Macro: Sandcastle economics
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Morning Brew August 7 2024
Erik Schafhauser
Senior Relationship Manager
Summary: Dead Cat Bounce?
Good morning all,
Markets are calming down and looking for the next impulse.
10-year yields rose to 3.90% as the expectation of rate cuts becomes more realistic. We now have 40 BPS cuts priced in for September. Equities rose broadly yesterday with the Dow up 0.8%, the S&P 500 and the Nasdaq up 1%, and the Russell gaining 1.25%. Overnight, we are seeing a further recovery: the Japan 225 is now at 35,070, the GER40 at 17,500, the US500 at 5,275, and the US Tech 100 NAS at 18,220.
Uber beat expectations and rose by 10% yesterday. In Europe, Novo Nordisk disappointed in earnings and outlook; the shares' reaction will be very interesting. Sony beat estimates with a 10% rise in profits.
The USD rose across the board and is at 1.0906 against the Euro, 1.27 against GBP, 147 against the Yen, and 0.8575 against the CHF. The Bank of Japan's Shinichi Uchida stated the central bank won't hike interest rates when markets are unstable. The Japanese Prime Minister called on the Japanese to invest more in stocks. Gold and silver are looking for clues at 2,390 and 27.05, respectively. Ole is optimistic longer-term, but we may see short-term nervousness.
We saw interesting data out of China overnight where exports disappointed significantly while imports exceeded expectations by far. Exports rose 7% against an expectation of +9.7%, while imports rose 7.2% against a forecast of 3.5%. This means the trade surplus came in 15% lower than expected. The higher imports are attributed to chip imports ahead of increased sanctions. Oil imports were at their lowest since 2022.
Kamala Harris picked her running mate to be Minnesota Governor Tim Walz; the first polls for the team will be interesting to see. Walz could appeal to the WASP community as an older white veteran.
Event risk remains with the Middle East where Hamas appointed Yahya Sinwar to the top position.
Traders remain nervous but hopeful, and we can continue to see sharp moves on any news. It remains to be seen if the Monday panic was just that or the beginning of a paradigm shift. With little top-tier economic data, there can be a lot of back and forth. If you are a trader, enjoy the volatility. Investors should remain calm, consider their long-term view, and act accordingly.
Key readings:
Insights into this week's US Treasury refunding: 3-, 10-, and 30-year overview.
DAX and EuroStoxx50 selling pressure likely to continue. Here are the key levels to watch
Wednesday
- Data: Germany Industrial Production, China Trade
- Earnings: Shopify, Walt Disney, Novo Nordisk, Sony, Robinhood
Thursday
- Data: US Initial Jobless Claims
- Speakers: Barkin
- Earnings: Lilly, Paramount, The Trade Desk
Friday
- Data: China CPI, PPI
- Earnings: Nikola
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