Wednesday's Markets Update (July 31, 2024)

31 Jul 2024 by rate3

On Wednesday, stocks surged as the Fed held rates steady but hinted at a possible cut. Chipmakers rallied, with Nvidia and AMD leading the charge. However, Microsoft stumbled amid cloud woes. On global markets, Eurozone inflation unexpectedly jumped while China's manufacturing sector continued to contract. Oil jumped as traders turned back to the Middle East conflict. BTC and ETH slumped further on weak technicals and a lack of whales' support at key resistance levels.

Details

The Fed kept interest rates unchanged at a 23-year high of 5.25%-5.50% for the 8th consecutive meeting, citing progress on inflation but acknowledging lingering risks. While the economy continues to grow and job gains moderate, the central bank remains cautious about rate cuts, emphasizing the need for sustained inflation decline before considering easing monetary policy. 1Y trend: "Up" (Fed)
Job growth slowed in July, with only 122K new jobs added, the least in 6th months, missing forecasts. Wage gains also cooled, suggesting inflation pressures may ease. While some sectors added jobs, others shed positions. This follows a recent trend of declining job growth and wage increases. 1Y trend: "Down" (ADP)
Chicago's economic contraction deepened in July. The Chicago PMI fell for the eighth straight month, indicating continued weakness. Production, new orders, and employment declined sharply, offsetting slight improvements in supplier deliveries. Prices continued to ease. 1Y trend: "Side"
Pending home sales declined 2.6% YoY in June, a slight improvement from May. While sales have fluctuated historically, the current trend suggests a continued cooling in the housing market. 1Y trend: "Up" (NAR)

Crypto

Stablecoin market capitalization has surged 2.11% to $164B in July, marking ten consecutive months of growth. This, combined with new developments in the crypto space, has boosted stablecoin dominance to 6.93%. (source)

World Markets

Eurozone inflation unexpectedly jumped in July to 2.6%, defying forecasts. Energy and goods prices surged, offsetting slower rises in services and food costs. Core inflation held steady, indicating persistent price pressures. Germany and France saw inflation accelerate, while Spain eased. 1Y trend: "Down" (EC)
China's manufacturing sector contracted for the third straight month in July. New orders, exports, and purchasing activity declined. Factory output grew but at a slower pace. Prices fell, with input costs decreasing and output prices dropping faster. Unemployment remained high, and while business sentiment was positive, it weakened. 1Y trend: "Side" (CN)
The Bank of Japan has tightened monetary policy by raising interest rates to around 0.25% from the prior range of 0 to 0.1% it set in March and reducing bond purchases. This marks a departure from its ultra-loose stance. While inflation is expected to ease, economic growth forecasts have been downgraded. The central bank aims to gradually normalize its balance sheet. 1Y trend: "Up" (BoJ)
France's annual inflation edged up slightly in July due to soaring energy costs, especially gas. While services and food prices slowed, manufactured goods prices stalled. Monthly inflation remained steady, driven by transport and accommodation costs. Overall, inflation came in below expectations. 1Y trend: "Down" (Insee)

Currencies

The dollar index retreated after an initial spike, as traders assessed the Fed's stance. While the central bank held rates steady, it signaled an upcoming rate cut. Powell indicated a potential September cut but stressed the need for more data. The yen strengthened significantly after the Bank of Japan tightened policy.
The offshore yuan gained ground after recent Chinese government pledges to boost the economy. However, new data shows manufacturing contracted sharply in July, and service sector growth slowed. These conflicting signals highlight China's economic challenges.

Commodities

Oil prices spiked more than 4% driven by technicals as well as by escalating Middle East tensions and unexpected inventory declines. However, weakening Chinese demand capped gains, as concerns over global economic slowdown persist.