Morning Brew August 26 2024

Good morning,

Powell delivered the message the market had hoped for, stating the time has come to lower rates and that inflation was under control. The key question in traders eyes is now if we see a 50 or 25 basis point cut on September 18^th to achieve a soft landing and avoid a recession. At the moment we are trading 60/40 in favor of  25 bps, the year end is seen at -105 bps.

Equities celebrated, the large indexes rose between 1% and 1.5%, the Russel 3.2%  Volumes were still below the 20 day average but above 10 billion shares again.

The week brought gains of 1.4% for the S&P 500 and the  Nasdaq, the Dow 1.3%. The S6P 500 and the Dow are within reach of new records, both are less than 1% from their all time high.

10 Year yields fell to below 3.8% and the USD index is trading at the last support before the psychologically important 100. EURUSD ended the week at 1.1190 with the next key level around 1.1250, USD JPY 144.37 and GBPUSD 1.32, highest since 2022. Oil gained over the weekend on worries of rising tension in the middle East, US Crude is trading 0.5% higher, Gold and Silver are little changed over the weekend at 2510 and 29.75. EURCHF and USDCHF are 0.9475 and 0.8475. Bitcoin is testing the 64k

We are heading into another important week that will culminate in the PCE Data on Friday – a key input for the Fed Meeting in September. Friday is also the last trading day of August, and we may see position adjustments.

Key topics this week will be:

• Middle East – violence flared up between Israel and Hezbollah yesterday and a ceasefire is becoming less likely.
• The Russia/Ukraininan conflict remains hot with Ukrainian troops in Russia.
• Economic Data with Consumer Conficence, Nvidia Earnings and the PCE the highlights.
• Trade friction with China
• Telegram founder Durov has been arrested
• Will the USD weakness persist?
• How will the polls react to the DNC last week and the endorsement of Donald Trump by Robert Kennedy.

Trade safely!

Key readings by our strats team:

Peter`s Equity Summary: Nvidia earnings will show another quarter of explosive growth

• Nvidia's strong AI-driven growth: Nvidia is expected to report a significant revenue increase of 113% YoY for FY25 Q2, driven by high demand for its AI chips (Hopper H100 and H200). Analysts anticipate Nvidia will surpass consensus estimates and possibly raise guidance for fiscal Q3, indicating continued strong momentum in the AI industry.
  
  
• Potential political and economic impact of a "Blue Sweep": Although still considered unlikely with a 10% probability, a "Blue sweep" in the upcoming elections could lead to corporate tax hikes, negatively impacting equity markets and valuations. A Harris victory with a split Congress remains the more probable outcome, affecting fiscal stimulus extensions in 2025.
  
  
• Growing momentum for weight-loss drugs: Eli Lilly's Zepbound study shows promising results in preventing diabetes, reinforcing the growing demand for GLP-1 weight-loss drugs. This success could lead to more government and insurance support, further boosting the obesity drug market alongside AI and defense stocks.

Ole`s Commodities weekly: Metal strength counterbalancing weakness in the energy and grain markets

• A softer dollar and lower US Treasury yields supported risk appetite ahead of Powell's Jackson Hole speech
• The industrial metal sector, led by aluminum, turning higher but improved fundamentals still needed
• Gold's continued surge underscores a world out of balance
• Falling fuel prices highlight crude's current demand challenge
• Persistent supply constraints keep cocoa prices elevated

Charu`s FX Update:

• USD: Downside bias could extend, if risk sentiment continues to hold up
• EUR: Inflation print is unlikely to bring aggressive rate cut expectations
• JPY: Three-legged tailwinds from hawkish Ueda, dovish Powell and Mideast escalation
• GBP: Nothing in pipeline to question BOE’s cautious easing stance
• AUD: CPI and retail sales to test RBA’s rate cut delay resolve
• CAD: BOC rate cuts could remain relatively more aggressive

Monday
- Data  CH Nonfarm Payroll, IFO Index, US Durable goods orders
- Earnings: Petrochina, PDD Holdings,
- Speakers: Mary Daly

Tuesday
- Data Japan PPI, Germany GDP, US Consumer confidence,
- Earnings: BHP, Bank of Montreal, Bank of Nova Scotia
- Speakers:
Wednesday- Data AU C% PI,
- Earnings: CNOOC, BYD, Meituan, , Bank of Communications Royal Bank of Canada NVIDIA Corp Salesforce Crowdstrike

Speakers: Christoph Waller

Thursday
- Data Consumer Confidence, Germany Inflation, US GDP, Initial Jobless claims.
- Earnings Bank of China China Merchants Bank China Life Insurance Canadian Imperial Bank Dell Technologies, Marvell Technology Autodesk
Speakers: Raaphael Bostic
Friday
- Data Japan CPI (Tokyo) AU retail Sales, CH KOF Indicator, DE Unemployment, EU HICP, US PCE, Canada GDP, University of Michigan

- Earnings:  Agricultural Bank of China China Construction Bank China Shenhua Energy China Yangtze Power Postal Savings Bank of China

Expiries:

Physically Settled Futures

OJU4 will expire on 26/aug 1215 hrs

RCU4 will expire on 23/aug 0900 hrs

FLGU4 will expire on 28/aug 1500 hrs

NGU4 will expire on 27/aug 1930 hrs

QGU4 will expire on 27/aug 1830 hrs

TTFMU4 will expire on 28/aug 0900 hrs

QIU4 will expire on 28/aug 1725 hrs

QGU4 will expire on 27/aug 1830 hrs

MHGU4 will expire on 28/aug 1500 hrs

HRCQ4 will expire on 27/aug 1730 hrs

Expiring CFDs

10YUSTNOTESEP24 will expire on 28/aug 1500 hrs

30YUSTBONDSEP24 will expire on 28/aug 1500 hrs

COCOANYSEP24 will expire on 22/aug 1500 hrs

COPPERUSSEP24 will expire on 28/aug 1500 hrs

CORNSEP24 will expire on 28/aug 1500 hrs

GASOLINEUSSEP24 will expire on 28/aug 1500 hrs

HEATINGOILSEP24 will expire on 28/aug 1500 hrs

SILVERSEP24 will expire on 28/aug 1500 hrs

SOYBEANMEALSEP24 will expire on 28/aug 1500 hrs

SOYBEANOILSEP24 will expire on 28/aug 1500 hrs

SOYBEANSSEP24 will expire on 28/aug 1500 hrs

WHEATSEP24 will expire on 28/aug 1500 hrs