Traders Market Weekly: Inflation and Bear Market Rallies

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    Bitcoin lower after a relatively steady weekend on approach to $23200.

    ETH is becoming a bit of the flavor of across crypto, threatening to displace BTC in usability and popularity.


    The main market sensitivities over the coming week will be around nonfarm payrolls, expected rate hikes by four central banks.

    Forecasts start at 290k with Scotia bank for July’s gain in nonfarm payrolls and with stable unemployment rate at 3.6%. If that’s anywhere in the right ballpark then it will be taken as a further sign of near-term resilience while saying nothing about where the economy is headed since jobs are a contemporaneous indicator and the unemployment rate is typically a lagging indicator. The drivers of the call are pretty shaky though.

    Small business hiring sentiment gauges have recently been weakening (chart 2). Job vacancies have slightly declined and it’s probably reasonable to think that some of the ones that are still up are zombie postings with less of a desire by employers to fill them as the economy softens (chart 3). Consumers are indicating that jobs are not as plentiful as they were a few months ago (chart 4). We won’t get the latest employment subindices for either the ISM-manufacturing or ISM-services gauges until next week but both have been deteriorating for several months and have pushed into contraction territory


    US markets face several other readings beyond the key payrolls report.

    ISM readings on the manufacturing (Monday) and service (Wednesday) sectors will provide fresh survey-based evidence on growth, supply chain challenges and inflationary pressures in updates for July.
    The June trade deficit probably narrowed to just under US$80 billion (Thursday) given advance merchandise figures and an assumed fairly stable services surplus. That could reverse this year’s deterioration and put it back toward December’s level partly as oil prices have pulled off their peak.
    Factory orders (Wednesday) should follow the 1.9% jump in durable goods orders at a more moderate pace given the prior month’s large jump in nondurables that might be hard to repeat.
    Vehicle sales are expected to post a modest rise in July’s tally on Tuesday based upon industry guidance.
    JOLTS job openings and quit rates during June could offer further insight into payrolls (Tuesday) and so could Thursday’s weekly claims.
    About 150 S&P500 firms will release earnings but this phase of the earnings season is transitioning away from the knock-out punches. Loews, Caterpillar, Moderna and Starbucks will be among the names.


    Dead cat bounces happen frequently in real bear markets.

    From March 2000 to April 2002, the Nasdaq lost 78 per cent. But during that time stocks rallied more than 10 per cent on 11 occasions, with one rally adding 45 per cent across 15 weeks.


    Friday’s employment cost index in the US rose 5.1 per cent in the June quarter. The Fed will want to be sure the labour market is cooling before it can breathe easier on inflation.

    The Fed still has plenty of work to do on inflation. The market sees US rates getting to about 3 per cent and then falling as the central bank tries to support a weakening economy.


    Watch factors other than earnings:

    Monday – Aug. 1

    All Day – Data watch for Macau GGR data, China monthly deliveries, Class 8 truck orders, firearm background check data.
    All Day – DOJ trial to block Change Healthcare’s (NASDAQ:CHNG) planned sale to UnitedHealth (UNH) scheduled to start.
    All Day- Day 2 of Alzheimer’s Association International Conference in San Diego. The conference takes place from Sunday through Thursday.

    Tuesday – Aug. 2

    All Day – The New York Fed will release its Q2 Household Debt and Credit report.

    Wednesday – Aug. 3

    All Day – Arcellx (ACLX) IPO lockup.
    All Day – OPEC+ ministers, including from Saudi Arabia and Russia, will hold a video conference to make a decision on production policy.
    7 a.m. – July MBA Mortgage Applications.

    Thursday – Aug. 4

    Premarket – Intercontinental Exchange (ICE) is scheduled to report Q2 results. ICE agreed to buy Black Knight (BKI) for $13 billion in early May.
    5:30 p.m. – Tesla (TSLA) shareholder meeting.

    Friday – Aug .5

    All Day – Russian President Vladimir Putin scheduled to meet with Turkish President Recep Tayyip Erdogan in Sochi, Russia.
    8:30 a.m. – The U.S. jobs report for July is expected to show 250K jobs were added to the economy during the month and the unemployment rate held steady at 3.6%.
    3 p.m. – The Federal Reserve releases June consumer credit numbers.


    Equity indices in the Asia-Pacific region began the week on a higher note.

    —Equity Markets—

    Japan’s Nikkei: +0.7%
    Hong Kong’s Hang Seng: +0.1%
    China’s Shanghai Composite: +0.2%
    India’s Sensex: +1.0%
    South Korea’s Kospi: UNCH
    Australia’s ASX All Ordinaries: +0.6%


    China’s Manufacturing PMI dipped back into contraction in the July reading,
    Japan’s Manufacturing PMI expanded for the 18th month in a row
    South Korea’s Manufacturing PMI fell into contraction for the first time in 22 months.
    The Chinese government is reportedly planning to seize undeveloped land from troubled developers.
    Banks in China are facing up to $350 bln in potential losses related to the mortgage boycott and stalled development projects.
    House Speaker Pelosi reportedly plans to visit Taiwan on Thursday.
    China’s July Manufacturing PMI 49.0 (expected 50.4; last 50.2) and Non-Manufacturing PMI 53.8 (expected 53.9; last 54.7). July Caixin Manufacturing PMI 50.4 (expected 51.5; last 51.7) o South Korea’s July trade deficit $4.67 bln (expected deficit of $4.06 bln; last deficit of $2.58 bln). July Imports 21.8% yr/yr (expected 20.7%; last 19.4%) and Exports 9.4% yr/yr, as expected (last 5.2%). July Nikkei Manufacturing PMI 49.8 (last 51.3)
    India’s July Manufacturing PMI 56.4 (expected 53.8; last 53.9)
    Hong Kong’s Q2 GDP 0.9% qtr/qtr (last -3.0%); -1.4% yr/yr (last -4.0%)
    Australia’s July AIG Manufacturing Index 52.5 (last 54.0), July Manufacturing PMI 56.2 (last 55.7), and July MI Inflation Gauge 1.2% m/m (last 0.3%)
    New Zealand’s June Building Consents -3.0% m/m (last -0.5%)


    Major European indices trade on a mostly higher note while Spain’s IBEX (-0.2%) underperforms.

    Equity Markets—

    STOXX Europe 600: +0.3%
    Germany’s DAX: +0.5%
    U.K.’s FTSE 100: +0.5%
    France’s CAC 40: +0.3%
    Italy’s FTSE MIB: +1.5%
    Spain’s IBEX 35: -0.2%


    Eurozone’s Manufacturing PMI returned into contractionary territory for the first time in two years in the July reading.
    The European Central Bank noted that eurozone output could decrease by 0.8% in the medium term due to higher oil prices.
    There are growing expectations that Liz Truss will be the next prime minister of the U.K.


    Eurozone’s June Unemployment Rate 6.6%, as expected (last 6.6%). July Manufacturing PMI 49.8 (expected 49.6; last 52.1)
    Germany’s June Retail Sales -1.6% m/m (expected 0.2%; last 1.2%); -8.8% yr/yr (expected -8.0%; last 1.1%). July Manufacturing PMI 49.3 (expected 49.2; last 52.0)
    U.K.’s July Manufacturing PMI 52.1 (expected 52.2; last 52.8)
    France’s July Manufacturing PMI 49.5 (expected 49.6; last 49.6)
    Italy’s June Unemployment Rate 8.1%, as expected (last 8.2%). July Manufacturing PMI 48.5 (expected 49.1; last 50.9)
    Spain’s July Manufacturing PMI 48.7 (expected 50.2; last 52.6)


    Boeing (BA 167.20, +7.89, +4.9%): St. Louis workers canceled planned strike; US has approved plan to inspect 787 jets in order to resume deliveries.
    Target (TGT 166.56, +3.18, +1.9%): upgraded to Overweight from Equal Weight at Wells Fargo
    The Southern Company (SO 76.81, -0.08, -0.1%): Bloomberg reports that CEO Tom Fanning will soon announce retirement
    EVO Payments (EVOP 32.75, +5.41, +19.7%): beats by $0.03, reports revs in-line; EVO Payments to be acquired by Global Payments (GPN) for $34.00 per share
    Jacobs Engineering Group (J 141.00, +3.70, +2.6%): beats by $0.06, reports revs in-line; guides Q4 EPS below consensus


    The S&P 500 futures down 16 points and are trading 0.5% below fair value.
    The Nasdaq 100 futures are down 39 points and are trading 0.5% below fair value.
    The Dow Jones Industrial Average futures are down 78 points and are trading 0.1% below fair value.


    Dow 32,798.40 -46.73 -0.14%
    S&P 500 4,118.63 -11.66 -0.28%
    Nasdaq 12,368.98 -21.71 -0.18%
    GlobalDow 3,645.04 9.13 0.25%
    Gold 1,788.40 6.60 0.37%
    Oil 93.82 -4.80 -4.87%


    and be of good cheer even in bad economic times as reflected in one of greatest albums all time 🙂

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