hold in reserve
- will cut the interest rate payable on existing mortgages
- will lower down payments for second homes
- said further easing is in the pipeline
- PBOC to offer 500 billion yuan in loans to funds, brokers and insurers to buy Chinese stocks
- PBOC to stump up another 300 billion yuan to finance share buybacks by listed companies
The Wall Street Journal (gated, but here is the link if you can access it) rounds up many economists and analysts who are underwhelmed, reasoning:
- borrowing costs are already low, yet credit data suggests households and businesses aren’t that interested in borrowing
- consumer confidence is near record low levels, reflecting anxiety over jobs in a weak economy
- the meltdown in property continues
For example, the Journal cite Capital Economics, who acknowledge the moves are heading the right way:
- “but are not really enough to drive a turnaround in the economy.”
- need more aggressive fiscal support
- weakening activity is hitting tax revenue and local governments are struggling to spend their borrowing quota on viable infrastructure projects
- central government needs to borrow and spend more to drive up growth and inflation
- local government needs more freedom to use their borrowing quotas to support consumption
PBOC sets USD/ CNY reference rate for today at 7.0202 (vs. estimate at 7.0212)
- PBOC CNY reference rate setting for the trading session ahead.
In open market operations (OMOs):
- PBOC injects 196.5bn via 14-day RR, rate at 1.85%
- 568 bn yuan reverse repo loans expire today
- net 372 bn liquidity drained from market in OMOs
PBOC 1-year Medium-term Lending Facility (MLF), rate cut to 2% (2.3% previously)
- 300bn yuan injected
China – top government economic adviser disappears after criticism of Xi Jinping
- Zhu Hengpeng’s social media posts have had him removed from his job and detained
Zhu Hengpeng was deputy director of the Institute of Economics at the state-run Chinese Academy of Social Sciences ()CASS). CASS is China’s pre-eminent thinktanks.
He lost his job and was detained after he allegedly made some remarks in a private group chat on the WeChat mobile-messaging app that were critical of President Xi’s economic management:
- comments about China’s flagging economy
- veiled criticism of Xi that referred to his mortality
The probe coincided with an indoctrination campaign for CASS staff, aimed at enforcing compliance with Communist Party rules. Party members in leadership roles were required to sign formal pledges on instilling discipline and reminded to obey the “10 prohibitions,” a list of banned activities that includes publishing improper material and collaborating with foreign entities without approval.
Info comes via the Wall Street Journal (gated, but here is the link if you can access it:
Top Economist in China Vanishes After Private WeChat Comments
Australian August CPI 2.7% y/y (expected 2.8%)
- This is the monthly CPI data from Australia, not the official quarterly reading
Australian August CPI 2.7% y/y, lower than expected and under the top end of the Reserve Bank of Australia 2 – 3% target band. Good news.
- expected 2.8%, prior 3.5%
- 2.7% y/y is the lowest since August of 2021
- the m/m came in at negative 0.2%
Trimmed mean 3.4% y/y
- expected 3.4%, prior 3.8%
- this above 3% rate for underlying inflation is still a thorny issue for the Reserve Bank of Australia, the Bank cites sticky high underlying inflation as a reason to hold the cash rate high
This much improved result is partially due to the largest annual drop in electricity prices on record, down nearly 18%. This is due to combined Commonwealth and State government rebates. Indeed, current RBA forecasts are for a headline CPI rate bounce back above 3% once these subsidies roll off.
Australian Treasurer Chalmers will travel to China this week
- Chalmers seeking to boost economic relations with China
Australian Treasurer Jim Chalmers:
- “We’ve seen a weakness in the Chinese economy which obviously has consequences for us
- We’re not immune from weakness in the Chinese economy and that’s why it is so important that over the next two days, I will be meeting with key Chinese counterparts in Beijing.
- This is another really important step towards stabilising our economic relationship with China.”
China is Australia’s #1 export market.
Japan data – August services PPI 2.7% y/y vs. 2.6% expected
- Japan Corporate Services Price Index for August 2024
Japan services PPI for August 2024 comes in at 2.7% y/y
- expected 2.6%, prior 2.8%
Cryptocurrency News
Crypto Today: Bitcoin, Ethereum, and XRP Face Slight Downturn Amid Uncertainty
Key Highlights
- Bitcoin: -0.3%, consolidating in the $62,000 – $64,700 range, despite significant ETF inflows.
- Ethereum: Trading around $2,560, down over 2%, with potential support at $2,395.
- XRP: Currently at $0.584, down 0.7%, at risk of a significant correction below $0.572.
Market Updates
Bitcoin experienced a slight downturn on Wednesday, falling 0.3% as it continues to trade within a consolidation range. Notably, U.S. spot Bitcoin ETFs recorded a substantial net inflow of $136 million, primarily driven by inflows from major players such as BlackRock’s IBIT, Fidelity’s GBTC, and Bitwise’s BITB. This influx reflects ongoing institutional interest despite the dip in price.
Ethereum also faced headwinds, trading around $2,560, marking a decline of over 2%. After breaking the $2,595 key support level, Ethereum could potentially test lower support around $2,395. However, Ethereum ETFs showed a positive trend, posting a net inflow of $62.5 million, the highest since early August.
Ripple’s XRP is trading at $0.584, down 0.7% over the last 24 hours. XRP appears to be consolidating within a critical price boundary, but a significant correction looms if it drops below the $0.572 – $0.576 lower trendline.
Macro Factors and Market Sentiment
According to analysts at Ecoinometrics, macroeconomic factors are likely to play a significant role in influencing Bitcoin’s price over the upcoming weeks. Since August, Bitcoin has exhibited a growing correlation with the NASDAQ 100, raising concerns about potential economic slowdowns in the U.S. Despite the uncertainty, many investors remain hopeful for an “Uptober” move in the crypto market.
Discussions surrounding AI, DeFi, Meme tokens, and Layer 2 solutions dominated the crypto narrative from January to August, with notable increases in social sentiment around chain abstraction, which rose by 673%. Conversely, sentiment around BRC-20 tokens fell sharply, declining by over 72%.
Industry News
In other developments, Visa is enhancing its presence in the crypto space with the introduction of the Visa Tokenized Asset Platform (VTAP), which will enable banks to launch fiat-based tokens on the Ethereum blockchain. The platform aims to facilitate the exchange of tokenized real-world assets using smart contracts. Spanish bank BBVA is set to pilot VTAP in 2025.
Additionally, Telegram announced a temporary restriction for users in the United Kingdom, limiting access to its Wallet feature until it registers with the Financial Conduct Authority (FCA) as a crypto asset provider. During this period, users can withdraw their assets to external wallets without incurring fees.
Overall, while Bitcoin, Ethereum, and XRP are experiencing slight downturns, the broader market remains focused on macroeconomic indicators and upcoming developments that could impact future price movements.
Caroline Ellison has been sentenced to two years in jail
- Cryptocurrency news
Caroline Ellison is Sam Bankman-Fried’s ex-girlfriend.
She’s copped the jail time for helping Sam steal $8 billion in customer funds.
- Ellison ran the hedge fund tied to the digital currency trading platform FTX
- She pleaded guilty to seven counts of fraud and conspiracy.
- She testified against Bankman-Fried, which appears to have lightened her sentence.
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