North American News
US Equities Close: Tech Selling Caps Strong Market Start
US equities closed mixed, with early optimism stemming from positive economic data and PCE inflation figures tempered by selling in the tech sector. The S&P 500 dipped by 0.1%, while the Nasdaq Composite fell 0.4%. In contrast, the Dow Jones Industrial Average gained 0.3%, and the Russell 2000 rose by 0.7%. Overall, the week showed gains across major indices, with the S&P 500 up 0.6% and the Nasdaq rising by 1.0%.
Market Overview
The trading session began positively, buoyed by a moderation in PCE inflation and stronger-than-expected consumer sentiment. However, concerns over geopolitical tensions and profit-taking led to a pullback in tech stocks, which impacted the broader market’s performance.
Key Highlights
- Economic Data: The PCE Price Index rose just 0.1% month-over-month, down from 0.2% in July. Year-over-year, the index is at 2.2%, indicating progress toward the Fed’s target. Personal income and spending each increased by 0.2%, while consumer sentiment improved, reaching a final reading of 70.1 for September.
- Sector Performance: The information technology sector lagged, falling 1.0%, which contributed to the Nasdaq’s decline. In contrast, the energy sector soared by 2.1%, driven by rising energy prices, while utilities rose 1.0% as Treasury yields dropped.
- Geopolitical Factors: Heightened tensions in the Middle East, particularly Israel’s airstrikes in Beirut, added caution to the market, overshadowing the positive economic indicators.
- Market Yields: The 2-year note yield fell six basis points to 3.56%, while the 10-year note yield decreased four basis points to 3.75%. The U.S. Dollar Index slipped 0.1% to 100.43 amid the stronger yen.
Weekly Performance Recap
- Nasdaq Composite: +1.0% for the week / +20.7% YTD
- S&P 500: +0.6% for the week / +20.3% YTD
- Dow Jones Industrial Average: +0.6% for the week / +12.2% YTD
- Russell 2000: -0.1% for the week / +9.7% YTD
Summary
Despite a positive start driven by favorable economic data, US equities faced headwinds from profit-taking in the technology sector and geopolitical concerns. While the major indices showed gains for the week, particularly in consumer sentiment and inflation moderation, the day’s market dynamics highlighted the ongoing volatility and cautious sentiment among investors.
US September UMich final consumer sentiment 70.1 vs 69.3 expected
- Final revisions to the September 2024 UMich consumer survey
- Prelim was 69.0
- Prior was 67.9
- Current conditions 63.3 vs 62.9 prelim (61.3 prior)
- Expectations 74.4 vs 73.0 prelim (72.1 prior)
- 1-year inflation 2.7% vs 2.7% prelim
- 5-year inflation 3.1% vs 3.1% prelim
The final revisions are rarely a market mover but the chart illustrates how this is a different picture than consumer confidence, which is nearing a breakdown.
The comments in the survey also highlight politics:
Consumer sentiment extended its early-month climb, ultimately rising more than 3% above August. This increase was seen across all education groups and political affiliations. Furthermore, all five index components gained, led by a 6% surge in one-year business expectations. The expectations index is now 13% above a year ago and reflects greater optimism across a broad swath of the population. While sentiment remains below its historical average in part due to frustration over high prices, consumers are fully aware that inflation has continued to slow. Sentiment appears to be building some momentum as consumers’ expectations for the economy brighten. At the same time, many consumers continue to report that their expectations hinge on the results of the upcoming election. Relative to August, consumers across political parties are increasingly expecting a Harris presidency, though about two-thirds of Republicans still expect Trump to win.
Atlanta Fed GDPNow Q3 forecast +3.1% vs +2.9% prior
- GDP tracker rises as Q3 winds down
The GDP tracker from the Atlanta Fed is rising after today’s round of data. It’s up to 3.1% from 2.9%. In their own words:
After recent releases from the US Census Bureau, the US Bureau of Economic Analysis, and the National Association of Realtors, a decline in the nowcast of real personal consumption expenditures growth was more than offset by increases in the nowcasts of real gross private domestic investment growth and the contribution of net exports to third-quarter real GDP growth.
US August core PCE +0.1% vs +0.2% expected
- Highlights of the August US PCE report
- Prior m/m +0.2%
- Headline inflation PCE +2.2% y/y vs +2.3% expected (Prior +2.5%)
- Deflator +0.1% m/m vs +0.1% expected (prior was +0.2%)
- Unrounded +0.0907% m/m vs +0.155% prior
Consumer spending and income for August:
- Personal income +0.2% vs +0.4% expected. Prior month +0.2%
- Personal spending +0.2% vs +0.3% expected. Prior month +0.5%
- Real personal spending +0.1% vs +0.4% prior
US Advanced goods trade balance for August $-94.26 billion vs. -100.60B estimate
- US Advanced goods trade balance for August 2024
- Prior month -102.6B
- International trade deficit in August: $94.3 billion (down $8.6 billion from July’s $102.8 billion)
- August exports of goods: $177.0 billion (up $4.1 billion from July)
- August imports of goods: $271.3 billion (down $4.5 billion from July)
US wholesale inventories advanced for August 0.2% versus 0.3%
- US wholesale inventories for August 2024
- Prior month 0.3%
- Wholesale inventories for August 2024 were $905.7 billion, up 0.2% from July 2024 and up 0.7% from August 2023.
- The June to July 2024 wholesale inventories change was revised from 0.2% to 0.3%.
- Retail inventories for August 2024 were $816.0 billion, up 0.5% from July 2024 and up 6.3% from August 2023.
- The June to July 2024 retail inventories change remained unchanged at 0.8%.
Fed’s Bowman: Data points continue to show economic strength
Fed’s Cook says she ‘wholeheartedly’ supported 50bp rate cut
- Federal Reserve Board Governor Lisa Cook
Federal Reserve Board Governor Lisa Cook speaking on policy and the economy this time:
- Wholeheartedly supported 50 bps rate cut.
- On path of policy, will look carefully at data, outlook, balance of risks.
- Normalization of economy, particularly of inflation, ‘quite welcome.’
- Labor market ‘solid’ but has cooled noticeably; may become more difficult for some to find employment.
- Sees significant easing in inflationary pressure.
- Upside risks to inflation have diminished; downside risks to employment have increased.
- expects AI to have an impact on inflation by augmenting labour productivity, allowing higher employment without corresponding inflation
- in the shirt-run Ai could be inflationary, because of high demand
- Over the long run AI could be disinflationary
Canada GDP for July 0.2% versus 0.1% expected
- Canada GDP monthly data for July 2024
- Prior month 0.0%
- Real GDP increased by 0.2% in July, following no change in June.
- Services-producing industries grew 0.2%, led by retail trade, public sector, and finance and insurance.
- Goods-producing industries edged up 0.1%, with utilities and manufacturing driving growth.
- 13 of 20 sectors expanded in July, despite negative impacts from wildfires on transportation, warehousing, and accommodation services.
For August, the advanced estimates:
Advance information indicates that real GDP was essentially unchanged in August. Increases in oil and gas extraction and the public sector were offset by decreases in manufacturing and transportation and warehousing. Owing to its preliminary nature, this estimate will be updated on October 31, 2024, with the release of the official GDP by industry data for August.
Commodities
Gold Dips to Three-Day Low Amid Softening Inflation Data
Gold has slipped to a three-day low of $2,646 following the release of the US Personal Consumption Expenditures (PCE) data for September, indicating progress towards the Federal Reserve’s 2% inflation target. Despite rising geopolitical tensions, particularly with Israel’s military actions in Lebanon, the yellow metal faced profit-taking pressure from traders, leading to a nearly 1% decline. The US Dollar Index also saw a slight dip, dropping 0.16% to 100.41.
Market Overview
Gold prices experienced a significant pullback, dropping below the critical $2,650 mark. This decline follows the BEA’s report suggesting that inflation is moving closer to the Fed’s desired target, raising expectations for potential easing measures.
Key Highlights
- PCE Inflation Data: The PCE index for August registered a year-over-year increase of 2.2%, down from 2.5% the previous month and slightly lower than expectations. Core PCE rose from 2.6% to 2.7%, reinforcing expectations for a dovish stance from the Fed.
- Market Reactions: The CME FedWatch Tool indicated that the probability of a 50 basis points (bps) rate cut in November has increased, although the chances have decreased to 54.7% from 60% just days prior.
- Geopolitical Tensions: Increased conflict in the Middle East, particularly Israel’s strikes on Hezbollah, has added to the uncertainty, yet gold failed to capitalize on these risk factors as profit-taking dominated.
- Consumer Sentiment: The University of Michigan Consumer Sentiment index showed improvement, rising from 69.0 to 70.1, with one-year inflation expectations slightly decreasing.
Summary
Gold’s retreat to $2,646 underscores the market’s response to softer inflation signals and profit-taking activity. While geopolitical tensions continue to simmer, they have not translated into upward momentum for gold, which remains sensitive to economic indicators and Fed policy expectations. As traders adjust their positions following the latest economic data, gold may be set for further volatility in the near term.
US government studying revocation of licenses for US oil companies in Venezuela – report
- Reuters report
Reuters reports:
The US government is “studying very closely” the possibility of additional sanctions on individuals as well as the potential revocation of licenses for oil companies working in Venezuela, a senior official said on Friday.
Baker Hughes Rig Count Summary
United States
- Total Rig Count: -1 to 587
- Oil Rigs: -4 to 484
- Gas Rigs: +3 to 99
- Miscellaneous Rigs: Unchanged at 4
- Year-over-Year Comparison:
- Total Rigs: Down 36 from 623
- Oil Rigs: Down 18
- Gas Rigs: Down 17
- Miscellaneous Rigs: Down 1
- Offshore Rig Count:
- Total: -1 to 19
- Year-over-Year: Down 1
Canada
- Total Rig Count: +7 to 218
- Oil Rigs: +8 to 152
- Gas Rigs: -1 to 65
- Miscellaneous Rigs: Unchanged at 1
- Year-over-Year Comparison:
- Total Rigs: Up 27 from 191
- Oil Rigs: Up 37
- Gas Rigs: Down 11
- Miscellaneous Rigs: Up 1
Summary
The latest Baker Hughes Rig Count reveals a slight decrease in the U.S. rig count, with a notable drop in oil rigs, while gas rigs saw a minor increase. In contrast, Canada experienced an increase in its rig count, particularly in oil rigs, reflecting a more robust exploration activity in that region compared to the U.S. Year-over-year, both countries exhibit distinct trends in their respective rig counts, highlighting shifting dynamics in the oil and gas sector.
EU News
European equity close: Strong gains across the board
- Strong gains again in the main European markets
Closing changes on the day:
- Stoxx 600 +0.5%
- German DAX +1.3%
- Francis CAC +0.8%
- UK’s FTSE 100 +0.5%
- Spain’s IBEX +0.3%
- Italy’s FTSE MIB +0.9%
Closing changes on the week:
- Stoxx 600 +2.7%
- German DAX +4.0%
- Francis CAC +4.0%
- UK’s FTSE 100 +1.1%
- Spain’s IBEX +2.0%
- Italy’s FTSE MIB +2.9%
Eurozone September final consumer confidence -12.9 vs -12.9 prelim
- Latest data released by the European Commission – 27 September 2024
- Economic confidence 96.2 vs 96.5 expected
- Prior 96.6; revised to 96.5
- Industrial confidence -10.9 vs -9.9 expected
- Prior -9.7; revised to -9.9
- Services confidence 6.7 vs 5.9 expected
- Prior 6.3; revised to 6.4
Germany September unemployment change 17k vs 12k expected
- Latest data released by the Federal Employment Agency – 27 September 2024
- Prior 2k
- Unemployment rate 6.0% vs 6.0% expected
- Prior 6.0%
France September preliminary CPI +1.2% vs +1.6% y/y expected
- Latest data released by INSEE – 27 September 2024
- Prior +1.8%
- HICP +1.5% vs +2.0% y/y expected
- Prior +2.2%
Spain September preliminary CPI +1.5% vs +1.9% y/y expected
- Latest data released by INE – 27 September 2024
- Prior +2.3%
- HICP +1.7% vs +1.9% y/y expected
- Prior +2.4%
Spain Q2 final GDP +0.8% vs +0.8% q/q prelim
- Latest data released by INE – 27 September 2024
UK September CBI retailing reported sales 4 vs -27 prior
- Latest data released by CBI – 27 September 2024
The headline reading is the highest since May, so that’s a welcome rebound in retail sales balance. At the same time, expected retail sales for October also moved higher to 5 and that is up from -17 in September.
BNP Paribas revises call and sees the ECB cutting rates in October now
- The firm expects the ECB to deliver a 25 bps rate cut next month
They are the next one to shift towards this call, following from HSBC before this. Both had previously expected the ECB to cut rates in December instead.
Deutsche Bank predicts consecutive 25bp rate cuts by ECB starting in December
- Db can’t rule out a 50bp
Deutsche Bank has revised its expectations for the European Central Bank rate cutting cycle … its going to be faster:
- DB see consecutive ECB 25bp rate cuts, beginning from the 12 December meeting
- DB don’t rule out a 50bp cut in December
- Terminal rate of 2 – 2.5% seen mid-2025
This compares to DB’s prior forecast of a 25bp rate cut every quarter until terminal rate of 2 – 2.5% at the end of 2025.
Asia-Pacific-World News
China urges local companies to stay away from Nvidia AI chips – report
- China ramps up pressure on companies to use domestic products
Bloomberg is out with a report saying China is ramping up pressure on domestic companies to use domestic chip products rather than Nvidia chips.
Shares of Nvidia are down 3.5% and at a session low and weighing on the broader market. The Nasdaq is now down 0.6%.
China cuts borrowing cost of standing lending facility by 20 bps
- 20 bps cut across all tenors
The PBOC continues to deliver on easing.
The SLF cuts are to the overnight, seven-day and one-month facility to 2.35%, 2.50% and 2.85%, respectively.
Shanghai, Shenzhen reportedly to lift key remaining home purchase curbs to boost market
- Reuters with the headlines, citing sources familiar with the matter
- To remove curbs on non-local residents from purchasing homes
- To scrap limits on number of homes that residents can buy
- Beijing to also consider limiting similar restrictions but in key districts
PBOC sets USD/ CNY reference rate for today at 7.0101 (vs. estimate at 7.0093)
- We’ve had two rate cuts from the People’s Bank of China already today – delivering on their promises.
In open market operations (OMOs):
- PBOC injects 333bn via 14-day RR, sets rate at 1.65%, lowered from 1.85%
- 572 bn yuan reverse repo expire today
- net 239bn liquidity drained from the market in OMOs today
PBOC cuts 7 day reverse repo rate to 1.5% (prior 1.7%)
- People’s Bank of China
The People’s Bank of China announced they’d be doing this earlier in the week.
Reverse repo rate cut delivered now.
China YTD industrial profits +0.5% y/y (prior +3.6%)
- China August month industrial profits -17.8% y/y
Poor data again from China but it may well be shrugged off given the stimulus announcements so far this week and the expectation there may be more to follow.
China January – August industrial profits +0.5% y/y
- prior +3.6%
Earnings over the same period +0.5% y/y
- prior +3.6%
August industrial profits are down 17.8% y/y
- prior +4.1%
Australian Treasurer Chalmers sees a positive impact from past China stimulus
- Chalmers is attending meetings in China
Australian Treasurer Chalmers is in China for meetings re economic relations with China.
- had frank and fruitful tasks with NDRC (China’s state planner)
- will have annual talks, strategic economic dialogue
- China slowdown a crucial factor in weaker growth globally
- sees China stimulus as a “really welcome development”
Base case forecast for RBA to cut on November 5 – a close call, very much data dependent
- UOB make an intriguing case for the Reserve Bank of Australia to cut at its next meeting
United Overseas Bank (UOB) in Singapore are maintaining a ‘base case’ forecast for the Reserve Bank of Australia to cut its cash rate by 25bp at its next meeting, on November 5.
OUB say the cut is a “close call’ and “very much dependent on upcoming data releases” ahead of the meeting date.
New Zealand consumer confidence improved to 95.1 in September (prior 92.2)
- ANZ-Roy Morgan Consumer Confidence
ANZ-Roy Morgan Consumer Confidence for September 2024 comes in at 95.1, its highest level since January 2022
- prior 92.2
- third straight month of improvement
- still well below 100, and thus still net pessimistic
ANZ comment:
- lift was driven by expectations about the future, rather than views of the here and now
- inflation expectations were unchanged at 3.8%
From the report:
BOJ hiking (slowly), RBA cutting (slowly), Fed, BoC, RBNZ all cutting
- Scenarios from UBS
A snippet from UBS on Pacific Rim central banks:
- Fed’s easing cycle is just getting started, UBS see another 50 bp of cuts this year and 100 in 2025
- Bank of Japan to raise short term rates by 25 basis points by the middle of 2025
- see the most aggressive easing moves from the Reserve Bank of New Zealand, 200 basis points of cuts by September 2025
- Reserve Bank of Australia is likely to wait until Q1/Q2 before starting its easing cycle, expect 75 basis points of easing by September 2025
- AUD is UBS’ ‘most preferred’, it’ll benefit from China’s measures.
- 150 basis points of reductions by the Bank of Canada by September 2025
Incoming Japan prime minister Ishiba: We must ensure exit from deflation
- Ishiba finally gets his chance after having lost out to then prime minister Shinzo Abe back in 2012
- Aims to accelerate incumbent prime minister Kishida’s new capitalism pledge
- Will consider appropriate timing for lower house election
- Revitalising consumption is key for Japan to emerge from deflationary spiral
- Must scrutinise what will be the most effective step to cushion blow from rising inflation
- There is a time lag for wage growth to exceed inflation
Shigeru Ishiba wins LDP leadership race run-off, will be Japan’s next prime minister
- USD/JPY tumbles on the announcement
Ishiba received 215 votes in the run-off while Takaichi only got 194 votes. That’s good news for yen bulls, as Takaichi was the one who had been vocal in scrutinizing the BOJ for hiking rates too fast. So, Ishiba winning at least takes some of that pressure away.
Tokyo area September inflation data: Headline 2.2% y/y (expected 2.2%)
- Tokyo CPI data leads the national result by about three weeks
Headline CPI 2.2% y/y, in line with expectations but down from August
- expected 2.2%, prior 2.6%
Core 2.0% y/y
- expected 2.0%, prior 2.4%
- this is ex food
Core-core 1.6% y/y, in line with expectations and an unchanged rate from August
- expected 1.6%, prior 1.6%
- this is ex food and energy and is the closest to the US measure of core inflation
Cryptocurrency News
Ethereum Gears Up for Breakout Amid Soaring Transaction Costs
Ethereum is on track to reach the $2,817 milestone as transaction fees have skyrocketed by 498% over the past ten days, driven by a surge in on-chain activity. Despite a slight dip in Ethereum ETFs, which saw $0.1 million in outflows—the lowest since their inception—the altcoin shows promise for substantial gains if it can maintain its upward trajectory.
Market Overview
Ethereum (ETH) is trading around $2,690, reflecting a more than 2% increase as it seeks to break through a crucial support level. The recent jump in transaction fees indicates heightened investor engagement and enthusiasm within the Ethereum ecosystem.
Key Highlights
- Spike in Transaction Fees: Ethereum transaction fees have reached a seven-week high, attributed to rising on-chain activity. Analysts observed a 7% increase in decentralized exchange (DEX) volumes and a 19% rise in ETH transfer volumes over the past week.
- Gas Price Increase: The average gas price for transactions has surged by 498% compared to the previous 30-day average, with the median transaction cost now standing at $1.69, up from just $0.09 at the start of the month.
- ETH Burn Rate: Daily ETH fees burnt have increased by over 900%, reaching 2,097 ETH on Thursday, indicating potential deflationary pressure that could bolster bullish sentiment among investors.
- ETF Flows: While Ethereum ETFs experienced minor outflows of $0.1 million, BlackRock’s ETHA and Fidelity’s FETH reported inflows of $15.3 million and $15.9 million, respectively. Conversely, Grayscale’s ETHE saw $36 million in outflows after two days of stability.
Summary
Ethereum is poised for further gains as it targets the $2,817 level amid a notable rise in transaction fees. The current trading environment reflects intensified activity within the Ethereum blockchain, raising optimism among investors despite recent ETF outflows. With significant inflows for select ETFs and increasing deflationary pressures from burnt ETH, the outlook for Ethereum remains cautiously optimistic.
Shiba Inu Set for Strong Upsurge Amid Rising On-Chain Activity
Shiba Inu is positioning itself for significant gains as active addresses have surged to their highest level since June, increasing nearly 75% in September. Additionally, social dominance has reached a six-month peak at 1.81%, indicating heightened relevance and engagement among traders. The meme coin has also reduced its supply on exchanges by nearly 12% in 2024, dropping to 73.08 trillion SHIB on Friday. With these bullish on-chain metrics, SHIB is eyeing over 12% gains as technical indicators show positive trends.
Market Overview
Shiba Inu (SHIB), the second-largest meme coin, has experienced notable spikes in both active addresses and social dominance—two key indicators of market interest and demand.
Key Highlights
- Surge in Active Addresses: Data from crypto intelligence tracker Santiment reveals that active addresses for SHIB have surged, reaching the highest level since June. The 24-hour active addresses climbed nearly 75% compared to the previous month.
- Increased Social Dominance: The social dominance metric, which measures the relevance and mentions of a cryptocurrency across social platforms, has risen sharply, hitting 1.81%. This spike reflects a surge in discussions around Shiba Inu, particularly following a 21% intraday gain earlier this week.
- Decline in Supply on Exchanges: Shiba Inu’s supply on exchanges has decreased by nearly 12% since the beginning of the year, bringing it down to 73.08 trillion SHIB on Friday. This decline suggests reduced selling pressure, as fewer tokens are available across trading platforms.
Summary
Shiba Inu is gearing up for a strong uptrend as key on-chain metrics exhibit bullish signals. The substantial rise in active addresses and social dominance highlights growing interest and relevance among traders. With a significant reduction in supply on exchanges, SHIB appears well-positioned to achieve over 12% gains, signaling potential bullish momentum for the meme coin.
XRP Eyes Further Correction as SEC Will “Possibly” Appeal Ripple Ruling
A former SEC lawyer told Fox Business journalist Eleanor Terret that the SEC will “probably” appeal the ruling in the lawsuit, raising concerns among XRP traders. The SEC vs. Ripple lawsuit ended on what was considered a positive note for both parties. While the regulator obtained over twelve times the penalty proposed by Ripple ($125 million vs. $10 million), Ripple continued with its business and gained legal clarity on XRP as a non-security when sold through exchanges. In July 2023, Judge Analisa Torres ruled that XRP is not a security in its transactions on cryptocurrency exchanges. However, if the SEC appeals, it questions the legal clarity of XRP as a non-security and requires the Judge to apply the Howey Test yet again to determine whether it satisfies the criteria to be considered a security, pro crypto attorney John Deaton said on X. Deaton concludes that it would be “a total waste of taxpayer money” to go through with the appeal since XRP fails to fulfill the requirements of the Howey Test, specifically the “common enterprise” factor, making it unlikely that the SEC appeal changes the initial ruling. However, the uncertainty surrounding the process could impact sentiments of XRP traders as they digest the possible outcomes of an appeal.
Daily Market Movers: XRP Legal Clarity at Risk
A former SEC lawyer told Fox Business journalist Eleanor Terret that the SEC will “probably” appeal the ruling in the lawsuit, raising concerns among XRP traders. The SEC vs. Ripple lawsuit ended on what was considered a positive note for both parties. While the regulator obtained over twelve times the penalty proposed by Ripple ($125 million vs. $10 million), Ripple continued with its business and gained legal clarity on XRP as a non-security when sold through exchanges. In July 2023, Judge Analisa Torres ruled that XRP is not a security in its transactions on cryptocurrency exchanges. However, if the SEC appeals, it questions the legal clarity of XRP as a non-security and requires the Judge to apply the Howey Test yet again to determine whether it satisfies the criteria to be considered a security, pro crypto attorney John Deaton said on X. Deaton concludes that it would be “a total waste of taxpayer money” to go through with the appeal since XRP fails to fulfill the requirements of the Howey Test, specifically the “common enterprise” factor, making it unlikely that the SEC appeal changes the initial ruling. However, the uncertainty surrounding the process could impact sentiments of XRP traders as they digest the possible outcomes of an appeal.
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