Market News by OnEquity

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US Stocks Rise, Caution Ahead of Fed Meeting and Microsoft Results
US stocks rose on Tuesday in a cautious environment ahead of the Federal Reserve meeting and the release of results from some of the largest US companies. Here is what is happening in the stock market.

Fed Meeting Awaited for More Clues on Interest Rates

Markets are on edge ahead of the Federal Reserve's latest meeting, which is set to start late Tuesday and end Wednesday.

The central bank is expected to leave interest rates unchanged. After June's benign inflation report, investors will be looking for Fed Chairman Jerome Powell to lay the groundwork for a rate cut in September.

Fed officials have repeatedly stated that they are looking for more evidence that inflation is steadily returning to 2% before cutting rates. However, Powell signaled earlier this month that the Fed may not wait until inflation achieves this target before cutting rates.

Markets have fully priced in a 25 basis point cut in September, with a slight possibility of a nearly 50 basis point reduction, and have priced in 66 basis points of easing by the end of the year.

Microsoft Begins Next Round of Big Tech Results

There are still more key results to digest this week, starting with Microsoft (MSFT), which will release its June quarter results on Tuesday after the bell.

Although the company is expected to post considerable profit growth due to new AI-related products, investors will be paying close attention to rising expenses and whether demand for artificial intelligence will be enough to drive profit.

The increased caution comes after high spending on artificial intelligence and sluggish revenue metrics last week marred strong earnings results from Alphabet (GOOGL).

In addition to Microsoft, technology heavyweights Meta Platforms (META) and Apple (AAPL) will release their earnings reports on Wednesday and Thursday, respectively.

Advanced Micro Devices (AMD), Merck (MRK), Procter & Gamble (PG), and Pfizer (PFE) are also due to report results.

Labor Market Data

Several labor market data points will be released this week, starting on Tuesday with job postings for the month of June.

On Friday, July nonfarm payrolls will be released, and are expected to indicate that the US economy added about 177,000 jobs in July, down from 206,000 last month.

The release will be closely scrutinized by investors, who will be looking to see if recent signs of cooling in the labor market continued in July, which could influence when the Federal Reserve begins to cut interest rates.

Crude Oil Prices Fall

Crude oil prices fell on Tuesday, nearing two-month lows, due to concerns about demand in China, the world's biggest crude importer, as traders ignored the risk of escalating conflict in the Middle East.

Traders dismissed the risk premium in crude oil after media reports indicated that Israeli authorities did not intend to start an all-out war with Lebanon in response to a rocket attack that killed 12 people in the Israeli-occupied Golan Heights.

The Organization of Petroleum Exporting Countries is meeting this week to discuss production levels. However, recent weakness in crude oil could lead the cartel to downplay any plans to cut output.

 

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U.S. Recession Indicator Close to Turning On
According to FRED data, the threshold will be breached if the unemployment rate rises to 4.2% in this week's employment report, which is set for release on August 2.

Economists' Forecast for the July 2024 Employment Report

The preliminary forecast for the July employment report, to be released Friday, calls for a net gain of 200,000 jobs, with the unemployment rate expected to fall from 4.1% to 4%, according to the analyst blog The Real Economy on July 29.

Analyst Joseph Brusuelas also anticipates a 0.2% increase in average hourly earnings, which corresponds to a year-over-year increase of 3.7%. Seasonal hiring in the leisure and hospitality sector will likely be an important factor in the report. July usually presents seasonal adjustment challenges for the Bureau of Labor Statistics, and this year is no exception.

If the estimate is incorrect, it could point to a faster pace of hiring overall. Additionally, the direction of the unemployment rate will be a key issue, as it has been rising due to more people entering the labor market, enticed by higher wages.

Expert Urges Fed to Cut Rates Soon to Ease Recession

While Wall Street expects Fed Chairman Jerome Powell to cut the prime rate at a Fed meeting in September, experts warn that it may already be too late to avoid a recession. Goldman Sachs and UBS predict a rate cut before the November presidential election, but not as soon as the Fed's July meeting.

One supporter of an earlier rate cut is former New York Fed President Bill Dudley, who initially advocated for higher rates for longer but now urges an immediate cut.

The former New York Fed president argues that the economic outlook has shifted due to slowing consumer spending, rising auto repossessions, and loan defaults.

"The facts have changed, so I've changed my mind. The Fed should cut, preferably at next week's monetary policy meeting," Dudley said on July 24.

He believes the Fed should act quickly despite skepticism about the severity of rising unemployment. Dudley stresses that delaying rate cuts could raise the risk of recession, even if it is already inevitable.

 

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Ether ETFs Rack Up $340 Million in Outflows in Their First Week
Outflows of more than $1.5 billion from the high-fee Grayscale Ethereum Trust have outpaced inflows into other spot products.

Negative Net Flows in the First Week

Spot Ether (ETH) exchange-traded funds (ETFs) saw negative net flows in their first week due to heavy outflows from Grayscale's Ethereum Trust (ETHE), which outpaced interest in competing products. Similar Bitcoin (BTC) funds, which debuted in January, captured $1 billion in net flows over the first four days, despite also suffering notable outflows from an existing Grayscale fund. Overall, spot ETH ETFs supported $340 million in negative net flows, with more than $1.5 billion exiting the Grayscale Trust fund, according to Farside Investors.

Ether Price Impact

The price action seemed to replicate the lackluster ETF action, with Ether falling 5% the previous week while Bitcoin rose 2%. Excluding Grayscale's ETHE, the other recently-listed Ether ETFs pulled in $1.15 billion in proceeds the previous week, led by offerings from BlackRock, Bitwise, and Fidelity.

Future Outlook for Ether ETFs

Although the current pace of ETHE outflows suggests the fund could run out of assets over the next four weeks, analysts expect them to start tapering off later this week. Quinn Thompson, founder of the digital asset hedge fund Lekker Capital, noted that ETHE has already lost the same amount of assets as GBTC when Bitcoin set a local low in late January during its post-ETHE selloff. BTC fell 15% to below $39,000 within two weeks before subsequently rebounding to hit new all-time highs.

Mads Eberhardt, principal cryptocurrency analyst at Steno Research, noted that GBTC outflows slowed considerably after the eleventh trading session and predicted that ETHE could follow suit. "Ethereum ETF net outflows have not yet declined, but it is likely to happen this week," Eberhardt said in a post on X on Monday. "When it does, it will only be to the upside from there," he added.

 

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Dollar Falls Ahead of Fed Decision, Yen Rises on BOJ Hike
The U.S. dollar declined on Wednesday in anticipation of the Federal Reserve's latest interest rate meeting, while the Japanese yen soared after the Bank of Japan decided to tighten monetary policy. Below, we will discuss what is happening in the currency market.

Dollar Loses Ground Ahead of Fed Decision

The Federal Reserve ends its two-day meeting today, Wednesday, and is expected to leave interest rates unchanged.

The Fed is widely expected to keep rates unchanged this week, but the dollar is showing signs of weakness as traders expect Fed Chairman Jerome Powell to set the stage for a rate cut at the next meeting of the U.S. central bank.

For many analysts, it is certain that Powell will reiterate a tone of voice marked by caution regarding inflation, but he has often been the voice of a more dovish faction of the FOMC and the press conference could generate some negative headlines that may directly affect the dollar

The general consensus is for a 25 basis point cut in September, according to the CME FedWatch tool.

Pound Falls on Bank of England Uncertainty

GBP/USD was down about 0.1% to 1.2826 ahead of the Bank of England's meeting on Thursday, which is expected to either keep rates unchanged or cut them.

UBS believes the BoE will make a 25 basis point cut tomorrow, asserting that the main reason for the expected cut is the latest data.

Many analysts believe that June's headline inflation of 2% was in line with the Bank's May forecast, despite upside surprises in April and May. Additionally, the overshooting of services inflation, which registered 5.7% in June compared to the 5.1% estimated by the Bank, was largely due to various volatile and regulated components. These factors should not affect the inflation outlook in the medium term, an assessment shared by several members of the Monetary Policy Committee, according to the June minutes.

Third, the July labor market report indicated further signs of slowing wage growth, with private sector wages declining 0.3 percentage points to 5.6% year-over-year in May, in line with the Bank's May forecast

The EUR/USD rose 0.1% to 1.0823 after the eurozone economy grew by about 0.3% in the second quarter, barely above estimates.

Likewise, eurozone consumer prices rose by 2.6% in July year-over-year, slightly above the 2.5% estimate. The underlying figure, which excludes volatile items such as energy and food, came in at 2.9% year-over-year.

Yen Soars on Bank of Japan Hike

In Asia, the USD/JPY lost about 1.4% to 150.66 as the yen soared after the Bank of Japan decided to raise its benchmark short-term interest rate by 15 basis points to 0.25%, the highest level in line with market expectations.

It also announced that it will halve the pace of Japanese government debt purchases from 6 trillion yen to 3 trillion yen ($19.5 billion) in the first quarter of 2026.

The yen posted strong gains during July, with USD/JPY down about 6.5%, as a combination of carry trades and suspicions of government intervention triggered buying in the currency.

USD/CNY retreated 0.4% to 7.2256 as strong purchasing managers' index data and positive comments from the government raised expectations of more stimulus measures in the country.

AUD/USD fell 0.7% to 0.6492, touching three-month lows, driven primarily by weak June quarter CPI data.

Although headline CPI rose as expected in the quarter, the decline in core inflation fueled hopes that inflation will ease in the coming months, reducing the need for a rate hike by the Reserve Bank of Australia (RBA).

 

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U.S. stock markets soar boosted by Federal Reserve decision; Microsoft fails to deliver

U.S. stocks rose Wednesday on optimism that the Federal Reserve will lead the way to a rate cut in September, overshadowing disappointing results from Microsoft. This and much more is happening today in the stock market.

Optimism about the Fed

All eyes are on the Federal Reserve on Wednesday, when the U.S. central bank wraps up its latest policy-setting meeting.

The Fed is expected to keep its benchmark overnight interest rate in the current range of 5.25% and 5.50%, as has been the case since last July, but investors expect policymakers to lay the groundwork for a rate cut in September.

Futures believe a quarter-point rate easing in September, with a remote possibility of a 50 basis point reduction, and 66 basis points of easing by Christmas.

Wall Street's major indexes ended mixed on Tuesday, with both the S&P 500 and NASDAQ Composite on track to end the month lower, with the latter losing nearly 3%.

Meanwhile, the Dow Jones Industrials are on track to end the month up more than 4% as the market has moved away from large tech stocks in favor of smaller, more cyclical-oriented companies.

Microsoft's earnings miss projections

Aside from the Fed, investors will likewise have to digest quarterly results from several market heavyweights.

Microsoft (MSFT) shares lost nearly 3% before the open of trading after its fourth-quarter cloud revenue growth missed market estimates.

While the company's global profit barely beat estimates for the June quarter, revenue from Azure, Microsoft's cloud business, rose 29%, below estimates of 30.2% and equally slowing compared to the previous quarter's 31% increase. All this, despite investment in artificial intelligence increasing by $5 billion during the quarter.

On the flip side of the coin, shares of Advanced Micro Devices (AMD) rose 9% before the market opened, while rival NVIDIA (NVDA) added nearly 5% after AMD generated better-than-estimated earnings and forecast positive revenue for the current quarter, alluding to strong demand in artificial intelligence.

AMD's earnings highlighted a potential divide in AI-supported profits, where vendors of AI-enabled equipment appear to be outperforming their customers.

Meta Paltforms, next

Meta Platforms (META) becomes the latest of the large-cap tech giants to release quarterly results this week after the close.

Meta, which owns and operates Facebook, Instagram, Threads and WhatsApp, among other products and services, is expected to have a 20% increase in quarterly revenue.

Other companies to release figures with Boeing (BA) before the bell, as well as Qualcomm (QCOM), eTSY (ETSY) and Carvana (CVNA), just after the session closes.

Crude oil prices soar on Middle East tensions

Crude oil prices soared on Wednesday as the assassination of Hamas leader Ismail Haniyeh in Iran heightened tensions in the Middle East, raising the possibility of a wider conflict impacting supply.

Multiple media outlets reported that Ismail Haniyeh was killed in an Israeli strike, which could mean an escalation of the war between Israel and Hamas, which extended into a ninth month in July.

It could also mean an escalation of tensions between Iran and Israel, following a series of missile strikes between the two earlier this year, and stoke fears of all-out war in the Middle East, especially after Israel carried out strikes on Tuesday against the Lebanon-based, Iranian-backed armed group Hezbollah.

The news has overshadowed data from the American Petroleum Institute, according to which U.S. inventories fell by nearly 4.5 million barrels the previous week.

The reading, if corroborated by official data to be released later in the session, would mark the fifth straight week of declining U.S. inventories, as demand for fuel remained supported by the travel-filled summer season.

 

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Senator Lummis Introduces Bill to Establish a Bitcoin Reserve in the U.S.
The bill, abbreviated as the "BITCOIN Act of 2024," calls for the U.S. Treasury to purchase bitcoins over a 5-year period until a pool of 1,000,000 BTC is achieved. The plan to incorporate Bitcoin (BTC) into the U.S. national reserves is beginning to take shape. U.S. Senator Cynthia Lummis has advanced the first draft of a bill that would enable the creation of a new "Bitcoin Strategic Reserve" and would set a path for the United States to have funds in that cryptocurrency. This was reported Wednesday by CoinDesk and The Block, which have had access to the document.

Dubbed the "Boosting Innovation, Technology, and Competitiveness through Nationally Optimized Investment Act of 2024," or the "BITCOIN Act of 2024" for short, the bill proposes that purchases of the cryptocurrency would be funded in part by the appreciation of gold certificates held by the Federal Reserve System.

Lummis, a Wyoming Republican known for her pro-Bitcoin stance, announced her intention to propose the reserve on Saturday during the "Bitcoin 2024" conference in Nashville. She took the stage minutes after former President Donald Trump, a Republican candidate in this year's presidential race, delivered a speech in favor of the cryptocurrency industry. Trump further proposed the formation of a "strategic national Bitcoin reserve" and made other related promises should he win the White House in November.

Bitcoin National Reserve: The Draft

According to reports, the draft states that the U.S. Treasury Secretary would set up a "Bitcoin Purchase Program" of up to 200,000 BTC per year for a period of five years, up to a total stash of 1 million bitcoins, currently valued at more than USD $1 billion. The bitcoins would be held for at least 20 years and would only be available to pay down the federal debt. Thereafter, no more than 10% of the assets could be sold within any two-year period.

The bill requires the Treasury Department to make public quarterly reports on Bitcoin holdings and post them on its website, the reports said. It also states that U.S. states will be able to voluntarily participate in holding Bitcoin as part of the reserve, provided they meet certain requirements, including security protocols. "Establishing a strategic Bitcoin reserve to bolster the U.S. dollar with a hard digital asset will secure our nation's position as a global financial leader for decades to come," Lummis said in a statement.

Federal Reserve Gold Revaluation

The bill also includes a section on adjustments to gold certificates, calling on the Federal Reserve Banks to revalue gold certificates and capture their fair market price. Under the plan, within six months of the law's enactment, Federal Reserve Banks will be required to surrender all of their gold certificates to the Secretary of the Treasury, CoinDesk has reported. "Within 90 days of the surrender of the last such certificate, the Secretary shall issue new gold certificates to the Federal Reserve Banks reflecting the fair market price of gold held by the Treasury against such certificates on the date specified by the Secretary in each certificate," the draft reads, as quoted by The Block.

Thereafter, the Federal Reserve Banks would "remit the difference in cash value between the old and new certificates" to the Secretary of the Treasury. On July 24, the Federal Reserve Banks held gold reserves valued at $11 billion, according to the central bank's balance sheet. Along with gold, the United States also holds oil reserves.

For After November

Lummis previously told The Block that the bill will not pass this year but could be considered after the November presidential election. Cryptocurrencies have become a central issue amid the presidential campaign in the U.S. Trump, who began accepting Bitcoin donations in May, has stated his intention to protect the industry and end the "crackdown" that has been pushed by Joe Biden's administration against the digital asset sector.

Meanwhile, Vice President Kamala Harris's presidential campaign team has reportedly begun reaching out to ask questions about the cryptocurrency industry. At the time of writing, BTC is trading around $66,100.

 

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U.S. stock markets plunge on economic worries and tech slump
U.S. stock indexes fell sharply on Monday during the European session amid growing concerns about an economic slowdown, with technology stocks mainly being hit.

Fear of economic slowdown hits Wall Street

The sharp losses in Wall Street futures came after U.S. stock markets in the U.S. had been rattled the previous week on fears of a possible economic slowdown.

A series of poor readings increased concerns that the Federal Reserve had kept interest rates at high levels for quite some time, and that the odds of a soft landing for the economy were slipping.

It seems that this notion came to a head on Friday after July's nonfarm payrolls data missed estimates by a wide margin, signaling a sizable cooling in the labor market.

Although the data raised hopes of further interest rate cuts by the Federal Reserve, it did dampen appetite for risk-linked assets.

Technology stocks, which benefited greatly from the positive tone at the beginning of the year, have been significantly affected, and the NASDAQ Composite, with a strong technology component, has lost close to 10% from its all-time high at the beginning of the year, entering correction territory.

More economic data

More economic data will be released on Monday, including the ISM services PMI for July, and San Francisco Fed President Mary Daly will speak at a conference after the close of business on Monday.

Investors will be looking for more signals regarding the strength of the world's largest economy, after Friday's jobs report made the sentiments n of fears of a recession.

The volatility index for U.S. stocks, the VIX index, surpassed the 40 level early Monday, reaching its highest level since October 2020, Bloomberg reports.

The index has surged to nearly 79%, the biggest rise on record since February 20018, and has reached its highest intraday level in four years.

Right now, markets are forecasting a near 78% chance that the Fed will not only cut rates by September, but by nearly 50 basis points.

High-profile earnings follow

Most of the major companies have already reported their results, although some high-profile results are expected in the coming days.

Caterpillar (CAT), the industrial leader, and Uber Technologies (UBER), the ride-sharing company, will release their results on Tuesday.

Super Micro Computer (SMCI), which saw a considerable valuation spike on the back of artificial intelligence hype, will also release its results on Tuesday, while media giants Walt Disney (DIS) and Warner Bros.

Crude oil falls as a result of growth concerns

Crude oil prices fell on Monday, trading near eight-month lows, due to growing concerns about the economic slowdown in the United States, the world's largest crude oil consumer.

Weak U.S. economic data in the previous week has hit sentiment in crude oil markets, as estimates of a recession in the world's largest economy are a bad sentiment for future demand, even as recent inventory data indicated that increased travel demand during the early summer had kept gasoline consumption high.

This comes on top of disappointing growth figures from China, the world's largest oil importer, and surveys indicating weaker manufacturing activity in Asia and Europe, adding to concerns about oil consumption.

 

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Trump plans to use cryptocurrencies to pay off U.S. debt and be a leader in the sector
Former President Donald Trump recently hinted at the potential usefulness of cryptocurrencies to pay down the $35 trillion U.S. national debt. In an interview on Fox Business and while participating in the Bitcoin2024 Conference, Trump argued that the cryptocurrency sector could play a role in the national financial strategy, although he did not provide specifics on how this proposal would be carried out.

Trump's changing perspective on cryptocurrencies

Trump, a Republican candidate for president, stated that the U.S. should take the lead in the cryptocurrency sector, which he called having a "very high intellectual level." This change represents a marked difference from his previous comments, as he has in the past branded digital assets as "a disaster waiting to happen" and, in May 2018, during his presidency, went so far as to order then-Treasury Secretary Steven Mnuchin to take action against Bitcoin for alleged fraud. At the Bitcoin2024 Conference, Trump made the case that, if re-elected, he would prevent the government from selling seized Bitcoin on the open market. Instead, he would hold the asset strategically as an investment, indicating a more positive view regarding the potential of cryptocurrencies.

Campaign strategy and cryptocurrencies

Trump's latest comments also correspond with his efforts to raise funds for his election campaign by positioning himself as a supportive candidate for cryptocurrencies, unlike President Joe Biden. This approach indicates Trump's recognition of the increasing importance of cryptocurrency in U.S. economic and political debates. Ultimately, Trump's statements show a nuanced shift in his attitude toward cryptocurrencies, viewing them as a tool for managing the national debt and strengthening his campaign by appealing to cryptocurrency advocates.

Senator Cynthia Lummis has recently proposed a bill to constitute a strategic Bitcoin reserve in the United States to combat the harmful effects of rampant monetary printing and preserve U.S. financial supremacy in global markets and trade.

The Wyoming senator has set a goal of having the U.S. Treasury purchase 5% of the total Bitcoin supply, preserving the scarce decentralized asset for at least 20 years as a bulwark against central bank monetary devaluation and poor fiscal policy.

 

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Market Highlights for the Week: Economy, Markets, Oil
Concerns about the economy continue, especially over fears that the Federal Reserve has kept interest rates high for too long, hurting growth. More high-profile earnings reports are expected, and oil prices look set to remain volatile due to a combination of recession fears and geopolitical risks. Here's a look at what will happen in the markets this week.

U.S. Data and Fed Speeches

After Friday's weak July jobs report, which fueled fears about a possible recession, the economic calendar for this week is notably lighter. On Monday, the Institute for Supply Management will release its service sector index, which is expected to indicate moderate growth.

On Thursday, investors will hear about the state of the labor market with the weekly release of initial jobless claims, which are expected to pull back slightly from their highest level in nearly a year. Investors will also hear from San Francisco Fed President Mary Daly and Richmond Fed President Thomas Barkin, who kept rates unchanged last week but left open the possibility of a rate cut in September.

More Earnings Reports

While many large companies have already reported their results, a few big names are still to come. Caterpillar (CAT) and Walt Disney (DIS) will shed light on manufacturing and consumer health. Reports from Eli Lilly (LLY) and Super Micro Computer (SMCI), key players in AI, are also expected. U.S. stock markets fell for a second day on Friday, with the Nasdaq Composite slipping into correction territory.

This was driven by concerns over an economic slowdown and fears that the Federal Reserve may have delayed a rate cut too long, compounded by drops in Amazon (AMZN) and Intel (INTC) due to weak quarterly results and outlooks.

China Outlook

This week, investors will be treated to information on how China's economic recovery will evolve in the second half of the year through a series of economic data. The week begins with a private sector survey on services activity, to be followed by trade data on Wednesday and a consumer price reading at the end of the week. Recent data point to a gloomy outlook for the world's second-largest economy, and recent rate cuts have highlighted the urgency of Beijing's efforts to shore up growth. Policymakers will be closely watching Friday's inflation figures for clues on how much more needs to be done to boost weak domestic demand.

Reserve Bank of Australia Decision

The Reserve Bank of Australia is expected to leave interest rates unchanged at its next policy meeting on Tuesday after data last month indicated that core inflation unexpectedly slowed to a two-year low in the second quarter and that economic growth moderated in the first quarter.

Market participants will be looking to future central bank guidance, with a 70% chance of a rate cut later in the year if inflation continues to slow.

Oil Prices

Oil prices declined on Friday, settling at their lowest level since January, as economic data from the U.S. and China, the largest oil importer, heightened concerns about demand expectations.

The weak U.S. jobs report, coupled with slowing manufacturing activity in China, pressured prices lower on the risk that the sluggish global economic recovery will impact oil consumption. Oil investors are also keeping an eye on the Middle East, where the Iranian-backed Lebanese group Hezbollah said its conflict with Israel had entered a new phase. Meanwhile, last Thursday's OPEC+ meeting did not change the group's production policy, which plans to start withdrawing production cuts from October.

 

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Market Highlights for the Week: Economy, Markets, Oil
Concerns about the economy continue, especially over fears that the Federal Reserve has kept interest rates high for too long, hurting growth. More high-profile earnings reports are expected, and oil prices look set to remain volatile due to a combination of recession fears and geopolitical risks. Here's a look at what will happen in the markets this week.

U.S. Data and Fed Speeches

After Friday's weak July jobs report, which fueled fears about a possible recession, the economic calendar for this week is notably lighter. On Monday, the Institute for Supply Management will release its service sector index, which is expected to indicate moderate growth.

On Thursday, investors will hear about the state of the labor market with the weekly release of initial jobless claims, which are expected to pull back slightly from their highest level in nearly a year. Investors will also hear from San Francisco Fed President Mary Daly and Richmond Fed President Thomas Barkin, who kept rates unchanged last week but left open the possibility of a rate cut in September.

More Earnings Reports

While many large companies have already reported their results, a few big names are still to come. Caterpillar (CAT) and Walt Disney (DIS) will shed light on manufacturing and consumer health. Reports from Eli Lilly (LLY) and Super Micro Computer (SMCI), key players in AI, are also expected. U.S. stock markets fell for a second day on Friday, with the Nasdaq Composite slipping into correction territory.

This was driven by concerns over an economic slowdown and fears that the Federal Reserve may have delayed a rate cut too long, compounded by drops in Amazon (AMZN) and Intel (INTC) due to weak quarterly results and outlooks.

China Outlook

This week, investors will be treated to information on how China's economic recovery will evolve in the second half of the year through a series of economic data. The week begins with a private sector survey on services activity, to be followed by trade data on Wednesday and a consumer price reading at the end of the week. Recent data point to a gloomy outlook for the world's second-largest economy, and recent rate cuts have highlighted the urgency of Beijing's efforts to shore up growth. Policymakers will be closely watching Friday's inflation figures for clues on how much more needs to be done to boost weak domestic demand.

Reserve Bank of Australia Decision

The Reserve Bank of Australia is expected to leave interest rates unchanged at its next policy meeting on Tuesday after data last month indicated that core inflation unexpectedly slowed to a two-year low in the second quarter and that economic growth moderated in the first quarter.

Market participants will be looking to future central bank guidance, with a 70% chance of a rate cut later in the year if inflation continues to slow.

Oil Prices

Oil prices declined on Friday, settling at their lowest level since January, as economic data from the U.S. and China, the largest oil importer, heightened concerns about demand expectations.

The weak U.S. jobs report, coupled with slowing manufacturing activity in China, pressured prices lower on the risk that the sluggish global economic recovery will impact oil consumption. Oil investors are also keeping an eye on the Middle East, where the Iranian-backed Lebanese group Hezbollah said its conflict with Israel had entered a new phase. Meanwhile, last Thursday's OPEC+ meeting did not change the group's production policy, which plans to start withdrawing production cuts from October.

 

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Dollar Falls on Recession Fears; Yen and Swiss Franc Gain
The U.S. dollar fell sharply on concerns about U.S. economic growth, while the Swiss franc and Japanese yen saw strong safe-haven demand.

Dollar Loses Ground on Recession Fears

The dollar's sell-off came after data released on Friday showed a significant cooling in U.S. job creation in July, and U.S. Treasury yields fell as traders began to consider the likelihood of a hard landing for the U.S. economy due to the prolonged period of high interest rates.

Traders now expect the Federal Reserve to cut interest rates in September, and anticipate larger cuts than the previously expected 50 basis points at the September and November Federal Open Market Committee meetings.

Wells Fargo now estimates two 50 basis point rate cuts at the Federal Open Market Committee meetings in September and November.

This forecast marks a considerable change from past predictions due to emerging economic indicators, with recent data raising concerns about the economy.

Swiss Franc in Demand as Carry Trades Unwind

In Europe, the Swiss franc soared as traders sought safety in this turbulent environment.

The Swiss franc hit a seven-month high against the dollar, with USD/CHF losing nearly 1.4% to 0.8458.

The Swiss currency also benefited from the unwinding of carry trades, in which investors borrow money from low-interest-rate economies such as Japan or Switzerland to finance investments in higher-yielding assets elsewhere, a strategy that has gained popularity recently.

The EUR/USD rose nearly 0.6% to 1.0974 due to the dollar's general weakness.

Expectations of further cuts by the European Central Bank have also increased, although very few traders have been long on the euro since the start of the political turmoil in France at the end of June.

Weaker global growth is not good for the pro-cyclical euro, although the fact that the narrative of U.S. exceptionalism could come back to earth with a bump should support EUR/USD, given that the Fed is poised to cut rates sharply.

GBP/USD lost 0.4% to 1.2752 on fears that the Bank of England will also delay, as the UK central bank did not cut interest rates until the previous week.

Moreover, the decision to cut rates by a quarter point to 5% was split among policymakers (5-4), indicating that the central bank may remain cautious going forward.

Yen Hits Seven-Month High

USD/JPY sank 3.2% in Asia to 141.86, and the yen hit a seven-month high against the dollar as traders unwound their carry trades in anticipation of major rate cuts by the Federal Reserve.

The rise in the yen, which hit a 38-year low against the dollar in July, was also helped by the Bank of Japan's 15 basis point rate hike last week.

The USD/CNY was down 0.6% to 7.1167, and the yuan rallied due to a weaker dollar, despite uncertainty about the economic slowdown in China.

 

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Dollar rebounds after sharp losses; euro and pound lose ground
The U.S. dollar gained ground on Tuesday, reversing some of its recent losses, as some calm returned to currency markets.

The dollar recovers after heavy losses

In recent weeks, the dollar has been significantly affected by fears of a possible U.S. recession after a series of weak labor market data, which has triggered bets that the Federal Reserve will cut rates more than initially expected.

Right now, traders are estimating 110 basis points of easing this 2024 by the Fed, with about an 80% chance of a 50 basis point cut in September, after fully discounting a 50 basis point cut on Monday.

Fed policymakers on Monday pushed back against the notion that the weaker-than-expected July jobs data means the economy is in a recessionary free fall but also noted that the Fed will have to cut rates if it wants to avoid such an outcome.

Austan Goolsbee, president of the Chicago Fed, said, "The employment numbers are weaker than expected, but they still don't look like a recession." "I think in making decisions you have to take into account where the economy is headed."

Both the euro and the pound lose ground

Turning to Europe, the dollar gained ground against the euro and sterling as the European Central Bank and the Bank of England have begun interest rate cuts aimed at stimulating their respective economies.

The EUR/USD lost about 0.4% to 1.0911, after touching a seven-month high of 1.100 on Monday, following news that retail sales lost 0.3% in June in the eurozone, meaning that consumers are likely to remain tight.

On the other hand, German industrial orders rose more than forecast in June, by 3.0% compared to the heavy month, indicating a glimmer of light and hope for the European continent's largest economy.

The GBP/USD lost about 0.5% to 1.2706, giving back some of its recent gains in the wake of the strengthening dollar.

The Bank of England cut interest rates last week, reducing the benchmark rate by about a quarter point to 5%.

Yen falls for first time in August

USD/JPY rose about 0.2% to 144.47 and the yen weakened for the first time in August, consolidating after flashy moves in recent days.

The yen had benefited from increased safe-haven demand in the face of the broader financial market slump. Bullish signals from the Bank of Japan, which raised interest rates and hinted at further hikes, also boosted the currency, as did the reversal of carry trades.

USD/CNY rose 0.3% to 7.1504, with the yuan losing strength in light of this week's trade and inflation data.

AUD/USD was down 0.2% to 0.648, with the Australian dollar retreating following comments from Reserve Bank of Australia Governor Michele Bullock that rate cuts are further away.

The Australian central bank left interest rates unchanged on Tuesday, as expected, while reiterating that it was not ruling out anything to control inflation.

 

[OnEquity]

U.S. Stock Markets Rise, with Strong Earnings Supporting Sentiment Shift
U.S. stock markets rose on Tuesday, showing signs of recovery from Monday's decline, despite continuing concerns about an economic slowdown.

Recession Fears Lead to Heavy Losses

Concerns about a significant slowdown in economic growth, following a string of poor data related to the purchasing managers' index and the labor market, caused the DJIA, S&P 500, and Nasdaq to lose nearly 5%, 6%, and 8% respectively in three days, marking their worst three-day performance in more than two years.

Weak economic data fueled fears that the Fed would keep interest rates higher for longer and that any cut by the central bank right now would not be enough for the economy to achieve a soft landing.

That said, markets increased their estimates for a 50 basis point cut in September and were looking at at least 100 basis points in rate cuts this year, according to CME FedWatch.

2Q Earnings Follow

Caterpillar (CAT) stocks rose 1% after the industry giant unveiled a slight quarterly profit increase, supported by resilient demand for its larger excavators and other construction equipment amid rising U.S. infrastructure spending.

Shares of Uber Technologies (UBER) rose more than 5% as the ride-hailing company beat estimates for both second-quarter revenue and core earnings on continued demand for its ride-sharing and food delivery services.

Super Micro Computer (SMCI) will also release its results after the bell, and is set to provide more clues about demand from the artificial intelligence industry.

Additionally, Palantir Technologies (PLTR) rose nearly 11% after the software services provider raised its annual revenue and profit forecast for the second time in 2024, while Lucid Group (LCID) rebounded more than 9% due to better-than-estimated second-quarter revenue and after the electric vehicle maker unveiled that its largest shareholder, Saudi Arabia's Public Investment Fund (PIF), will invest about $1.5 billion in cash.

Media giants such as Walt Disney (DIS) and Warner Bros Discovery (WBD) will release their results on Wednesday.

Oil prices continue to fall

Crude oil prices declined on Tuesday and continued to fall in a volatile market after hitting eight-month lows on concerns about global demand.

Concerns about a possible escalation of the war between Israel and Hamas, especially after Iran vowed to retaliate for the assassination of a Hamas leader in Tehran, have been supportive for oil markets.

However, confidence remains very fragile due to fears that slowing economic growth will dampen demand, especially after disappointing U.S. labor market data raised concerns about a hypothetical U.S. recession.

 

[OnEquity]

U.S. Wholesale Inflation Moderated in July, Sign of Easing Price Pressures

U.S. wholesale price increases slowed in July, indicating that inflationary pressures are moderating as the Federal Reserve (Fed) moves closer to potentially cutting interest rates, expected early next month. The Labor Department reported Tuesday that its Producer Price Index (PPI), which tracks inflation before it reaches consumers, rose 0.1% from June to July and 2.2% from a year ago.

Excluding food and energy prices, which tend to fluctuate month to month, so-called core wholesale prices were unchanged from June and up 2.4% from July 2023. The increases were more moderate than expected and are roughly consistent with the Federal Reserve's 2% inflation target. The Producer Price Index can provide an early signal of the direction consumer inflation will take.

Economists also follow it closely because some of its components, particularly health care and financial services, are included in the Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge.

Upcoming Release of Consumer Prices

The Labor Department will release the Consumer Price Index (CPI), the primary measure of inflation, on Wednesday. Forecasters estimate that consumer prices rose 0.2% from June to July, after falling 0.1% the previous month, and 3% from July 2023, according to a survey by data firm FactSet.

Inflation has decreased significantly since reaching a four-decade high in mid-2022. However, as Americans prepare to vote in the November presidential election, many remain dissatisfied with consumer prices, which are about 19% higher than before the inflationary spike began in the spring of 2021. Many have blamed President Joe Biden, although it remains unclear whether Vice President Kamala Harris, a presidential hopeful, will also face accountability.

The Federal Reserve May Soon Lower Interest Rates

The Fed, in its fight against high inflation, raised its benchmark interest rate 11 times in 2022 and 2023, bringing it to its highest level in 23 years. Year-over-year consumer price inflation has fallen from 9.1% in June 2022 to 3% as of the latest report. The much weaker-than-expected July U.S. employment report reaffirmed the general expectation that Fed policymakers may begin cutting rates when they meet in mid-September to support the economy. The employment report indicated that the unemployment rate rose for the fourth straight month to 4.3%, still good by historical standards, but the highest level since October 2021.

Over time, a series of rate cuts by the Fed would likely lead to lower borrowing costs across the economy—for mortgages, auto loans, credit card loans, and commercial loans—and could also stimulate stock prices.

 

[OnEquity]

Dollar Awaits CPI, Pound Falls
The U.S. dollar stabilized on Wednesday, benefiting from the previous night's weakness ahead of the release of the July Consumer Price Index, while the British pound weakened following benign inflation data.

Dollar Slides on CPI Expectations

The U.S. dollar retreated on Tuesday after the Producer Price Index (PPI) for July came in below expectations, prompting traders to shift their bets slightly towards a 50 basis point rate cut in September.

The PPI reading raised hopes that the Consumer Price Index (CPI) inflation reading, to be released later today (Wednesday), will also indicate that inflation remained subdued in July, giving the Federal Reserve more room to initiate rate cuts.

Analysts have been bearish on the dollar in recent days and generally optimistic about anything that stabilizes confidence. A benign U.S. CPI reading could pave the way for more dollar trading until the underlying Personal Consumption Expenditures (PCE) data is released on August 30, followed by the September 6 employment numbers.

At the end of July, the Federal Reserve kept the official interest rate at 5.25% to 5.50%, as it has done for more than a year, although it indicated that it might cut rates in September if inflation continues to cool.

Pound Falls on UK Inflation Release

In Europe, GBP/USD lost about 0.2% to 1.2837 after UK consumer price inflation rose less than expected in July, increasing the likelihood that the Bank of England (BoE) will cut interest rates again.

The annual rate of consumer price inflation was expected to rise to 2.2% after two months at the BoE's 2% target, but it came in below the 2.3% estimate.

The Bank of England cut interest rates from 5.25%, its highest level in 16 years, earlier this month, and financial markets are now pricing in a 44% chance that the BoE will cut rates by a quarter point in September, down from 36% before the data release.

EUR/USD rose nearly 0.3% to 1.1019, reaching levels not seen earlier this year, after France's EU-harmonized year-on-year inflation rose to 2.7% in July from 2.5% in June.

The European Central Bank began cutting interest rates in June, and most expect policymakers to agree to another reduction in September, although rising inflation could make this less likely.

New Zealand Dollar Loses Ground After Rate Cut

In Oceania, NZD/USD fell nearly 1% to 0.6014 after the Reserve Bank of New Zealand (RBNZ) cut interest rates by 25 basis points, and Governor Adrian Orr reported that the bank had also considered a 50 basis point reduction.

The RBNZ highlighted progress made towards achieving its annual inflation target of between 1% and 3%, while noting market expectations that interest rates will fall by 100 basis points by mid-2025.

In Asia, USD/JPY was up nearly 0.2% to 147.15, showing signs of stability after strong overnight gains, although further strength in the yen was capped by improved risk appetite.

Second-quarter Gross Domestic Product (GDP) data from Japan will be released on Thursday, which is likely to influence the Bank of Japan's rate-cutting plans.

USD/CNY lost about 0.1% to 7.1470, with industrial production data and retail sales figures due for release later this week.

 

[OnEquity]

U.S. inflation rose less than expected in July; CPI rose by 2.9% annually

U.S. consumer prices increased in July at a slower-than-expected annual rate, raising the likelihood that the Federal Reserve will begin to cut interest rates at its next scheduled meeting in September.

The Labor Department's consumer price index (CPI) rose about 2.9% last month, slowing slightly from 3.0% in June. Economists had estimated that the figure would most likely match June's rate.

On a month-on-month basis, the reading rose to 0.2% after falling 0.1% the previous month, matching estimates.

Excluding more volatile items such as food and gasoline, the underlying figure rose by 3.2% in the twelve months to July, below estimates of 3.3%. On a monthly basis, underlying price growth increased by nearly 0.2% after rising by 0.1% in June.

This release followed the much cooler-than-expected July producer price index, which serves to confirm the very possibly benign inflation pressures that could give the Fed a chance to cut its interest rate from the 5.25%-5.50% range it has been at for more than a year.

Fed Chairman Jerome Powell has stressed that positive inflation data is vital for a rate cut in September.

In addition, the non-farm payrolls report earlier this month indicated that U.S. employment growth slowed more than expected in July, while the unemployment rate increased to 4.3%, which could increase fears that the labor market is deteriorating making the economy highly vulnerable to a recession.

 

[OnEquity]

U.S. Stock Markets Rise on Positive CPI Data
U.S. stocks rose on Wednesday as investors digested the latest consumer inflation data amid expectations that the Federal Reserve will ease its monetary policy stance next month.

CPI Data Expected to Support Rate Cut Expectations

U.S. consumer prices rose less than estimated on an annual basis in July, with the consumer price index increasing by 2.9%, slightly slowing from June's 3.0%. Market analysts had expected the figure to remain at the June rate.

On a month-to-month basis, the reading rose by 0.2% after falling by 0.1% in the previous month, which matched estimates.

Excluding more volatile items such as food and gasoline, the core figure rose by 3.2% in the twelve months to July, slightly below estimates of 3.3%. On a monthly basis, core price growth increased by 0.2% after a 0.1% rise in June.

Although this release confirmed generally benign inflation pressures, following Tuesday's cooler-than-expected July producer price index, expectations for a more substantial rate cut have increased.

The Federal Reserve is expected to officially cut its interest rate in September from the 5.25%-5.50% range it has maintained for more than a year, although uncertainty remains regarding the size of the reduction.

Traders are currently divided between expecting a 25 to 50 basis point cut in September, according to CME's FedWatch tool.

Intel Sells Its Shares in Arm

In the corporate sector, Intel (INTC) sold its 1.18 million-share stake in U.K. chip firm Arm Holdings (ARM) in the second quarter, according to a regulatory filing released Tuesday.

The chipmaker mentioned earlier this month that it would cut more than 15% of its workforce and suspend its dividend amid a pullback in spending on traditional data center semiconductors and a shift toward AI chips.

Chocolate maker Mars Inc. wants to pay $83.50 per share for packaged food producer Kellanova (NYSE
), representing a 12% premium over Tuesday's close and valuing the company at more than $30 billion, according to The Wall Street Journal.

Oil Prices Rise After U.S. Inventory Drawdown

Oil prices rose on Wednesday, supported by industry data that indicated a larger-than-expected drawdown in U.S. inventories.

Data from the American Petroleum Institute showed that U.S. crude inventories fell by 5.2 million barrels in the week ended August 10, much more than the estimate of a near 2 million barrel drawdown.

If confirmed by official inventory data later in the week, this reading suggests that demand continues to be strong in the world's largest fuel consumer, even as the generally travel-heavy summer season begins to wind down.

 

[OnEquity]

U.S. Inflation Slows in July to 2.9%, Bitcoin Dips Below $61,000
U.S. inflation showed signs of slowing in July, aligning with economists' estimates and paving the way for a possible interest rate cut.

The U.S. Consumer Price Index (CPI), a widely analyzed measure tracking the cost of a broad basket of goods and services, increased slightly by 0.2% month-over-month in July, leaving the 12-month inflation rate at 2.9%, according to a report released Wednesday by the Labor Department's Bureau of Labor Statistics.

These results were in line with forecasts from economists surveyed by Dow Jones, which had predicted readings of 0.2% for the month and 3% for the year, according to CNBC. The annual reading, slightly below estimates and down from June's 3%, is the lowest since March 2021.

The core CPI, which excludes food and energy costs, also showed a modest increase of 0.2% in July, matching expectations and slightly above the 0.1% increase from the previous month. The year-over-year core CPI was 3.2%, in line with estimates and slightly lower than June's 3.3%.

Inflation data has been moving progressively closer to the Fed's 2% annual target. The latest reading supports the narrative for an upcoming interest rate cut in September, as investors anticipate.

Fed officials have signaled their willingness to ease rates, though they have not committed to a specific timeline or speculated on the pace of the cuts.

The Fed raised interest rates rapidly to combat inflation, which reached multi-decade highs in 2022 after the COVID-19 pandemic, and has not cut rates since. Rates have remained at a 23-year high within the 5.25% – 5.5% range for over a year.

Bitcoin Slides Below USD $61,000

The cryptocurrency market did not respond positively to the inflation news, as Bitcoin slipped below USD $61,000 after the report's release. This downturn was mirrored by other major cryptocurrencies, which are currently showing declines of nearly 1% over the last hour.

In contrast, gold surged to $2,474.04 an ounce in Wednesday morning trading, approaching record highs, as reported by Reuters.

Earlier in the week, Bitcoin experienced its fastest pace of decline in several years, plunging to the USD $49,000 area amid concerns about a slowing U.S. labor market and fears of an economic recession. The situation was further exacerbated by tensions in the Middle East and a rate hike announced by the Bank of Japan.

The digital asset market has shown signs of recovery from last week's downturn, although volatility persists. Bitcoin is hovering around USD $60,900 at the time of publication, up 3.3% in the last few hours and 6.3% for the week, according to CoinMarketCap data.

 

[OnEquity]

Dollar gains bearish momentum, pound reaches one-month highs
The U.S. dollar fell ahead of the release of the Federal Reserve's July monetary policy meeting minutes and Chairman Jerome Powell's upcoming speech in Jackson Hole near the end of the week.

Dollar downtrend begins to gain momentum

The minutes, which will be released on Wednesday, and Jerome Powell's speech on Friday are likely to be the main precursors of the week's currency movements, with traders expecting a negative tone to emerge.

According to market analysts, the signals may be subtle, but the downward momentum may be starting to consolidate. Likewise, the DXY dollar index appears to be crossing the same levels seen at the beginning of August. This week's events, such as the July FOMC minutes, revised payrolls and Fed speakers, could add to the dollar's losses. Market investors most likely want to see how much further the dollar can fall next month.

The Fed has kept its benchmark overnight rate between 5.25% and 5.50% since the previous July, just after it had risen 525 basis points since 2022.

Traders have fully discounted a 25 basis point rate cut by the Fed in September, with a 24.5% chance of a move of almost 50 basis points.

Pound hits one-month highs

Turning to Europe, GBP/USD rose nearly 02% to ,2963, reaching a one-month high, as the pound benefits from a weaker dollar.

According to market analysts, GBP/USD looks set to revalidate its high for the year at 1.3045, as broad dollar weakness dominated global currency markets. A dovish stance from the Bank of England could contain the pound's gains. Not to forget, the Bank's Governor, Andrew Bailey, will have the opportunity to speak at Jackson Hole on Friday this week.

Possibly what analysts may be underestimating, however, is the demand for sterling coming from M&A activity. In this 2024, the UK is the hub region for deals worth close to $200 billion.

EUR/USD rose as much as 0.1%, or 1.1037, approaching the more than seven-month high reached the previous week.

Yen rises

In Asia, the USD/JPY lost 1% to 146.05 on the back of a broad-based weakening of the dollar and the likelihood of further political divergence between the U.S. and Japan.

Bank of Japan Governor Kazuo Ueda is scheduled to address Parliament on Friday, where he is expected to speak on the central bank's decision last month to raise interest rates.

The USD/CNY lost about 0.3% to 7.1408, and the yuan headed for its biggest gain in two weeks, taking advantage of a broad-based sell-off in the dollar as investors bet on a US Fed rate cut.

 

[OnEquity]

U.S. Stock Markets Flat, Jackson Hole and Fed Minutes in Focus
U.S. stocks traded flat on Monday, consolidating after last week's gains as investors awaited further signals regarding the Federal Reserve's monetary policy outlook.

Wall Street's major indices recorded their best week so far in 2024, as recent positive data eased fears of a possible recession.

The S&P 500 index gained nearly 3.9%, posting its best week since 2023. The tech-heavy Nasdaq Composite added 5.2%, while the blue-chip Dow Jones Industrial Average rose 2.9%.

Recessionary Prospects Decline

The previous week's rally came after a turbulent start to the month following the disappointing July nonfarm payrolls reading.

However, July's ISM non-manufacturing index rebounded, with its employment component entering the expansionary zone for the first time since November last year, according to economists.

In addition, July retail sales exceeded estimates, indicating a marked growth in real consumption, and initial jobless claims have fallen over the past two weeks.

Goldman Sachs has revised its one-year US economic recession forecast to 20% from 25%, citing the latest economic data that indicate no signs of a slowdown.

The increase was midway between the long-term average recession probability of 15% – based on the historical occurrence of one recession every seven years – and the 35% estimate during the banking turmoil in early 2023.

Investors will focus this week on the minutes of the Fed's latest meeting, due out on Wednesday, ahead of Fed Chairman Jerome Powell's speech at Jackson Hole next Friday.

Earnings Season Continues

Earnings season continues this week, with results due on Monday from Palo Alto Networks (PANW) and Estée Lauder (EL).

Bank of America's most recent survey of fund managers indicated a decline in the proportion of investors overweight equities, from 51% to 31%.

The survey also highlighted that 40% of investment managers are pushing for CEOs to improve their companies' balance sheets. Despite the current AI boom, the desire to increase capital expenditure has fallen to 24%, the lowest level since November 2023.

Crude Oil Prices On The Lookout For Gaza Ceasefire Talks

Crude oil prices fell on Monday due to concerns over weaker demand in top oil importer China, while ceasefire talks in the Middle East remain in focus.

Attention is now focused on Gaza ceasefire talks, which will continue this week in Cairo after a two-day meeting in Doha the week before.

U.S. Secretary of State Antony Blinken on Monday called Washington's latest diplomatic effort to reach a Gaza ceasefire agreement "perhaps the best and last chance" and urged all sides to reach an agreement that would get them over the finish line.

The urgency to reach a ceasefire agreement has grown amid fears of an escalation of hostilities across the region, an upsurge that could impact on supplies to the oil-rich area.