Source: Wall Street See
Authors: Fang Jiayao, Du Yu, and Bu Shuqing.
Before the release of inflation data in the UK and US, the market focused on the Israel-Iran conflict. Despite OPEC's rare reduction in oil demand expectations, US crude oil still rose more than 4%, rising for five consecutive days and breaking through $80, with European natural gas reaching its highest level in eight months. Gold rose by 1.7%, and the two-year US Treasury yield fell 5 basis points to approach 4%. The US stock market fell significantly in the last trading session, with small-cap stocks falling nearly 1%, highlighting risk aversion. However, chip and Chinese concept stocks rose more than 0.6%, and NVIDIA rose 6% and then closed up more than 4%. The yen briefly fell by more than 1%.
Former Bank of Japan board member Sakurai Shin ruled out the possibility of Japan raising interest rates again this year, and said it is uncertain whether it can raise interest rates by March next year. The market is focusing on key US economic data this week, including July PPI and CPI inflation as well as retail sales. Walmart and Home Depot's financial reports will also provide clues about consumer spending.
Wall Street generally expects Wednesday's US inflation report to set the tone for the market this week. The year-on-year increase in US core CPI in July is expected to drop by 0.1 percentage points to 3.2%, hitting a new low since May 2021, but the month-on-month increase may rebound from 0.1% to 0.2%.
On Monday, the performance of US stocks were mixed, with small-cap stock indices falling by more than 0.9%. NVIDIA led a rebound in technology stocks, rising more than 4%, and the S&P 500 and Nasdaq both ended up slightly. The US stock market fell significantly towards the end of the trading session. According to CCTV's report, Iran may launch a "major" attack on Israel as early as this week, adding to market uncertainty.
The geopolitical situation has led investors to buy high-quality assets. US bonds rose across the board, with short-term US bond yields falling more than 5 basis points to approach the 4% level. Safe-haven currencies such as the yen and Swiss franc rebounded from their lows, and gold and silver rose more than 1% to a ten-day high. Supply risks have pushed up oil prices for five consecutive days, with US crude rising more than 4% and breaking through the psychological barrier of $80.
In terms of US economic data, the New York Fed’s July consumer survey showed that one-year and five-year inflation expectations among consumers remained stable at 3.0% and 2.8%, respectively, but three-year inflation expectations dropped sharply to 2.3%, a historical low. Fed board member Bowman said on Sunday that there is still upward pressure on inflation and that the recent surge in the unemployment rate to 4.3% may exaggerate the degree of cooling in the labor market, suggesting that he may not support an interest rate cut at the Fed meeting in September. With two months left in this fiscal year, the US budget deficit has exceeded $1.5 trillion.
US stocks were up and down on Monday, with the Chinese concept stock index rising more than 0.6% and outperforming US stock indices. NVIDIA rose 6% and then closed up more than 4%, driving the chip stock index up by 0.73%:
Major stock indices showed different trends: the S&P 500 closed up 0.00% at 5344.39 points. The Dow Jones closed up 0.36%, or 140.53 points, at 39357.01 points. The Nasdaq closed up 0.21% at 16780.61 points. The Nasdaq 100, which measures the performance of technology stocks in the Nasdaq 100, rose 0.16%. The Nasdaq Technology Market Cap-weighted Index (NDXTMC), which measures the performance of Nasdaq 100 components in the technology industry, closed up 0.51%. The Russell 2000 index closed down 0.91%. The fear index VIX rose 1.67% to 20.71.
Most US industry ETFs fell on Monday. The global aviation industry ETF fell more than 2%, and regional bank ETFs and banking industry ETFs both fell more than 1%. The Internet stock index ETF, financial industry ETF, daily consumer goods ETF, biotech index ETF, optional consumer ETF, and medical industry ETF all fell by about 0.5%. Semiconductor ETFs, technology industry ETFs, and global technology stock ETFs all fell by nearly 1%, and energy industry ETFs fell by about 0.5%.
Of the 11 sectors in the S&P 500 index, the real estate and telecommunications sectors fell by more than 0.6%, while the consumer discretionary sector fell by the least, down 0.36%, and the energy sector rose 0.49%. The information technology/technology sector rose 0.92%.
According to Morgan Stanley analysts, investors are more concerned about economic growth than inflation and interest rates. The market hopes that economic growth or policy support will boost optimism, but there is currently no clear evidence. Due to economic uncertainty and weak corporate earnings expectations, the rise of US stocks may be limited. It is expected that the S&P 500 index will fluctuate in the range of 5000 to 5400 points, with an upper limit of only 1% higher than the current level and a lower limit of 6.4% lower.
According to Goldman Sachs data, hedge funds slightly increased their US stock holdings in the week of August 9 and preferred to buy high-quality stocks when the market fell. The net purchase of individual stocks reached a six-month high. Among the 11 major stock sectors in the United States, 9 sectors showed net buying, with information technology, consumer staples, industrial, communication services, and financial sectors having the highest net buying volume. After experiencing four weeks of net sales, fund managers quickly changed their strategies to net buy into this sector at the fastest rate in about three months.
Goldman Sachs technical analyst Scott Rubner predicts that there will be a brief opportunity to buy on dips in the US stock market at the end of August, mainly due to the reduction of selling pressure from systematic funds and the increase in share buyback activities by companies. August will be the last month he will be bearish on the stock market, and he will switch to a tactical bullish view on August 30. He also warned that the outlook for the stock market may deteriorate after September, and it is expected that there will be no obvious upward trend in the market before the fourth quarter and the US election in November.
"Tech seven sisters" showed mixed performance. Nvidia rose 4.08% as the leading gainer, followed by Apple rising 0.71%, and Microsoft rising 0.19%. However, Google A fell 0.84%, Meta, also known as the "Metaverse", fell 0.35%, Amazon fell 0.08%, and Tesla fell 1.26%.
It is worth noting that Huang Renxun, president and CEO of Nvidia, cashed out $24.9 million of his company's shares on August 8-9, selling 0.24 million shares.
Chip stocks showed different performance. The Philadelphia Semiconductor Index rose 0.73%; the industry ETF SOXX rose 0.58%; the two-times long ETF of Nvidia rose 8.39%. On Semiconductor fell 1.3%. ASML Holding ADR fell 0.89%, Qualcomm fell 0.97%, Intel fell 1.78%, while KLA Corp rose 1.44%, AMD rose 1.86%, Arm Holdings rose 0.11%, Broadcom rose 0.24%. TSMC ADR rose 0.31%, and Applied Materials rose 1%. Micron Technology rose 1.68%.
AI concept stocks showed mixed performance. Super Micro Computer, known as an "AI demon", rose 6.33%, BigBear.ai rose 11.57%, and Dell Technologies rose 2.94%. SoundHound AI, an AI voice company in which Nvidia holds shares, rose 5.95%, while Oracle rose 0.39%. Serve Robotics, an AI robot delivery company in which Nvidia holds shares, fell 18.71%, while BullFrog AI and Snowflake fell 1.94% and 1.11%, respectively. CrowdStrike fell 0.65%, C3.ai fell 1.4%, and Palantir fell 2.1%.
China concept stocks outperformed the US market. The NASDAQ Golden Dragon China Index closed up 0.61% at 5587.13 points. Among the ETFs, the KraneShares CSI China Internet ETF (KWEB) rose 1.10%, and the KraneShares China Technology ETF (CQQQ) rose 0.22%.
Among the popular China concept stocks, Dingdong Maicai rose nearly 14%, DouYu rose about 8%, Ke Holdings rose about 5.5%, New Oriental rose 3.9%, PDD Holdings rose more than 3.2%, GDS Holdings rose 2.5%, Yatoura rose more than 2%, while Qifu Technology, Tencent Music, VIPShop, Boss Direct Hire, H World Group, Alibaba, and Noah Holdings rose no more than 1.7%. Ctrip, Baidu, Sohu, and Zai Lab rose no more than 0.4%, while ZTO Express, NIO, NetEase, and Autohome fell no more than 0.9%. Ideal and Yum China fell more than 1.9%, EHang Intelligent fell about 2.3%, On Semiconductor fell more than 2.5%, Bilibili fell about 2.7%, and Xpeng fell more than 3.3%. Daqo New Energy fell more than 4.7%.
Among other stocks with significant changes due to financial reports, Ke Holdings rose more than 12.8% during the session, closing up 5.49%. The company benefited from strong expansion in the secondhand housing transactions, house rental and home improvement businesses, with second-quarter revenues of 23.4 billion yuan, a year-on-year increase of 46% in net income.
In volatile stocks, (1) Keycorp rose nearly 17% during the session, closing up 9.1%. It was previously reported that the Bank of Nova Scotia plans to spend $2.8 billion to acquire a 14.9% stake in Keycorp. (2) The Independent Investment Bank fell more than 50% during the session due to reports that the company faces a bigger risk disclosure investigation. (3) JetBlue Airways (JBLU) fell 20.66%, the biggest single-day decline since the company's U.S. IPO in mid-April 2002. Moody's and S&P both downgraded the airline's rating after it announced a bond issuance. (4) After opening lower by nearly 22%, Hawaiian Electric, a subsidiary of Berkshire Hathaway, fell more than 14%. Previously, the utility expressed doubts about "sustained operations".
Investors are focused on key economic data this week, such as U.S. and U.K. CPI, while European stocks are up and down at the close:
Market participants are watching to see if recent market turbulence has ended, with the pan-European Stoxx 600 index down 0.02%. The sectors are up and down, with the travel and leisure sectors leading the decline, down 0.8%, while oil and gas stocks are up 0.6% after OPEC cut its 2024 global oil demand growth forecast. Major regional stock indices are mostly up, with the UK index up 0.52%, the Spanish index up 0.07%, the Italian index up 0.46%, the German index up 0.02%, and the French index down 0.26%.
Geopolitical tensions are rising and U.S. bond yields continue to rise, with short-term U.S. bond yields falling more than 5 basis points:
US Bond: At the close, the yield on the 2-year U.S. Treasury bond, which is more sensitive to monetary policy, fell 5.20 basis points to 4.0110%, trading in the intraday range of 4.0797% to 4.0006%; the yield on the 10-year benchmark U.S. bond fell 3.63 basis points to 3.9035%, trading in the intraday range of 3.9647% to 3.8940%.
Investors are awaiting Wednesday's UK CPI data, with eurozone bond yields roughly flat and the 10-year UK bond yield down about 3 basis points: The 10-year German benchmark bond yield rose 0.1 basis points. The 30-year German bond yield rose 0.1 basis points, the 2-year German bond yield rose 0.7 basis points, the 10-year French bond yield rose 0.3 basis points, the 10-year Italian bond yield fell 0.2 basis points, the 10-year Spanish bond yield fell 0.1 basis points, and the 10-year Greek bond yield rose 0.9 basis points. The 2-year UK bond yield fell 1.6 basis points and the 10-year UK bond yield fell 2.8 basis points.
The U.S. dollar index rose and fell, with escalating Middle Eastern conflicts prompting investors to seek safe havens in the yen and the Swiss franc, but the yen fell overall and fell more than 1% during the session:
The U.S. dollar: The DXY, a basket of six major currencies against the dollar, fell 0.01% to 103.124 points, with an intraday trading range of 103.310-103.094 points. The Bloomberg U.S. dollar index rose 0.15% to 1247.87 points, refreshing a daily high of 1248.60 points at 00:43 Beijing time.
Non-U.S. currency markets were mixed. The euro rose 0.16% against the dollar, the pound 0.03%, and the dollar was unchanged against the Swiss franc near 0.8650, with an intraday high of 0.8712.
On the news front, Brown Brothers Harriman (BBH) believes that the market's reaction to weak U.S. economic data has been exaggerated. It is expected that the Fed will adopt a more conservative interest rate cut strategy than other central banks, which will help stabilize the dollar exchange rate. The release of economic data this week is expected to show that the U.S. economy is actually relatively healthy, which may prompt traders to reassess their expectations of Fed policy, and the dollar is expected to rebound further.
Yen: The dollar rose 0.39% against the yen to 147.19 yen, with a daily high of 148.22 yen at 21:33 Beijing time, showing a trend of rising and falling throughout the day. The euro rose 0.52% against the yen to 160.89 yen; the pound rose 0.46% against the yen to 187.880 yen.
Offshore RMB: Offshore RMB (CNH) fell 40 points against the U.S. dollar to 7.1784, trading in a range of 7.1676-7.1856 throughout the day.
Cryptocurrencies show mixed movement. The largest market cap leader, Bitcoin, fell 3.13% to $59,080.00 in the afternoon trading range of $60,910.00-$57,945.00. The second largest, Ethereum, rose 3.37%, reporting $2,687.50 at the end of the day.
Investors are closely watching the situation in the Middle East. The crude oil rose for the fifth day in a row and soared more than 4%, surpassing the psychological level of 80 US dollars.
US crude oil: WTI September crude oil futures rose $3.22, or 4.19%, to close at $80.06 per barrel, approaching the closing price of $81.30 per barrel on July 18 (based on the recovery of the 200-day moving average last Friday, August 9), rising above the 50-day and 100-day moving averages. In the past five trading days, it has rebounded by more than 9.76%. Judging from the performance in the session, US crude oil remained on an upward trend throughout the day, and the US stock market reached a daily high before closing, rising by more than 4.3% to close to $80.20 per barrel.
Brent crude oil: Brent crude oil futures for October rose $2.64, or more than 3.31%, to close at $82.30 per barrel, approaching the closing price of $83.93 per barrel on July 18, rising by more than 7.86% since August 5. Judging from the performance in the session, Brent crude oil and WTI rose steadily throughout the day, and the US stock market reached a daily high before closing, rising by more than 3.4% to break through $82.40.
According to CCTV News, on August 12 local time, John Kirby, a spokesman for the US National Security Council, said that Iran may launch a "significant" attack on Israel earliest this week. Kirby said US President Biden had already called French, German, Italian, and British leaders to discuss the escalating tensions. At the same time, the Chief of General Staff of the Israeli Defense Forces approved a combat plan on different fronts and demanded that the military be on high alert.
On Monday, OPEC lowered its forecast for global oil demand growth in 2024 by 0.135 million barrels per day to about 2.11 million barrels per day. Although the adjustment is not significant, it is the first time since July 2023 that OPEC has lowered its relatively optimistic forecasts since its first release in 2024. The decision whether to continue the scheduled production expansion plan from October will be made in the next few weeks.
Natural gas: U.S. September natural gas futures rose more than 2.14% to $2.1890 per million British thermal units. European natural gas surged, and the TTF Dutch natural gas futures fell 0.82% to 39.800 euros per megawatt hour, while ICE UK natural gas futures fell 1.32% to 97.350 pence per calorie, but both hit the highest level since early December last year during the session.
The tense situation in the Middle East has intensified, and the safe-haven demand has pushed the gold price up more than 1%, approaching a 10-day high:
Gold: COMEX December gold futures rose 1.55% to $2,512.00 per ounce at the end of the day, approaching the historical high of $2,537.70 on July 17. Spot gold hit a daily low of $2,423.90 in the Asia-Pacific market early in the morning and then fluctuated steadily, refreshing this year's high of $2,473.06 per ounce before the US stock market closed, rising by nearly 1.7% and breaking through $2470.
Silver: COMEX September silver futures rose 1.67% to $28.050 per ounce. Spot silver fell more than 0.8% in the Asian market early in the morning and then continued to rise steadily. Before the US stock market closed, it refreshed the daily high and rose more than 2.1% to break through $28, and finally rose 1.89% to $27.9780 per ounce.
London industrial base metals generally rose. The economic barometer "Dr. Copper" rose 1.80% or $160 to $9026 per ton. London zinc rose $6, London tin rose more than 0.84%, and London aluminum rose $4, London nickel rose by about 1.27%, and London lead rose by $10.
International copper, Shanghai copper, Shanghai zinc, Shanghai lead, and alumina rose by more than 1% in the night market.
Unlike the overall high-frequency oscillations of precious metal prices, the Shanghai copper has fallen from a high level since mid-to-late May this year due to rising expectations of economic recession in Europe and the United States and the industry's off-season. It has a gold-copper deviation pattern. After experiencing a stage of continuous decline, the current market tends to be bullish on the future copper price.
Chicago soybean futures hit a four-year low, falling more than 1.4% to break through the psychological threshold of $10 per bushel, and the US Department of Agriculture predicts that the yield per acre of soybeans in 2024 will hit a new record high.
Editor/Jeffy