Author: train2invest Admins

Gold futures prices jumped to a record high Tuesday as rising expectations of a September interest rate cut bolstered demand for bullion.

Spot gold climbed 1.4% to $2,454.77. Gold futures advanced 1.3% to $2,461.10, an intraday record topping the previous high of $2,454.20 reached May 20.

Gold prices hit all-time highs earlier this year before pulling back as the prospect of higher-for-longer interest rates dampened investor enthusiasm for the precious metal.

But interest in the asset has grown after June’s softer inflation data and some recently dovish comments from Federal Reserve Chair Jerome Powell combined to raise the odds of rate cuts coming this year. Markets are pricing in three quarter-percentage point cuts coming this year, with the first slated for September, according to the CME FedWatch Tool, which uses 30-day fed funds futures to find probabilities.

A weakening dollar has also supported demand for bullion. On Tuesday, the U.S. greenback rebounded after falling to a five-week low.

“Interest to ‘buy-the-dip’ remained prevalent among investors amid strong sentiment towards gold, which is likely why the market was quick to rally on soft U.S. data prints and dovish Fed expectations,” UBS’ strategist Joni Teves said in a note on Friday.

“With the market sitting just above the psychological $2400 level, we think risks are skewed to the upside,” Teves continued. “We think positioning remains lean and there’s space for investors to build gold exposure.”

Gold rallied to record highs in the first half of 2024 on the back of a multi-year spike in demand from central banks around the world, as mounting global geopolitical risks boosted interest in the safe haven asset. According to UBS, central bank buying of bullion is the highest it’s been since the late 1960s.

“With some central banks now questioning the safety of holding USD- and EUR-denominated assets (following the financial and debt crises and more recently the war in Ukraine), many are choosing to instead fill their reserves with gold,” read a note last month from UBS.

On the flip side, gold has also come under pressure from lackluster Chinese demand. In a recent note, Citi said China central bank and retail consumption of gold is expected to remain weak over the summer, but noted “underlying strength” in demand amid a slow recovery in the China real estate market.

Gold mining stocks also advanced on Tuesday. The VanEck Gold Miners ETF gained 1.2% in the premarket, on pace for a fifth winning day in six. The U.S.-listed shares of Harmony Gold and Gold Fields rose 6% and 4%, respectively. The U.S. listed shares of DRDGold popped more than 5%.

• Here’s what they reported: Earnings of 83 cents a share vs. 80 cents a share estimate.
• Revenue of $25.54 billion vs. $25.22 billion estimate.
• The firm said net interest income would rise to about $14.5 billion later this year, giving investors confidence that a turnaround is under way.

Bank of America (BAC) earnings Q2 2024 (cnbc.com)

The Dow Jones Industrial Average advanced to new highs on Tuesday, as the market rally continued broadening out beyond big technology names on hopes of forthcoming interest rate cuts.

The Dow surged by 547 points, or 1.3%, hitting a new intraday record. The S&P 500 added 0.3%, while the Nasdaq Composite flickered around its flatline.

Bank of America and Morgan Stanley jumped more than 5% and 2%, respectively, after earnings came in ahead of analyst forecasts. They’re the latest household names to post quarterly financial results as the new reporting season kicks into gear.

Stock market today: Live updates (cnbc.com)

Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, fell 0.8 per cent to $82.2-billion in May.

The overall decrease came as sales fell in five of the seven subsectors, with the largest decline coming from motor vehicle and motor vehicle parts and accessories, which decreased by 3.8 per cent to $13.9-billion.

In volume terms, wholesale sales decreased by 0.8 per cent in May.

Meanwhile, Statistics Canada says manufacturing sales rose 0.4 per cent to $71.4-billion in May, driven by 11.2 per cent higher production in the aerospace product and parts industry group.

That followed an increase of 1.1 per cent in April.

In constant dollars, Statistics Canada says manufacturing sales rose 0.4 per cent in May, indicating a higher volume of goods was sold.

Asia’s crude oil imports from Canada’s newly expanded Trans Mountain pipeline will rise in September as major refiners in Japan and South Korea and a refinery in Brunei have bought their first cargoes alongside China, multiple trade sources said.

The purchases come after exports commenced from the expanded TMX pipeline in May which will triple the flow of crude from landlocked Alberta to Canada’s Pacific coast to 890,000 barrels per day (bpd). Owned by the Canadian government, the pipeline gives Canadian producers more access to U.S. West Coast and Asian markets while providing Asian refiners an opportunity to diversify their imports.

Chevron CVX-N +1.06%increase will split a Cold Lake crude cargo between its South Korean joint venture refiner GS Caltex and Japan’s top refiner ENEOS, traders said. ENEOS bought 250,000 barrels while GS Caltex takes the remaining 300,000 barrels, they added.

South Korea’s top refiner SK Energy, a unit of SK Innovation, bought a cargo from Unipec while Hengyi Petrochemical, a refinery operator in Brunei, also purchased a cargo from PetroChina, traders said.

The cargoes, of 550,000 barrels each, to be delivered in September were sold at discounts of between $5 and $6 a barrel to ICE Brent, they added.

Meanwhile, Chinese private refiner Rongsheng Petrochemical has also purchased another two TMX cargoes from ConocoPhillips COP-N +0.26%increase and Vitol after buying two cargoes via a tender, traders said.

Rongsheng’s four Canadian Access Western Blend (AWB) crude cargoes will be delivered to Zhoushan, in eastern China, in September, they added.

These companies typically do not comment on commercial deals.

Cold Lake and AWB are heavy sour crude with API gravity of 21-22 degrees and contain 3.5-4 per cent sulfur.

Most North Asia refiners prefer Cold Lake as AWB is more acidic, which could cause corrosion in plants, traders said.

“Canada’s TMX crude attracts interest from Asian buyers who are keen to secure cheap supplies of heavy grades but do not have access to U.S.-sanctioned Venezuelan crude,” said Muyu Xu, a senior crude oil analyst at analytics firm Kpler.

“It will still take some time for refiners to experiment with and test TMX crude as the first few cargoes have just arrived.”

TMX crude exports, expected at about 350,000 to 400,000 bpd, will mostly compete with heavy grades from Latin America and the Middle East, Xu said.

Cold Lake is about $10 per barrel cheaper than Iraq’s Basra Heavy for deliveries to China, she added.

TMX crude exports in June were at 343,000 bpd, with 187,000 bpd to China, 60,000 bpd to India and the remainder to U.S. West Coast refineries, Kpler data showed.

Cargoes to China are expected to be discharged later this month at PetroChina’s Qinzhou and Jieyang refineries as well as Sinopec’s Maoming plant in southern China.

India has yet to purchase more Canadian crude due to abundant Russian supplies, traders said, after Reliance Industries bought its first TMX cargo from Shell for July delivery.

Some traders are also watching out for any impact from the wildfire season on Canadian oil production.

Cleveland-Cliffs said on Monday it will buy Canadian peer Stelco Holdings for C$3.85 billion ($2.8 billion), marking its first acquisition since a failed bid for rival U.S. Steel last year.

Cliffs’ CEO Lourenco Goncalves said the steel maker stands to benefit from the deal as the enterprise value has a lower cost structure compared to building a new mill in the U.S.

The Cleveland, Ohio-based company expects the buyout to be immediately accretive to its 2024 and 2025 per-share profit.

Cliffs has offered C$60.00 in cash and 0.454 shares of its common stock for each Stelco share held, or a total of C$70.00. Stelco’s shares last closed at C$37.36.

The transaction, the first for Cliffs since it bid for U.S. Steel in August, has received support from David McCall, international president of the United Steelworkers (USW) union and is expected to close in the fourth quarter.

Cleveland-Cliffs had made an unsolicited $7.3 billion offer for the takeover of rival U.S. Steel in August 2023.

However, U.S. Steel called the bid “unreasonable” and instead decided to merge with Japanese steel giant Nippon Steel for $14.9 billion.

Stelco operates in two sites in Ontario, one a steelmaking facility in Lake Erie Works and the other a downstream finishing and cokemaking facility in Hamilton Works.

Upon completion of the transaction, Cliffs’ shareholders will own 95% of the company while shareholders of Stelco, which is expected to continue operations as a wholly owned unit, will own 5% of the combined company.

The acquisition of Stelco expands Cliffs steelmaking footprint and doubles its exposure to the flat-rolled spot market, with cost advantages in raw materials, energy, healthcare and currency, the U.S. steelmaker said.

Shares of Cleveland-Cliffs were down 3% in premarket trading.

• China’s National Bureau of Statistics on Monday said the country’s second-quarter GDP rose by 4.7%.
• That’s slower than the 5.3% year on year GDP increase in the first quarter.
• Retail sales for June missed expectations, while industrial production figures beat.
  
• China reports second-quarter GDP growth of 4.7%, missing expectations (cnbc.com)

Monday July 15

China’s Third Plenum policy meeting runs through Thursday

China real GDP for the second quarter, plus June industrial production, retail sales and fixed asset investment

Euro area industrial production

830 am ET: Canada manufacturing sales

830 am ET: Canada wholesale trade

830 am ET: Canada new motor vehicle sales

1030 am ET: Bank of Canada Business Outlook Survey and Survey of Consumer Expectations (Q2)

1230 pm ET: Fed Chair Powell interviewed at the Economic Club of Washington, DC

Earnings include: BlackRock, Corus Entertainment, Goldman Sachs Group, Prairiesky Royalty

Tuesday July 16

Euro area trade surplus for May, plus Germany business confidence survey and Italy CPI for June

815 am ET: Canada housing starts for June. They are expected to be down 1.7%

830 am ET: Canada consumer price index for June. Consensus is for a 0.1% rise from May. Year over year it is expected to be up 2.8%, cooling from 2.9% a month earlier

830 am ET: U.S. retail sales for June. Consensus is for a decline of 0.2%

830 am ET: U.S. import prices

10 am ET: U.S. NAHB housing market index for July

10 am ET: U.S. business inventories.

Earnings include: Bank of America, Charles Schwab, Morgan Stanley, Goodfood Market

Wednesday July 17

Japan trade balance

ECB Monetary Policy Meeting; press conference at 845 am ET

UK June employment report

830 am ET: Canada international securities inflows and outflows

830 am ET: U.S. housing starts for June. Consensus is for a 1.3 million annualized rate, which is up 1.8%

830 am ET: U.S. building permits

915 am ET: U.S. industrial production. Consensus is for a rise of 0.4%

2pm ET: U.S. Beige Book

Earnings include: Alcoa, US Bancorp, Las Vegas Sands, Johnson & Johnson

Thursday July 18

Japan consumer prices

UK consumer confidence and June retail sales

830 am ET: Canadian construction investment

830 am ET: U.S. initial jobless claims

10 am ET: U.S. leading indicator

Earnings include: Alaska Air Group, American Airlines, Blackstone, Taiwan Semiconductor Manufacturing, Domino’s Pizza, D R Horton, Netflix, Choice Properties REIT

Friday July 19

830 am ET: Canadian retail sales for May. Consensus is for a 0.2% decline. In April, they rose 0.7%

830 am ET: Canadian industrial and raw materials price index

830 am ET: Canada household credit and mortgage credit for May

Earnings include: Travelers, Halliburton

Federal Reserve Chair Jerome Powell’s testimony and U.S. inflation data top the agenda in the week to come, with U.S. banks reporting earnings and rate decisions due in New Zealand and South Korea.

Meanwhile, the tectonic plates of politics continue shifting, with France’s Sunday election following hot on the heels of the U.K. vote.

Here is your look at what matters for markets in the coming week from Makhaila Gause and Lewis Krauskopf in New York, Kevin Buckland in Tokyo, Yoruk Bahceli in Amsterdam and Marc Jones in London.

1. Inflation update

Thursday’s monthly U.S. consumer price index reading will shape views on whether the Fed could cut interest rates in the coming months.

The June reading is expected to have climbed 0.1 per cent, according to a Reuters poll, after being unexpectedly unchanged in May.

Data late last month showed another inflation measure, the personal consumption expenditures price index, rose 2.6 per cent on an annual basis – suggesting inflation is cooling, but the measure was above the Fed’s target of 2 per cent.

That comes of course after Powell’s testimony before Congress on Tuesday. He told a conference in Portugal this week that the U.S. is back on a “disinflationary path,” but policymakers need more data before cutting interest rates.

2. Bank earnings

Higher interest rates and an uncertain economic environment are casting a cloud over U.S. bank earnings, with the second-quarter reporting season kicking off.

JPMorgan Chase, Citigroup and Wells Fargo will report second-quarter earnings on July 12. Bank of America will release its results on July 16.

The largest U.S. lender, JPMorgan, is expected to report earnings per share (EPS) of $4.69, according to LSEG estimates – below $4.75 a year earlier. Bank of America’s EPS is forecast to slide to 79 cents from 88 cents a year earlier, though EPS at Citi and Wells Fargo are projected to climb.

Executives’ commentary on the path of interest rates will remain a key focus, especially after industry leaders cited improving conditions for investment banking, analysts said.

3. Take two

France is back to the polls on Sunday for the second round of its shock snap election. Investors are pinning their hopes on a hung parliament.

Prospects for higher spending under Marine Le Pen’s far-right National Rally (RN), or even a left government, rocked markets in June.

But investors are more optimistic this week, with the RN posting a smaller win than some polls expected at last Sunday’s first round. A cross-party bid to keep it away from power this week has further reduced the odds of an RN absolute majority.

The risk premium on France’s debt over Germany’s has dropped to around 70 basis points, after hitting its highest since 2012 last week at 85 bps.

But a hung parliament is no comfort for investors, as it risks a policy paralysis that could make it even harder to improve France’s stretched finances that have left it facing European Union’s disciplinary measures.

4. Pondering policy pivots

Investors are hungry for clues on whether rate cuts are coming this year at the Reserve Bank of New Zealand and the Bank of Korea. Both central banks have taken a cautious stance amid stubbornly high inflation, and are widely expected to keep rates steady at 15-year highs at their meetings on Wednesday and Thursday, respectively In New Zealand in particular, policymakers even flagged the risk of another hike this year, with a cut not projected until late 2025.

Markets are more optimistic, pricing for a single cut this year to come as early as October, as inflation cools, business sentiment deteriorates and domestic demand weakens.

South Korea has had even more pronounced indications of prices coming under control, but the market consensus is still for no cut until the fourth quarter. Political pressure is mounting though, with President Yoon Suk Yeol calling cuts to keep in step with the U.S. Federal Reserve “unavoidable.”

5. Baptism of sewage

New governments face a baptism of fire, but for the UK’s just-crowned Labour Party, it will be more of a baptism of sewage on Thursday.

That’s when water regulator, OFWAT, announces just how much water firms – most of whom have been relentlessly pumping untreated human effluent into U.K. rivers for years – can jack up customers’ bills. It has the potential to turn nasty.

Britain’s biggest water company, Thames Water, which serves more than 16 million customers in and around London and has 15 billion pounds ($19.14-billion) of debt, faces nationalization unless it can attract vast amounts of new capital to fix its woes.

It has requested bill hikes of 59 per cent, which OFWAT is unlikely to grant given the public mood. But it will need to be enough to convince reluctant investors, who have already started to bail out of Thames, to turn the taps on again.

Monday July 8

3 pm ET: U.S. consumer credit

Tuesday July 9

6 am ET: U.S. NFIB small business economic trends survey

10 am ET: U.S. Fed Chair Powell testifies to the Senate Banking Committee

Wednesday July 10

Chinese June consumer prices and producer prices

Italy industrial production

10 am ET: U.S. Fed Chair Powell testifies to the House Financial Services Committee.

10 am ET: U.S. wholesale inventories for May.

Earnings include: Goodfood Market, Postmedia Network

Thursday July 11

China trade surplus.

Germany June inflation; UK GDP, industrial production, trade deficit and services index.

830 am ET: U.S. consumer prices for June. Consensus is for a 0.1% rise from May, or 3.1% year over year, which is down from May’s reading of 3.3%. Excluding food and energy, inflation is expected to be up 3.4%.

830 am ET: U.S. initial jobless claims.

2 pm ET: U.S. budget balance.

Earnings include: MTY Food Group Inc, Cogeco and Cogeco Communications, OrganiGram Holdings Inc, Richelieu Hardware Ltd,

Friday July 12

Japan industrial production

Germany retail sales for May and France inflation data for June

830 am ET: Canadian building permits for May. It’s expected to be down 5% after a 20.5% surge in April.

830 am ET: U.S. producer price index.

9 am ET: Canada existing home sales for June. They are expected to be down 8.5% from a year earlier, while average prices are expected to be down 3%.

9 am ET: MLS home price index for June. It’s expected to be down 4% from a year ago, steeper than May’s decline of 2.4%.

10 am ET: University of Michigan consumer sentiment. Consensus is for a reading of 67.0, down from June’s 68.2.

Earnings include: Wells Fargo, JP Morgan Chase & Co., Citigroup