Morning Brew August 23 2024

Good morning,

A higher-than-expected US PMI triggered a bout of nervousness yesterday afternoon. The Composite came at 54.1 vs an expectation of 53.5. Indexes dropped across the board and the USD gained as US Yields rose.

Tech-Stocks performed worst with Nvidia at -3.7% and Tesla -5.65%. The USD Index rose from 100.90 to 101.58 Gold and Silver came under pressure trading as low as 2478 and 28.78 before gaining to 2495 and 29.26 again.

Indexes also recover this morning, the US500 is 5591, US 30 40800 and the US Tech100 NAS 19607. In Europe the GER40 is at 18500 while the Japan 225 is 38370.

While there are many news worth looking at, traders focus today will be on Jerome Powell`s Speech today at 16:00 CET.

Right now, the expectation is that there is a 75% chance of a 25 basis point cut in September with the  other 25% for 50 Basis points, the year-end Rate is being traded at -98 Basis points acc to LSE data. Any shift in this expectation will be what moves markets. A dovish tone will boost equities especially tech, weigh on the USD and US Yields, if he is more hawkish than expected, yields will rise and the USD gain value.

While I doubt Powell will want to cause too much irritation, it is one of those situations where one should carefully consider what happens when one is wrong and not only when one is right – we have seen quite a few Fridays with extraordinary volatility sparked by news that did not appear too important.

Next to Powell`s speech, we are expecting the Canadian Retail Sales and US New Home sales, both will only really significant if there is a severe deviation form the expectation.

• Other key topics are
  US Election: Harris acceptance speech went well and the next polls will be interesting. It is time to start considering which assets will perform best under a Harris/Walz Administration.
• Nestle has announced Laurent Freixe will take over as CEO on September 1
• The Bank of Japan came with hawkish tones on a CPI of 2.7%.
• Canada and North America may be facing supply chain issues on labor disputes at railroads.
• China and the EU seem to be heading for trade disputes
• Russia and Ukraine remain a severe risk
• An EY study shows the car industry to be under pressure globally.

Next week we are looking forward to US and EU Inflation data as key inputs into the September rate decisions and maybe most interesting will be the NVIDIA earnings on the 28^th.

Friday
- Data Japan CPI Canada Retail Sales, US New Home  Sales, Canada Retail sales

- Earnings:  China Construction Bank, China Petroleum
- Speakers: 16:00 Powell speaks at Jackson Hole