MARKET REPORT
(Unburdened by what has been)
Buenos Aires 1908
You were found in clear conditions. But you’re handsome in the Fog.
Day in Review:
Today:
(Kamalanomics: Govt-manipulated data with un-reported historic downward revisions to make the economy look more favorable):
DATA:
– Retails sales in the US unexpectedly edged up 0.1%, compared to forecasts it would fall 0.2%, and following an upwardly revised 1.1% surge in July
– However, sales excluding autos and gas remained below expectations
– FOMC’s two-day meeting begins today
– WSJ’s Timiraos’ Fed Preview highlights the tough decision the Fed has to make between 25 and 50bps cut
– Home Builder confidence up to 42 from 39 AUG
– After a significant decline in July, US Industrial Production rebounded dramatically in August, rising 0.8% MoM (as July was revised down from -0.6% to -0.9% MoM). That lifted Industrial Production back up to unchanged on a YoY basis:
– Cooler-than-expected Canadian CPI
– Germany’s ZEW economic sentiment slumps
COMPANIES:
– Amazon enacts return to office mandate
– Google to rethink big data centre in China
GENERAL:
– Euro Bourses close higher
– Thousands of Hezbollah TERRORISTS injured after Israel remotely detonates their pages
– Equities mixed, Treasuries down, Crude up, Dollar up.
Coming Up:
– Japanese Machinery Orders, Exports/Imports, UK CPI, Services, EZ HICP (Final), US Building Permits, GDP Production.
– FOMC Policy Announcement; BCB Policy Announcement; BoC Minutes.
Speakers:
– Fed Chair Powell
MAJORS:
DX:
– The Dollar saw muted trade overnight and into the European session, but once the hotter-than-expected US Retail Sales M/M for August were realised, strength arrived for the dollar with gradual upside ensuing for rest of the day.
Outside of Retail Sales, US releases were on the strong side, helping the Buck extend on its gains, as Industrial Production rose more than expected, printing at the high end of analysts’ expectations, while Manufacturing Output increased more than anticipated in August.
Later on, Atlanta Fed GDPnow (Q3) was revised upwards to 3% (prev. 2.5%), cementing the Dollar’s intraday gains.
Attention now turns towards Wednesday, for the much-awaited Fed rate decision, accompanying statement, and SEPs, in addition to Powell’s Press Conference that will follow. In terms of money markets, they continue to favour a 50bps rate cut, with a 65% likelihood. Report courtesy of newsquark.
AUD:
– Outperformed on the day
EUR/GBP
– Germany’s ZEW Economic Sentiment falling abruptly to 3.6 (exp. 17, prev. 19.2), its lowest figure since October 2023. The release also saw Current Conditions follow suit, falling more than expected to -84.5 (exp. -80, prev. -77.3). Adding to the report, the ZEW President said “The hope for a swift improvement in the economic situation is visible fading. The number of optimists and pessimists is now evenly balanced”.
The disappointing data saw EUR/USD pulll back slightly from highs, but nothing too notable with the EUR mainly falling foul to the broader Buck strength. Regarding ECB speak, Simkus noted the likelihood of an October rate cut is very small.
YEN:
– Nothing of note pre FOMC
EQUITIES:
EUR:
– DAX: +0.52% at 18,731, FTSE 100: +0.38% at 8,310, CAC 40: +0.51% at 7,487, Euro Stoxx 50: +0.67% at 4,860
US:
– SPX +0.03% at 5,635, NDX +0.05% at 19,432, DJIA -0.04% at 41,606, RUT +0.74% at 2,205
Sectors (W to S): Health -1.01%, Consumer Staples -0.93%, Real Estate -0.84%, Technology -0.09%, Utilities -0.08%, Materials +0.16%, Communication Services +0.41%, Financials +0.51%, Industrials +0.52%, Consumer Discretionary +0.62%, Energy +1.41%.
– Microsoft: Raised quarterly dividend +10% to USD 0.83/shr alongside a new USD 60bln share repurchase program
– Apple: Raised quarterly dividend +10% to USD 0.83/shr alongside a new USD 60bln share repurchase programme.
GOLD/SILVER:
– The Federal Reserve’s Open Market Committee meeting (FOMC) began Tuesday morning and ends Wednesday afternoon with a statement and press conference from Fed Chairman Jerome Powell. The marketplace thinking has shifted recently, now slightly favoring a 0.5% rate cut, after earlier reckoning a 0.25% rate cut was most likely. The CME’s FedWatch Tool is currently putting a 67% probability of a 50 basis-point cut, while the likelihood of the smaller 25 basis-point cut has slipped to 33%. The Bank of England and the Bank of Japan hold their regular monetary policy meetings Thursday.
Some stronger-than-expected U.S. economic data released this morning, including retail sales and industrial production, also likely pressured gold and silver as the U.S. dollar index pushed modestly higher following those reports.
OIL:
– Hedge funds and asset managers have sold significant amounts of oil contracts, reaching a record net short position, indicating extreme bearish sentiment.
This bearishness is driven by concerns about a global economic slowdown and doubts about OPEC+’s ability to support prices.
US natural gas offers a glimmer of hope as low prices and high consumption reduce excess inventories.
BONDS:
US 1-MO: 4.928 -0.064
US 6-MO: 4.584 +0.029
US 1-YR: 4.02 +0.043
US 5-YR: 3.443 +0.038
US 10-YR: 3.647 +0.026
US 30-YR: 3.96 +0.023
2’s/10’s: 0.04 -0.03
After last week’s solid auction which saw stellar demand no doubt on the expectation that the Fed will soon be slashing rates, moments ago we got the results of this week’s sole coupon offering: a $13 billion reopening of 19Y-11M cusip UD8, where we learned that demand for 20Y paper was far weaker than expected.
Stopping at a high yield of 4.039%, the 20Y reopening yield was down from 4.16% in August, and even though this was the lowest 7Y yields since July 2023, it was the auction this month to still yield above 4% (thanks to the infamous 20s-30s kink, the 30Y trades at 3.96%). Notably, it also tailed the When Issued 4.019% by 2.0bps, the biggest tail since February’s catastrophic – and record – 3.3bps tail, and followed 6 consecutive stop throughs.
The demand metrics were just as ugly: the bid to cover sank to 2.51 from 2.54, the lowest since February and naturally below the six-auction average of 2.68%. Bond report courtesy zerohedge.com
CRYPTO
-BlackRock’s iShares Bitcoin Trust took in $15.8 million on Monday, ending its 13-day long streak of flat or negative flows
– Overall, the ten U.S.-based spot bitcoin ETFs bled $770 million since Aug. 27
– During its losing streak, IBIT’s net outflows summed to $23.1 million, a small amount versus the more than $20 billion in assets under management at the fund. The 10 U.S.-based spot ETFs as a whole had about $1 billion in outflows over the same period
KEEP DOING WHATS WORKING, STOP WHAT ISNT
Best of luck out there. Let the market come to you
Post of the day:
https://www.youtube.com/watch?v=hjBDa6_AXok
Song of the day:
https://www.youtube.com/watch?v=7wfYIMyS_dI
Joke of the Day:
https://www.youtube.com/shorts/9WQVeQDulwU
(Seize all assets of Duke and Duke enterprises)
I can be contacted should anyone have any questions, input at [email protected] during US hours of EST 9am until 5pm
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