Morning Brew August 24 2023

Good Morning,

Nvidia delivered great results, a strong outlook and a massive share buyback, sending the shares over USD 500 in the aftermarket. It will be an interesting day. Indexes had risen yesterday and are continuing this morning. The Dow ended up 0.5%, the S&P 500 up 1.1%, Nasdaq up 1.6%.

PMI had come in rather low internationally sparking hopes for hawkish central banks. Rates fell off the highs and precious metals had a blast. Silver rose to 24.35 before taking a break to 24.23 now, Gold is at 1921.50, more than 30 USD above the low and back above the 200d simple moving average.

EURUSD is approaching the 1.09 again it seems – currently trading at 1.0870 it found support on the 200day SMA yesterday. The USD Index fell to 103.33 testing the 200 day line

The 10 Year yield fell to below 4.20 after testing 4.35. the 2 year is below 5% again

There is no agreement on expanding BRICS yet and the possibility of a single BRICS currency backed by Gold has been very quiet.

Yesterday, Yevgeny Prigozhin was on board a plane which crashed north of Moscow, apparently there were no survivors.

What will drive the market from here?

Technicals as pointed out above, the Turkish Rate decision, US initial jobless claims and Durable goods, NVIDIA Price action and comments out of Jackson Hole even if the main event is tomorrow.

John Hardy wrote up Jackson Hole Scenarios:

1. The ”boring” scenario would be a discussion of the above without any solid takeaways or hints on either longer term implications or what the Fed is set to deliver at the September FOMC meeting. Market outcomes: the US dollar and other currencies will revert to their usual correlations with risk sentiment/China and yield direction.
2. Lowering interest on bank reserves to zero would help stave off a rising rate spiral by forcing banks to pay less on deposits, thus both lowering bank earnings and effectively taxing depositors with “real losses” via an inflation tax as banks can’t offer attractive yields on deposits. This would be likely very bad for banks and possibly economic growth, but could also mean lower long yields – so most bullish for the yen?
3. The Fed could take its longer run Fed policy rate projections higher, The hawkish surprise on this front would be language hinting that the September FOMC meeting will deliver a bump in the longer run rate projections. Market outcomes: A rise in the longer run rate projectionswould be the scenario most likely to deliver USD strength and risk-off.

Data:
Thursday August 24

Start: The 2023 Economic Policy Symposium in Jackson Hole  "Structural Shifts in the Global Economy," Aug. 24-26.

Data: Turkey Rate decision, US Durable Goods orders, Initial jobless claims

Earnings CRH PLC, AIA Group, Toronto-Dominion, Workday Inc, Marvell Technology, Royal Bank of Canada

Friday August 25

Data: Japan CPI; PPI, DE GDP & IFO, University of Michigan

Earnings: China Merchants Bank China Petroleum & Chemical Zijin Mining Group