Pending Home Sales Dropped 5.5% in July

Data Interpretation

Economic

Summary:

Pending home sales fell 5.5% in July.Month over month, contract signings declined in all four U.S. regions.Compared to one year ago, pending home sales increased in the Northeast but decreased in the Midwest, South and West.

Pending home sales in July retreated 5.5%, according to the National Association of REALTORS. All four U.S. regions posted monthly losses in transactions. Year-over-year, the Northeast rose while the Midwest, South and West registered declines.

The Pending Home Sales Index (PHSI)– a forward-looking indicator of home sales based on contract signings – slipped to 70.2 in July, the lowest reading since the index began tracking in 2001. Year over year, pending transactions were down 8.5%. An index of 100 is equal to the level of contract activity in 2001.

"A sales recovery did not occur in midsummer," said NAR Chief Economist Lawrence Yun. "The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming U.S. presidential election."

Pending Home Sales Regional Breakdown

The Northeast PHSI waned 1.4% from last month to 64.6, an increase of 2.4% from July 2023. The Midwest index reduced 7.8% to 67.8 in July, down 11.4% from one year ago.

The South PHSI sank 6.5% to 83.5 in July, falling 11.5% from the prior year. The West index shrunk 3.8% in July to 56.2, down 6.0% from July 2023.

"In terms of home sales and prices, the New England region has performed relatively better than other regions in recent months," added Yun. "Current lower, falling mortgage rates will no doubt bring buyers into market."

To stay updated on all economic events of today, please check out our Economic calendar

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Warren Takunda

Commodity

Brent oil prices declined on Tuesday as sluggish economic growth in China, the world's biggest crude importer, increased demand concerns while a halt to Libyan production and exports provided a floor.

Brent crude futures fell 92 cents, or 1.2%, to $76.62 a barrel by 0814 GMT.

West Texas Intermediate crude futures, which did not settle on Monday because of the U.S. Labour Day holiday, were down 25 cents, or 0.3%, at $73.30.

"The weaker than expected Chinese manufacturing PMI over the weekend likely exacerbated concerns about the Chinese economy's performance," said Charalampos Pissouros, senior investment analyst at brokerage XM

"The Libya and Middle East stories are keeping a floor below prices, leaving the door open to a further recovery in the foreseeable future."

On Monday China reported new export orders fell for first time in eight months in July and that prices of new homes rose in August at their weakest pace this year.

In Libya, oil exports at major ports were halted on Monday and production curtailed across the country, six engineers told Reuters, continuing a standoff between rival political factions over control of the central bank and oil revenue.

So far there is limited upside support from large production disruptions in Libya, owing to the uncertainty over how long those outages might last, said UBS analyst Giovanni Staunovo.

Libya's National Oil Corp (NOC) declared force majeure on its El Feel oilfield from Sept. 2.

Total production had plunged to little more than 591,000 barrels per day (bpd) as of Aug. 28 from nearly 959,000 bpd on Aug. 26, NOC said. Production was at about 1.28 million bpd on July 20, the company said.

Some supply is set to return to the market as eight members of OPEC and affiliates, together known as OPEC+, are scheduled to boost output by 180,000 bpd in October. The plan is likely to go ahead regardless of demand worries, industry sources said.

A prolonged Libyan outage could support Brent prices in the mid-$80s even with additional supply coming on the market in the fourth quarter, RBC Capital analyst Helima Croft said in a note.

Continuing disruptions to supply flows from the Middle East are also supporting the market. Two oil tankers were attacked on Monday in the Red Sea off Yemen but did not sustain major damage.

Source: Reuters

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ING

Central Bank

Economic

EUR rates nudge higher as focus turns to the US

It’s a decisive week for rates given the data that is lined up in the US. Releases will kick off with the ISM manufacturing today, which is seen improving slightly but staying in contractionary territory. The focus is especially on the employment component ahead of the payrolls figure later this week. With the inflation issue seen as largely tackled, it is the state of the jobs market that will determine the rates outlook, and the more near term is the size of the Fed’s first rate cut that is expected this month – a 25bp is the market's base case, but there is still a 25-30% chance of a larger 50bp cut in the pricing.

Monday of course was a US holiday. And left to their own devices EUR rates nudged up by 4bp with the 10Y Bund yield above 2.34% again, the highest since late July. Front-end rates still rose by 2-3bp, including the pricing for the October rate cut, where the probability for a consecutive cut following one in September was pared back to below 40%. Given the ECB’s emphasis on relying more on its forecasts again, we still think this is exaggerating the chances of that happening.

In terms of eurozone data, we saw some upwardly revised manufacturing PMIs, but observing the slight bear steepening of the curve we think the busy primary markets could be more to blame. This year's issuance activities have picked up somewhat earlier than usual after the summer break with the past one to two weeks seeing a busy slate of issuance across sectors. In Govies and SSAs we saw Finland and Austria come to the market with new bonds last month. In SSAs, we saw ESM yesterday and EFSF the week with both now having completed their funding for 2024.

Issuance kicked off earlier post summer break

Source: BondRadar, ING

Today's events and market view

US ISM data will be today’s highlight. The manufacturing component is expected to nudge up from 46.8 to 47.5. The consensus sees the prices paid index fall slightly from 52.9 to 52.0, which reflects easing price pressures. From the eurozone, we have the change in Spanish unemployment for August and the ECB’s Joachim Nagel will speak at a banking event.

Issuance includes Austria auctioning a 9Y and a 62Y ultra-long RAGB, totalling €1.4bn. From Germany, we have €4.5bn worth of 2Y Schatz.

To stay updated on all economic events of today, please check out our Economic calendar

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FxPro

Cryptocurrency

Market Picture

The crypto market rose 2.3% in 24 hours to reach a cap of $2.07 trillion, growing steadily throughout Monday. This recovery has yet to improve sentiment, with the index remaining at 26 for the third consecutive day.

Bitcoin is trading just below $59K at the start of active trading in Europe, having reached $59.7K at the peak of the Asian session. Despite intraday fluctuations, the BTC exchange rate has closed in the $59.0-59.3K range for the past six days, reflecting the balance of power. The local initiative remains with the bears, as the price is below the 50- and 200-day moving averages, and close to the lower boundary of the descending channel.

Tron remains in a corrective phase, having fallen to $0.1525. In August, the price soared from $0.1160 to $0.1680, flying from the lower to the upper boundary of the ascending corridor since the beginning of 2023. The current correction is helping to ease overheating and attract new buyers, but a dip below $0.1430-0.1480 would set a more cautious tone.

News Background

According to CoinShares, crypto fund investments fell by $305 million last week after three weeks of inflows. Bitcoin investments fell by $319 million, Ethereum by $6 million and Solana by $8 million.

QCP Capital notes Ethereum’s significant decline in August compared to BTC, as well as the underperformance of spot ETFs in the US, and warns that the market’s decline could continue in September.

According to Santiment, the number of bitcoin wallets with a minimum of 100 BTC rose to 16,120, a 17-month high. Experts believe that increased wallet activity is a positive signal for the market. Bitgrow Lab notes that historically, significant whale purchases have often preceded new all-time highs in bitcoin.

According to BiTBO, bitcoin miners’ revenue fell to its lowest level in 11 months in August. The dynamics were affected by an increase in complexity and a decrease in the number of transactions.

The Cardano network successfully passed the Chang hardfork, marking the beginning of the Conway registry era and the ecosystem’s transition to decentralised governance. ADA token holders will be able to participate in a vote to determine the future of the network.

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BEA

Economic

Personal income increased $75.1 billion (0.3 percent at a monthly rate) in July, according to estimates released by the U.S. Bureau of Economic Analysis. Disposable personal income (DPI), personal income less personal current taxes, increased $54.8 billion (0.3 percent) and personal consumption expenditures (PCE) increased $103.8 billion (0.5 percent).

The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.2 percent . Real DPI increased 0.1 percent in July and real PCE increased 0.4 percent; goods increased 0.7 percent and services increased 0.2 percent.

The increase in current-dollar personal income in July primarily reflected an increase in compensation.

The $103.8 billion increase in current-dollar PCE in July reflected an increase of $59.3 billion in spending for services and $44.5 billion in spending for goods. Within services, the largest contributor to the increase was housing and utilities (led by housing). Within goods, the largest contributors to the increase were motor vehicles and parts as well as food and beverages.

Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—increased $103.3 billion in July . Personal saving was $598.8 billion in July and the personal saving rate—personal saving as a percentage of disposable personal income—was 2.9 percent.

Prices

From the preceding month, the PCE price index for July increased 0.2 percent . Prices for goods decreased by less than 0.1 percent and prices for services increased 0.2 percent. Food prices increased 0.2 percent and energy prices increased by less than 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

From the same month one year ago, the PCE price index for July increased 2.5 percent. Prices for goods decreased by less than 0.1 percent and prices for services increased 3.7 percent. Food prices increased 1.4 percent and energy prices increased 1.9 percent. Excluding food and energy, the PCE price index increased 2.6 percent from one year ago.

Real PCE

The 0.4 percent increase in real PCE in July reflected an increase of 0.7 percent in spending on goods and an increase of 0.2 percent in spending on services. Within goods, the largest contributor to the increase was motor vehicles and parts. Within services, the largest contributor to the increase was health care.

To stay updated on all economic events of today, please check out our Economic calendar

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Warren Takunda

Stocks

Asian shares mostly declined Tuesday as investors looked ahead to a key report on U.S. employment set for release later in the week.

Japan’s benchmark Nikkei 225 erased earlier gains to finish less than 0.1% lower at 38,686.31, while Australia’s S&P/ASX 200 fell less than 0.1% to 8,103.20.

The closely watched U.S. jobs data is expected to influence the Federal Reserve’s read on the American economy and when it will start lowering interest rates. The move will have repercussions through global markets, including Asia.

“It is shaping up to be a significant litmus test. A stronger-than-expected payroll number, paired with a lower unemployment rate, could inject some much-needed confidence into the market, signaling that growth risks might be easing, at least for now,” said Stephen Innes, analyst at SPI Asset Management.

“If the report disappoints, especially if it pushes the unemployment rate higher, we could quickly see growth concerns flare up again.”

A wait-and-see mood was earlier prevalent, as Monday was Labor Day, a national holiday in the U.S.

South Korea’s Kospi initially rose after a report showed consumer inflation slowed in August to the weakest in more than three years, supporting expectations of an easing of monetary policy. The Kospi later declined 0.6% to 2,664.63.

South Korea’s consumer price index, or CPI, rose 0.4% from the previous month and 2.0% from a year earlier, after gaining 0.3 from a month earlier and 2.6% on-year in July.

Hong Kong’s Hang Seng dipped 0.4% to 17,624.35, while the Shanghai Composite edged down 0.3% to 2,803.99.

Worries were also growing about the resilience of China’s economy, as recently disclosed data showed a mixed picture. Recent weak earnings reports from Chinese companies, including New World Development Co., a property developer and investor, added to the pessimism.

In energy trading, benchmark U.S. crude rose 53 cents to $74.08 a barrel. Brent crude, the international standard, lost 15 cents to $77.37 a barrel.

In currency trading, the U.S. dollar slipped to 146.00 Japanese yen from 146.89 yen. The euro cost $1.1061, down from $1.1074.

Source: AP

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FOREX.com

Forex

GBP/USD eases lower despite consumer spending rising

Consumer spending rose in August GBPUSD eases after strong gains in AugustGBP/USD tests 1.3140 support

GBP/USD is easing lower on Tuesday against both the US dollar and the euro as investors book profits following sterling's impressive monthly rally in August. GBP/USD booked the strongest gains in 10 months in August as the USD fell 2.2% in August against its major peers.

The pound is drifting lower today despite UK consumers showing signs of life in August. UK consumer spending increased modestly last month, boosted by spending on food and drink amid warmer weather, adding to signs of steady economic growth in H2 of 2024.

According to Barclays, consumer spending on credit and debit cards rose by 1% in August after two months of declines, and according to the British Retail Consortium, spending in shops rose by 1%, its strongest pickup since March.

The data supports the view that consumers could increasingly support the economy in the second half of the year amid growing real incomes, easing interest rates, and improving consumer confidence.

Meanwhile, the US dollar is inching higher today against its major peers, hovering around a 2-week high as traders come back from the long weekend and look at US ISM manufacturing data.

GBP/USD forecast – technical analysis

After running into resistance at 1.3265, GBP/USD has eased lower, testing support at 1.3140, the July ’23 high. The pair remains within the ascending channel dating back to late April.

Should the support hold, buyers will look to rise back towards the 1.3230 trendline resistance, ahead of 1.3260 and fresh YTD highs.

Should buyers break meaningfully below 1.3140, the next support is seen at 1.30, the round number, and the mid-line of the rising channel.

GBP/USD, USD/JPY Forecast: Two Trades to Watch_1

USD/JPY looks to ISM manufacturing PMIs ahead of a busy week

US ISM manufacturing PMI forecast to rise to 47.5Data this week could confirm or refute recession fearsUSD/JPY eases to 146.00

USD/JPY is falling after four straight days of gains. The yen is rising towards 146, rebounding from two-week lows, as it tracks a rally in Japanese government bond yields amid a hawkish outlook for BoJ's monetary policy.

Bank of Japan policymakers have recently supported a more hawkish stance should economic projections materialize, and the markets are betting that the central bank will raise interest rates again in December.

Yesterday, Japanese manufacturing PMI was revised modestly higher to 49.8 from 49.5, heading closer to stabilisation.

Today, the USD is holding steady as traders return from the long Labour Day weekend. Attention will be on the US ISM manufacturing survey, which will kick off a busy week for U.S. economic data.

The ISM manufacturing PMI is expected to improve slightly to 47.5 but remains below the 50 level, which separates expansion from contraction.

The data comes ahead of ISM services figures later in the week and Friday's non-farm payroll report. This week's data will either confirm or refute US recession concerns, which were sparked a month ago following a weaker-than-expected US non-farm payroll report.

The market expects the Federal Reserve to cut interest rates in September. However, the size of that rate cut is still up for debate, with the market pricing a 33% probability of a 50 basis point rate cut. Stronger data this week could help rein in expectations of a larger rate cut, lifting the US dollar.

USD/JPY forecast - technical analysis

USD/JPY recovered from support at 143.50 before stalling at 147.20. The price is testing support at 146.40, the 23.6% fib level of the 161.90 high and 141.70 low.

Sellers need to remove 146.40 and 145 round numbers to bring 143.50 back into sight. Below, 141.70 comes into focus.

On the upside, should 146.40 hold, buyers will look to extend gains towards 149.40, the mid-August high and the 38.2% fib level. GBP/USD, USD/JPY Forecast: Two Trades to Watch_2