Daily Broad Market Recap – August 13, 2024

Easing producer price pressures in the United States have fueled speculation of a Federal Reserve rate cut and encouraged risk-taking in markets.

How did your favorite assets trade on Tuesday?

Let’s take a look at the headlines that highlighted it:

Headlines:

• Westpac: Consumer sentiment in Australia The index improved from 82.7 to 85.0 in August as concerns about further interest rate hikes by the Reserve Bank of Australia eased.
• Australia Wage Price Index Q2 2024: 0.8% QoQ (0.9% forecast, prior)
• tusk: Australian Business Confidence Decreased from 3 to 1 in July after downward revision
• Initial orders for manufacturing machinery in Japan It rose another 8.4% year-on-year in July after a 9.7% year-on-year increase in June.
• Change in the number of claimants in the UK July: 135K (14.5K expected, 36.2K previously); Unemployment rate down to 4.2% from 4.4% in June; Average earnings slow to 4.5% from 5.7% in three months to June
• The International Energy Agency kept its forecast for global oil demand steady in 2024 but cut it in 2025 due to weaker expectations for China.
• ZEW Economic Sentiment Index in Germany For August: 19.2 (32.6 expected, 41.8 prior)
• ZEW Economic Sentiment Index for the Eurozone Decreased from 43.7 to 17.9 (vs. 35.4 expected) in August
• China’s new bank loans fell from 2.13 trillion yuan to 260 billion yuan in July
• The National Business Federation’s Small Business Optimism Index rose to 93.7 from 91.5 in July, the highest reading since February 2022.
• US Producer Price Index July: 0.1% m/m (0.2% expected, prior); core PPI down from 0.3% to 0.1% (0.2% expected); annual PPI slowed from 2.7% to 2.2%
• FOMC Voting Member Raphael Boucek He says rate cuts are ‘coming’ but needs ‘more data’ before backing lower rates.
• the API reported inventory withdrawal 5.205 million barrels versus estimates of a 2 million barrel decrease for the week ending August 9.

Price movement in the broad market:

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

But things got better in the US session. Weak US producer price reports fueled speculation that the Federal Reserve might cut interest rates sooner rather than keep them higher for longer.

Talk of a possible rate cut by the Federal Reserve, coupled with easing concerns over tensions in the Middle East, has given a boost to U.S. stocks. The S&P 500 hit a two-week high of 5,430, and the Nasdaq climbed above 19,000. Meanwhile, the yield on the 10-year Treasury note fell to 3.85%, and gold prices remained below $2,475.

US crude oil prices failed to capitalize on the risk-on rally, likely due to easing Middle East concerns and companies such as OPEC and the International Energy Agency cutting their demand forecasts due to weak Chinese demand. West Texas Intermediate crude tested $80.00 but ended the day closer to $78.40.

Forex Market Behavior: US Dollar vs Major Currencies:

US Dollar Overlay Against Major Currencies Chart by TradingView

Forex prices were moved by individual catalysts early in the day. The return of Japanese traders pressured the yen during the Asian session, while the Australian and New Zealand dollars found support from persistently high wage pressures in Australia and positioning ahead of the Reserve Bank of New Zealand decision.

Sterling rose after the UK unemployment rate fell, but was unable to hold on to those gains as traders turned their focus to weak wage growth. The euro, which had weakened in late Asian trading, was only slightly lower when Germany’s ZEW economic sentiment index fell to a two-year low.

During the US session, the dollar fell across the board as disappointing US producer price index reports fueled speculation of a rate cut by the Federal Reserve. This sent 10-year US Treasury yields lower and encouraged risk-on sentiment across all markets.

Potential catalysts coming up on the economic calendar:

• UK CPI report at 6:00am GMT
• France final CPI reading at 6:45 am GMT
• UK House Price Index at 8:30am GMT
• Eurozone quarterly employment change at 9:00 am GMT
• Eurozone GDP at 9:00 am GMT
• Eurozone Industrial Production at 9:00 am GMT
• US CPI report at 12:30 PM GMT
• US Energy Information Administration Crude Oil Inventories at 2:30 PM GMT
• Reserve Bank of New Zealand Governor Orr will deliver speeches at 6:00pm and 7:30pm GMT.
• New Zealand Food Price Index at 10:45 PM GMT
• Japan Preliminary GDP at 11:50 PM GMT
• Melbourne Institute Inflation Forecasts at 1:00am GMT (August 15)
• Australia jobs data at 1:30am GMT (Aug 15)

European economic reports will be on fire today with the UK and France announcing their latest inflation data. In the Eurozone, we will see not only preliminary GDP readings but also quarterly labor market figures.

Then Uncle Sam prints inflation reports that could fuel speculation of a Fed rate cut. Keep an eye on the USD crosses and risk sentiment in general when the report is released!