Articles

Goldman CEO David Solomon on CNBC says:

• Environment is actually okay for bank activity
• there are places where it’s exhilarating
• the economy is still in great shape
• The likely scenario is that the Fed navigates with a soft landing
• COnsumer is still healthy especially in the service sector.
• I found the CEO sect at consumer seminar is quite positive on the economy
• See 2 maybe 3 cuts into the fall
• My view has always been very data dependent.
• The consensus is in the soft landing camp
• There is a case to be made for 50 basis points based on softer labor market
• My expectation is for 25 basis point cut.
• We have made real progress on inflation
• There is a risk of slow growth on inflation but not his base case scenario.
• Going to see material improvement and investment banking activity. A bigger Improvement in capital markets activity and less improvement in M&A. Recovery has been a little slower in the recovery.
• I don’t think unwinding the credit card business has proven to be messier then we thought, and going to see that there is a material improvement in investment banking activity.
• Nvidia’s Jenson’optimism on the pace of innovation is quite optimistic and compelling.
• Nvidia is a super company, but don’t call “balls and strikes” on the valuation of the company.
• The report on policy issues from Trump and Harris and projected its impact on growth impact. THe impact was only 0.2%.

This article was written by Greg Michalowski at www.forexlive.com.

Japan Business Survey Index for Q3 2024: 4.5%

• prior -1.0%

Earlier data:

• Japan PPI (August) -0.2% m/m (expected +0.0%) and +2.5% y/y (expected +2.8%)

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Japan’s Quarterly Business Survey Index (BSI) measures the sentiment of business executives regarding the economic conditions in their industries. It is compiled by Japan’s Ministry of Finance and Cabinet Office through surveys of companies across various sectors, including manufacturing and non-manufacturing.

Here’s a breakdown of the key features:

• BSI Formula: The BSI is calculated as the percentage of companies that report an improvement in business conditions minus the percentage of companies that report a worsening. Positive values indicate optimism, while negative values reflect pessimism.

• Frequency: It is released quarterly and provides insights into the business outlook for the upcoming quarter.

• Key Indicators: It includes business conditions, production capacity, employment, and capital investment plans. The BSI is often used to predict economic trends and business cycles.

• Impact: A higher BSI suggests improved confidence among businesses, which may lead to increased investments and hiring, signaling economic expansion.

This article was written by Eamonn Sheridan at www.forexlive.com.

-0.2% m/m for a miss

• expected 0.0%, prior 0.3%

2.5% y/y, also a miss

• expected 2.8%, prior 3.0%

Falling m/m wholesale inflation and lower than previous y/y. The rising yen may well have played a role in these results – check out the graph on the right, the import index.

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The Producer Price Index (PPI) in Japan is also known as the Corporate Goods Price Index (CGPI)

• its a measure of the average change over time in the selling prices received by domestic producers for their output
• is calculated by the Bank of Japan

Unlike the Consumer Price Index (CPI), which measures the price change that consumers see for a basket of goods and services, the CGPI focuses on the change in the prices of goods sold by companies.

The PPI reflects some of cost pressures faced by producers

• its based on a basket of goods that represents the range of products produced within the Japanese economy, including items such as:
  • raw materials like metals and chemicals
  • semi-finished goods
  • and finished products
  • different weights are assigned to each category within the index based on its contribution to the overall economy.
• it does not account for the quality improvements in goods and services over time, which might lead to overestimation of inflation
  • additionally, it reflects only the prices of domestically produced goods, leaving out the impact of imported goods

The PPI can be used as a guide to inflationary pressures in the economy:

• If producers are facing higher costs, they may pass these on to consumers, leading to higher consumer prices.

This article was written by Eamonn Sheridan at www.forexlive.com.

UK Incomes Data Research survey of wage growth:

• median pay
  settlement awarded by major employers dropped to 4.0% in the
  three months to July, the lowest since August 2022 and down from
  4.8% in the three months to June

Subdued wage growth, if a 4& quarterly gain can be so described, keeps the Bank of England on track for further rate cuts.

Wednesday brought earlier wages data from the UK:

• UK July ILO unemployment rate 4.1% vs 4.1% expected

This article was written by Eamonn Sheridan at www.forexlive.com.

Data from the Royal Institution of Chartered Surveyors (RICs) in the UK, its house price balance (this measures the difference between surveyors seeing falls and rises in house prices) for August 2024.

Came in at +1, the strongest since January 2020

• expected -14
• prior -18

GBP is little changed:

This article was written by Eamonn Sheridan at www.forexlive.com.

The day after the presidential debate in the US, Russia’s Putin is getting his shot in by saying maybe Russia should think about export restrictions like uranium, titanium, and nickel important commodities exported from Russia.

Trump said that he would solve the Ukraine- Russia conflict before he took office in January if elected. Harris said that Trump’s ego makes him think he is good buddies with dictators and that they play him by stroking his ego.

This article was written by Greg Michalowski at www.forexlive.com.

Card spending data covers around 68% of core retail sales in NZ.

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Card spending

Data for purchases made in New Zealand on debit, credit and store cards. Card spending data covers around 68% of core retail sales in NZ. Its used as the main retail sales indicator for the country.

This article was written by Eamonn Sheridan at www.forexlive.com.

NZD little changed

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The New Zealand Food Price Index (FPI) is a measure of the changes in the average price of food items sold in New Zealand.

• calculated and published monthly by Statistics New Zealand
• the FPI tracks the prices of a basket of food items that represent the typical spending patterns of New Zealand households
• the FPI is an important indicator of inflation in New Zealand, as food prices account for a significant portion of household expenditure

This article was written by Eamonn Sheridan at www.forexlive.com.

Kim Jong Un grabbing the headlines again

This article was written by Eamonn Sheridan at www.forexlive.com.

Earlier this week Arno had the intitial round of numbers showing slipping China car sales:

• China August passenger car sales down 1.1% y/y to 1.92 mln CPCA reports

Follow-up numbers from the China Association of Automobile Manufacturers (CAA) were released on Wednesday. These were ven worse, showing that car sales in August dropped by 5.0% y/y

• July was -5.2%
• June was -2.7%

Sales of ICE vehicles plunged, sales of new energy vehicles (NEVs), including battery EVs and plug-in hybrids, surged.

This article was written by Eamonn Sheridan at www.forexlive.com.

Info via Bloomberg of jumbo-sized interest rate cuts to come from the Federal Open Market Committee (FOMC).

Citi were expecting a 50bp Fed Funds cut on September 18 but after the CPI data on Wednesday trimmed that back to now forecasting a 25bp rate cut:

• maintain their projection for 125bp of rate cuts by year end, which translates now to 50bp cuts on November 7 and 50 again on December 18

This article was written by Eamonn Sheridan at www.forexlive.com.

• Snapback day. Major indices close higher after trading sharply lower earlier in the day.
• Crude oil futures settled at $67.31
• Fed IG said Atlanta Fed Pres. Bostick violated Fed rules on trading
• US 30 year mortgage rates lowest in 20 months at 6.11%
• The US treasury auctions of $39 billion of 10 year notes at a high yield of 3.648%
• Goldman Sachs Solomon on CNBC. Sees 2 maybe 3 cuts. Could see possibility of 50 BP cut
• Weekly US EIA crude inventories 0.833M build vs build of 0.987M estimate
• Geopolitics: Russia’s Putin says maybe Russia should think about export restrictions
• Reuters Poll: BOE to cut bank rate by 25 basis points one more time this year
• Citigroup sees a 25 bp rate cut in September down from 50 bps prior to CPI
• Kickstart the FX trading day on Sept 11 w/a technical look at the EURUSD, USDJPY & GBPUSD
• Remembering those who died on September 11, 2001
• US August CPI 2.5% YoY versus 2.6% expected
• The JPY is the strongest and the NZD is the weakest as the NA session begins
• ForexLive European FX news wrap: Yen firms as yields fall, US CPI up next
• US MBA mortgage applications w.e. 6 September +1.4% vs +1.6% prior

US CPI was released at 8:30 AM ET and the core measure disappointed with a 0.3% gain (estimate 0.2%). The year on year for came in at 3.2% as expected and unchanged from last month. On a more positive spin, the headline number came in as expected at 0.2% (but unrounded below 0.2%). The YoY dipped to 2.5% from 2.9% last month.

Real weekly earnings rose by 0.5% versus -0.2% which is indicative of increased productivity.

The markets initially reacted negatively to the data with yields moving higher and stocks moving lower. The US dollar also extended to the upside.

At session lows the Dow industrial average was down -740 points with all 30 down stocks negative on the day, but is closing the day up 124.75 points.. The NASDAQ index fell -238 points at session lows or -1.40%, but is closing the day higher by 2.17% up 369.65 points.

US yields are ending the day higher but off their highest levels:

• 2 year yield, 3.649%, +4.1 basis points
• 5 year yield 3.450%, +2.3 basis points
• 10 year yield 3.661%, +1.7 basis points
• 30 year yield 3.976%, +2.2 basis points

The US treasury successfully auctioned off 39 thing dollars of 10-year bonds with a negative tale of -1.4 basis points. For the second auction in a row, the demand was buoyed by strong international demand.

Looking at the strongest to the weakest of the major currencies, the AUD is the strongest while the CHF is the weakest. The USD is sitting in the middle of the range as the market adjusts to a Fed that will cut but not by 50 bps at the meeting next week.

The AUD was supported by the risk-on flows. The CHF lost some of its safety flows and is extending above the 38.2% retracement of the move down from the mid-August high. That level comes in at 0.8517. The current price is trading at 0.8525.

Tomorrow, US PPI will be released with expectations of 0.1% for the headline and 0.2% for the core reading. Many more important would be the initial jobless claims as the market since be content that inflation is fairly under control. The concern is a deterioration in the employment picture. The initial jobless claims are expected to remain unchanged 227K. Also of importance tomorrow will be the ECB rate decision at 8:15 AM ET.

This article was written by Greg Michalowski at www.forexlive.com.