Daily Market Recap – August 13, 2024

Pressure on prices from U.S. chiller producers has fueled speculation of a Fed rate cut and inspired risk-taking in markets.

How did your favorite assets trade on Tuesday?

Let’s take a look at the main headlines that caught the eye:

Securities:

• Westpac: Australian Consumer Sentiment The index improved to 85.0 from 82.7 in August as fears of further RBA rate hikes eased
• Australian Wage and Price Index for Q2 2024: 0.8% qoq (0.9% forecast and previous)
• NAB: Australian Business Confidence went from a downwardly revised ratio of 3 to 1 in July
• Preliminary orders for machine tools in Japan rose another 8.4% year-on-year in July after rising 9.7% year-on-year in June
• Evolution of the number of asylum seekers in the United Kingdom for July: 135,000 (14.5 thousand forecast, 36.2 thousand previously); unemployment rate fell from 4.4% to 4.2% in June; average earnings slowed from 5.7% to 4.5% in the three months to June
• The International Energy Agency (IEA) has kept its forecast for global oil demand stable in 2024, but lower in 2025 due to weak prospects from China
• German ZEW Economic Sentiment Index for August: 19.2 (32.6 expected, 41.8 previous)
• Eurozone ZEW Economic Sentiment Index fell from 43.7 to 17.9 (versus 35.4 expected) in August
• New Chinese bank loans rose from CNY2.13 trillion to CNY260 billion in July
• The NFIB U.S. Small Business Optimism Index rose from 91.5 to 93.7 in July, the highest level since February 2022
• US Producer Price Index for July: 0.1% m/m (0.2% forecast and previous); core PPI decreased from 0.3% to 0.1% (0.2% forecast); annual PPI slowed from 2.7% to 2.2%
• Raphael Bostic, FOMC voting member He said a rate cut “is coming” but he needed “a little more data” before supporting lower interest rates.
• THE API reported inventory draw of 5.205 million barrels versus estimates of a decline of 2 million barrels for the week ending August 9

Price action in the broader market:

The return of Japanese traders from their holidays did not bring much action to major assets during the Asian session, with markets mostly trading in tight ranges as everyone awaited more important data releases.

However, things improved in the US session. Weak US PPI figures fuelled speculation that the Fed could cut interest rates sooner than expected rather than keep them elevated for longer.

Rumors of a potential Fed rate cut, as well as easing concerns about tensions in the Middle East, gave a solid boost to U.S. stocks. The S&P 500 hit a two-week high of nearly 5,430 points and the NASDAQ broke through the 19,000 mark. At the same time, U.S. 10-year Treasury yields fell to 3.85% and the price of gold remained below $2,475.

U.S. crude prices missed the risk rally, likely due to easing Middle East concerns and the likes of OPEC and the IEA cutting their demand forecasts due to weaker Chinese demand prospects. WTI crude tested $80.00 but ended the day closer to $78.40.

Foreign Exchange Market Behavior: US Dollar vs. Major Currencies:

Forex prices were influenced by individual catalysts early in the day. The return of Japanese traders put pressure on the yen during the Asian session, while the Aussie and Kiwi found support in the still-elevated wage pressure in Australia and positioning ahead of the RBNZ decision.

The pound surged after the UK unemployment rate fell but failed to hold on to gains as traders turned their attention to weaker wage growth. The euro, which had weakened in late Asian trading, barely budged as Germany’s ZEW economic sentiment index fell to a two-year low.

During the US session, the dollar was broadly lower as disappointing US PPI data fuelled speculation of a Fed rate cut. This pushed down US 10-year Treasury yields and encouraged risk-taking in markets.

Potential catalysts coming up on the economic calendar:

• UK CPI to be released at 06:00 GMT
• IPC France Final at 06:45 GMT
• UK House Price Index at 8:30 GMT
• Quarterly change in employment in the euro zone at 9:00 GMT
• Eurozone GDP in figures at 9:00 GMT
• Eurozone industrial production at 9:00 GMT
• US CPI to be released at 12:30 GMT
• EIA Crude Oil Inventories at 14:30 GMT
• RBNZ Governor Orr will deliver speeches at 18:00 and 19:30 GMT
• New Zealand Food Price Index at 22:45 GMT
• Japan preliminary GDP at 23:50 GMT
• Melbourne Institute inflation forecast at 1:00 GMT (15 August)
• Australian employment data at 1:30 GMT (August 15)

European figures are set to intensify today, with the release of the latest inflation data from the UK and France. In the Eurozone, we will see not only the first GDP figures, but also quarterly labour market figures.

Next up, Uncle Sam will release his inflation reports, which could fuel speculation of a Fed rate cut. Keep an eye on USD pairs and overall risk sentiment when the report is released!