Dollar falls amid rate cut cycle, company news and fundamental reviews
Market Reviews
• Investors greeted with moderate optimism the surprising downward revision of previously published US labor market figures. Firstly, the fact was within expectations. Secondly, it fuels hopes for a Fed rate cut. Third, the data still showed job growth, which means it provides a low base for future numbers and does not indicate a recession in the United States.
Otherwise everything is calm. The global economy is slowing down. Elections are approaching. The holiday season is ending. We are preparing for new bouts of volatility.
• With the vast majority of Fed policymakers willing to cut interest rates, a global easing cycle is looming. Lower rates in the US give smaller markets room to move. Already on Thursday, the Bank of Korea opened the door to cuts in October. Bank Indonesia has prepared cuts for the fourth quarter.
• Traders sold the dollar, believing that short-term US rates - currently 5.25-5.5% - will fall for a very long time. Markets have priced 161 basis points of easing in Europe by the end of next year and 135 basis points in the UK versus 222 basis points in the US. The dollar hit one-year lows against sterling and the euro, which cleared major resistance levels as markets mull whether to expect a cyclical decline for the dollar.
• US and European Purchasing Managers' Index data due later on Thursday could provide insight into the relative performance of each economy, although sluggish growth on the continent has not held back the euro's strong gains in recent weeks.
• A cheaper dollar also tends to have a positive impact on global growth, boosting investment in emerging markets and allowing other economies to keep interest rates lower, as well as a positive impact on commodities.
• Metal prices are recovering from multi-month lows, supported by reports of additional measures to support the Chinese real estate market.
• Meanwhile, oil has its own problems and traders are worried about demand as data points to a weakening economy. At $76.11 a barrel, Brent crude futures are near a one-year low.
• Japanese factory activity fell in August, although only slightly, while the service sector expanded.
• The minutes of the Fed meeting confirmed expectations. The vast majority of FOMC members support a rate cut in September.
• Tokyo Metro is preparing to go public: the largest IPO in 6 years. It is noted that this will be the largest IPO in Japan since 2018, when the telecommunications division of SoftBank Group went public with a valuation of $23.5 billion. Tokyo Metro is owned by the Japanese government (53.4%) and the Tokyo Metropolitan Administration (46.6%). Subway owners expect to receive listing approval from the Tokyo Stock Exchange as early as mid-September.
• Citi says hedge funds are using dollars for new carry trades.
• JD-com's major shareholder Walmart has reportedly sold its entire stake in the Chinese e-commerce giant for $3.6 billion, sending JD shares down 4%.
• The Chinese real estate crisis is slowly spreading around the world, spreading to other sectors - FT.
• The capitalization of the big four mining companies has lost $100 billion due to falling demand for ore.
• Goldman Sachs on Brent oil: Brent oil prices could fall to $68 per barrel by the end of 2025 due to weak demand.
• Shein sues Temu for copyright infringement - AP. Online fast fashion giant Shein has filed another lawsuit against rival Temu, accusing the Chinese shopping platform of stealing its designs, copying images of its products and other fraud. The lawsuit was filed in federal court in Washington this week.
• Ford is scaling back its electric vehicle plans as demand lags. The automaker expects to take $1.9 billion in special charges and write-offs as automakers continue to adjust their electric vehicle plans due to softer-than-expected demand.
• Argentina joins a US-led initiative to attract more investment in critical minerals. Said a representative of the US State Department. As part of efforts to create metals supply chains that do not include China.
• Will Buffett's "bet" stop the fall in oil company Occidental shares? - Reuters Shares of U.S. oil producer Occidental Petroleum fell to $56.17 on Tuesday, below the level that typically triggers a stock purchase by its largest owner, billionaire Warren Buffett's Berkshire Hathaway. Past multimillion-dollar stock purchases have regularly coincided with declines.
• Macy's (M) reports another quarter of declining sales, a month after rejecting a $6.9 billion buyout offer. On Wednesday, Macy's reported net sales fell 3.8% year over year to $4.9 billion. missing the forecast of $5.06 billion. Same-store sales fell 4%, worse than the expected decline of 0.27%. The company's shares fell 13%.
• Ola Electric shares are up 82% since their debut to reach a value of $7 billion. Ola Electric Mobility's meteoric rise justifies the founder's desire to take the company public despite initial skepticism about its valuation.
• Chipmaker Analog Devices (ADI) forecast strong fourth-quarter results as demand recovers. Analog Devices on Wednesday forecast fourth-quarter revenue and profit above Wall Street expectations as it benefits from a rebound in demand for its chips used in consumer electronics.
• JT Group will buy American cigarette manufacturer Vector for $2.4 billion. JT Group has agreed to buy discount cigarette manufacturer Vector Group Ltd. for about $2.4 billion to expand in the United States, changing course after the war cut off its path to growth in Russia.
• Xiaomi sales grow fastest since 2021. Buoyed by the initial success of its first electric vehicles and a global rebound in the smartphone market.
• Shares of BigBear.ai (BBAI) rose 27% yesterday. The company will be a subcontractor on a $2.4 billion contract over 10 years to provide IT capabilities and new technologies to the US Federal Aviation Administration.
• Shares of retail chain Target (TJX) rose 6% yesterday after the report. Revenue rose 2.7% YoY to $25.5 billion, beating analysts' estimates. Same-store sales rose 2%, also beating expectations, and the company raised its forecast: Target now expects to earn between $9 and $9.70 per share for the fiscal year ending in January, up from a previous estimate of $8.60 to $9. 60 and above the consensus of $9.23 per share.
• Stocks after the report
- WOLF up 6%
- ZM up 3%
- SNOW down 3%
- URBN down 8%
Key events that may affect markets on Thursday:
- Economy: business activity indices in Europe, the UK and the US, unemployment claims in the US.
- Income: Swiss Re.
International reviews
• US job growth in the year to March was much lower than forecast. The BLS estimate for total wage employment for the period from April 2023 to March 2024 was lowered by 818,000. The revision showed an overall downward change of about 0.5% and means that monthly job growth during this period was the average was approximately 174,000.
/ But this is within expectations (a decrease in the old figure by 500-1000 thousand people) and is unlikely to change the Fed’s plan to reduce the rate in September by 0.25%.
• Moody's has identified more than 46 thousand companies in the EU with Russian participation. As of July 2024, Moody's has identified tens of thousands of such companies, most of all in the Czech Republic (12,480), Bulgaria (9,581), Germany (4,296), Latvia (3,338), Italy (2,539).
• China is lending at a 15-year low as the central bank holds rates. The People's Bank of China left the base rate for one-year loans at 3.35% and for five-year LPR at 3.85%. Both key interest rates were cut by 10 basis points in July.
In July, new yuan loans fell 25% from a year earlier to 260 billion yuan ($36.4 billion) on a net basis, the lowest level since October 2009.
• China has launched an investigation into EU dairy products in response to tariffs on electric vehicles. China will consider 20 subsidy schemes from the bloc's 27 countries, notably Austria, Belgium, Croatia, the Czech Republic, Finland, Italy, Ireland and Romania, it said.
In June, China already launched an anti-dumping investigation into EU pork imports, which mainly affected Spain, the Netherlands and Denmark, in response to tariffs on electric cars. / Is the first global trade war starting?
• The Bundestag avoids tax increases and wants to maintain the debt ceiling. This was stated by Bundestag deputy from Olaf Scholz's party, member of the budget committee Andreas Schwarz, commenting on the lack of money for military support of Ukraine. The situation is tense, adds Schwartz: “We are now in the center of a budget discussion in Germany... We understand that the restoration of world security, based on rules, and not on the rule of force, depends on the results of the war.”
• New US nuclear doctrine: Biden allegedly secretly ordered preparations for confrontation with the Russian Federation, China and North Korea - NYT. In March 2024, American President Joe Biden approved an updated top secret US strategic nuclear plan. Moreover, the plan exists only in a printed version for security purposes.
• Kamala Harris is now officially the Democratic presidential candidate. US Vice President Kamala Harris accepted the Democratic presidential nomination after a ceremonial roll call vote, where each state's delegates symbolically endorsed her. Kamala Harris supports Biden's tax proposals, including a tax on unrealized capital gains
Biden's plan proposes "a minimum tax of 25% of total income, generally including unrealized capital gains, for all taxpayers whose wealth (that is, the difference obtained by subtracting liabilities of assets) exceeds $100 million.”
Unrealized capital gain, also called paper gain, refers to the increase in the value of an asset that a person has not yet sold, whether it is stock in a business or real estate. / This is a real nightmare for rich Americans. And they will do everything they can to make sure Harris doesn't win.
• Kamala Harris' plan to lower cost of living will end in failure - The Economist. The cost of living plan could usher in a new phase in a troubling odyssey. Harris is targeting four spending categories: housing; food; medicine; and taxes.
While some of her ideas are good and useful, many others will end up putting pressure on prices and causing them to rise - the exact opposite of the intended effect.
• Close allies of Donald Trump are quietly urging independent presidential candidate Robert F. Kennedy Jr. to support the Republican nominee. If he withdraws from the campaign for the White House as early as this week. Kennedy will speak Friday "about this historic moment and his path forward," his campaign announced Wednesday, fueling growing speculation that he might drop out of the race and endorse Trump. / It was previously believed that RFK-m's withdrawal from the race would give votes to Kamala Harris. It's getting more and more interesting.
• Hungary has found a way to provide itself with oil despite problems with transit through Ukraine. Negotiations are now in full swing to ensure balanced oil supplies for Hungary in the long term, despite Ukrainian measures and the fact that the European Commission is not helping us, said Hungarian Foreign Ministry Peter Szijjártó.
• The debt of developing countries is growing twice as fast as that of developed countries. According to the UN, about 3.3 billion people live in countries that spend more on paying interest on debt than on education or health care.