Pump Prices Dip While Electricity Rates Hold Steady

Economic

Data Interpretation

Summary:

The national average for a gallon of gas hit $3.45,and the national and state average prices for L2 commercial electricity were unchanged from a week ago.

Falling by just three cents since last week, the national average for a gallon of gas hit $3.45, similar to the price in June. Meanwhile, the national and state averages for L2 commercial electricity remain the same as a week ago.

“With Tropical Storm Debby drifting up the I-95 corridor to visit the Mid-Atlantic and Northeast, the threat to Gulf Coast oil production and refining is over,” said Andrew Gross, AAA spokesperson. “But tensions in the Middle East and some overseas economic uncertainty may mitigate any drop in oil prices.”

With an estimated 1.2 million AAA members living in households with one or more electric vehicles, AAA lists the kilowatt-per-hour cost for Level 2 (L2) commercial charging by state.

Today’s national average for a kilowatt of electricity at an L2 commercial charging station is 34 cents.

According to new data from the Energy Information Administration (EIA), gas demand fell from 9.25 million b/d to 8.96 last week. Meanwhile, total domestic gasoline stocks rose from 223.8 to 225.1 million barrels. Gasoline production increased last week, averaging 10.0 million barrels per day. Crude oil production hit an all-time high of 13.4 million barrels per day. Lower gasoline demand, rising supply, and stable oil costs may lead to sliding pump prices.

Today’s national average for a gallon of gas is $3.45, five cents less than a month ago and 37 cents less than a year ago.

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

Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Bitcoin can beat its imminent “death cross” if it flips $62,000 to support, the latest analysis says.

In a dedicated X thread on Aug. 9, popular trader Benjamin Cowen used history to suggest how bulls might avoid a fresh BTC price dive.

$62,000 becomes key BTC price resistance hurdle

Recent BTC price action has led BTC/USD to the door of another moving average crossover classically known as a “death cross.”

This involves the downward-sloping 50-day simple moving average (SMA) crossing below its 200-day equivalent. Currently, the 50-day and 200-day SMAs stand at 61,998 and 91,882, respectively, per data from Cointelegraph Markets Pro and TradingView. Bitcoin Price Must Flip $62K to Avoid Worst 'Death Cross' Consequences_1

Bitcoin Price Must Flip $62K to Avoid Worst 'Death Cross' Consequences_1

BTC/USD 1-day chart with 50, 200SMA. Source: TradingView

The Death Cross gets its name from the assumption that the crossover acts as a prewarning for the downside of the BTC price once it is complete.

As Cowen shows, however, the results are often mixed, with the last daily death cross in 2023 in fact precluding a bout of gains.

“In 2023, BTC started its rally just after the death cross. It then got above its 50D SMA and subsequently held it as support before going higher,” he noted.

By contrast, in 2019, 2021 and 2022, a brief tap higher into the death cross event itself ultimately gave way to the expected result — losses.

“The durability of this move will likely depend on first BTC getting above its 50D SMA ($62k), and then holding it as support like it did in 2023,” Cowen concluded. Bitcoin Price Must Flip $62K to Avoid Worst 'Death Cross' Consequences_2

Bitcoin Price Must Flip $62K to Avoid Worst 'Death Cross' Consequences_2

BTC/USD chart. Source: Benjamin Cowen/X

He added that should that fail, downside may return until macroeconomic conditions notably change. Specifically, the United States Federal Reserve should perform a “sufficient pivot” on interest rates to boost crypto and risk assets.

Bitcoin open interest sluggish on BTC price rebound

BTC/USD continued its recovery on the day, reaching $62,775 into the prior daily close before returning to consolidate slightly lower at the time of writing. Bitcoin Price Must Flip $62K to Avoid Worst 'Death Cross' Consequences_3

Bitcoin Price Must Flip $62K to Avoid Worst 'Death Cross' Consequences_3

Source: Charles Edwards

Market observers noted a lack of rebound in futures market open interest despite the higher prices, this coming days after a giant flush rarely seen in Bitcoin’s history in terms of scale.

“This Bitcoin bounce has been mostly shorts covering positions in the futures market,” Julio Moreno, a contributor to onchain analytics platform CryptoQuant, wrote in part of an X response. Bitcoin Price Must Flip $62K to Avoid Worst 'Death Cross' Consequences_4

Bitcoin Price Must Flip $62K to Avoid Worst 'Death Cross' Consequences_4

Bitcoin exchange open interest (BTC). Source: Julio Moreno/X

Fellow contributor Axel Adler Jr meanwhile flagged the area above $62,000 as key resistance, with major support still at this week’s six-month lows beneath $50,000. Bitcoin Price Must Flip $62K to Avoid Worst 'Death Cross' Consequences_5

Bitcoin Price Must Flip $62K to Avoid Worst 'Death Cross' Consequences_5

BTC/USD chart. Source: Axel Adler Jr/X

Source: Cointelegraph

Risk Warnings and Disclaimers

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Bank of Russia

Central Bank

The Bank of Russia's updated medium-term forecast assumes a considerably higher projected path of the key rate for 2024–2026, which is required for stabilising inflation at the target level of around 4%.

Inflation:

In the second quarter of 2024, inflation in Russia reached 8.6% on a seasonally adjusted annual basis, up from 5.8% in the first quarter. This increase was significantly above the target level of 4%. The growth in prices accelerated, especially from May to June, impacting both core and non-core components of the consumer basket. Core inflation was recorded at 9.2% in Q2 2024, influenced by factors such as price indexation for domestically produced automobiles and increased price volatility in the tourism sector.

Labor Market and Wages:

In the first half of 2024, several factors contributed to inflationary pressures. One of these was the continued rise in real wages, which grew at a pace exceeding labor productivity due to the rigidity in the labor market. This wage growth contributed to the overall inflationary environment.

Economic Growth:

The positive output gap that was observed in the first quarter of 2024 continued to widen and remained significant in the second quarter. This expansion of the output gap was another contributor to the inflationary pressures in the economy.

Monetary Policy:

The Central Bank of Russia projects that inflation will slow down in the third quarter of 2024 under the influence of tight monetary conditions. In the fourth quarter, as saving activity increases and economic activity slows, the upward pressure on prices is expected to continue decreasing. The Central Bank forecasts that consumer price growth will be between 6.5% and 7.0% for the year 2024. By 2025, with ongoing monetary policy, inflation is expected to decrease to 4.0%–4.5%, stabilizing around 4% in subsequent years .

Commentary On The Medium-Term Forecast Of The Bank Of Russia

Risk Warnings and Disclaimers

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Owen Li

Stocks

Global shares firmed on Friday, capping a rollercoaster week on a calmer footing after U.S. jobs data eased concerns that the world's biggest economy was headed for a hard landing.

Stocks in Japan and elsewhere in Asia gained, taking their cue from a Wall Street bounce back on Thursday when data showed U.S. jobless claims fell more than expected last week, suggesting fears the employment market is unraveling were overblown.

Figures showing that China, the world's No. 2 economy, is taking a step back from deflation, also underpinned the better mood after sharp falls in stock benchmarks globally earlier in the week.

Oil prices headed for weekly gains of around 3% as fears of a widening Middle East conflict persisted.

The MSCI All Country stock index, was up 0.3% at 784.4 points, recovering much of the ground lost during the week.

The benchmark is 5.7% below its lifetime high of 832.35 reached on July 12, though still up 7.5% for the year.

In Europe, the STOXX index of 600 companies was up 0.7%, with the loss for the week all but erased.

In a sign of calmer nerves, the VIX index, also known as Wall Street's 'fear gauge', was in negative territory, a far cry from its record one-day spike on Monday.

Divergent central bank interest rate moves, a repricing of recession probability in the United States, thinner liquidity in August accentuating volatility, and Middle East tensions all combined to put the brakes on a months-long winning streak in stocks to record highs, analysts said.

"We are still in the month of August, so we can still have some volatility," said Marie de Leyssac, portfolio manager at Edmond de Rothschild Asset Management.

Investors will continue to study employment data, keep an eye on the Bank of Japan, and particularly on the annual meeting of global central bankers hosted by the Kansas City Fed in Jackson Hole later this month, she said.

"This year I think it is a really important meeting because we will have more insight into what (Federal Reserve Chair) Jerome Powell sees for the future, and maybe more insight on the path to lower rates," de Leyssac said.

Wall Street stock index futures, were firmer, with no major U.S. data expected on Friday.

Nikkei Recovers

The BOJ's reassurance that it will not be hiking interest rates amid market volatility helped sentiment recover.

Japan's Nikkei stocks benchmark closed 0.6% higher, erasing most of the losses since a 12.4% crash on Monday.

The yen also veered from negative to positive through the session, last trading at 147 per dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.8%, more than reversing the drop from Thursday. For the week, it has reversed earlier losses to be largely flat.

Also helping sentiment is Chinese data showing that consumer inflation ran at 0.5% in July, above forecasts of a gain of 0.3%, suggesting there is less risk of the economy sliding into outright deflation.

"The prospect of better-than-feared U.S. growth and a weaker yen constrain the fundamental and technical risks that inspired the extreme volatility experienced at the start of the week," said Kyle Rodda, a senior financial market analyst at Capital.com.

Some Federal Reserve officials said they were increasingly confident that inflation is cooling enough to allow interest-rate cuts ahead, but not because of the recent market rout.

The U.S. dollar gained as markets gave up bets on an emergency rate cut from the Fed, and is set for a 0.4% gain on yen this week, despite Monday's precipitous 1.5% plunge.

Bond yields have climbed this week with safe havens in less demand. U.S. 10-year yields held at 3.9627%, well off Monday's low of 3.667%, and were set for a weekly gain of about 20 basis points.

Two-year yields were trading at 4.0282%.

Brent crude futures were trading little changed at $79.10 a barrel, but were up more than 3% for the week, while U.S. West Texas Intermediate crude was flat at $76.11, also up over 3% for the week.

Gold prices eased slightly to trade at $2,424 an ounce, and heading for a drop on the week.

Source: Reuters

Risk Warnings and Disclaimers

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Bank of Russia

Central Bank

On 26 July 2024, the Bank of Russia’s Board of Directors decided to increase the key rate by 200 basis points to 18.00% per annum. Inflation has accelerated and is developing significantly above the Bank of Russia’s April forecast. Growth in domestic demand is still outstripping the capabilities to expand the supply of goods and services. For inflation to begin decreasing again, monetary policy needs to be tightened further. Returning inflation to the target requires considerably tighter monetary conditions than presumed earlier. The Bank of Russia will consider the necessity of further key rate increase at its upcoming meetings. The Bank of Russia’s forecast has been substantially revised, including the inflation forecast for 2024, which has been raised to 6.5–7.0%. Given the monetary policy stance, annual inflation will decline to 4.0–4.5% in 2025 and stay close to 4% further on.

In 2024 Q2, the current seasonally adjusted price growth averaged 8.6% in annualised terms after 5.8% in the previous quarter. In recent months, the acceleration of inflation was partially driven by one-off factors. Concurrently, underlying inflationary pressures also rose. In 2024 Q2, the average seasonally adjusted core inflation went up to 9.2% in annualised terms from 6.8% in the previous quarter. Annual inflation grew from 8.6% in June to 9.0% as of 22 July. This growth reflects, among other things, the indexation of utility rates from 1 July.

Inflation expectations of households and financial market participants continued to grow. Businesses’ price expectations generally remained unchanged but were still high. Elevated inflation expectations increase the inertia of underlying inflation.

High-frequency indicators for 2024 Q2 show that the Russian economy continues to grow rapidly. Consumer activity remains high amid a significant increase in households’ incomes and positive consumer sentiment. Substantial investment demand is supported by both fiscal incentives and high profits of businesses. The significant upward deviation of the Russian economy from a balanced growth path is not decreasing.

Labour shortages continue to grow. In these conditions, the growth in domestic demand does not result in a proportional expansion of the supply of goods and services but rather increases the costs of businesses and, consequently, intensifies inflationary pressures.

Monetary conditions continued to tighten. Money market rates and OFZ yields have risen significantly, reflecting, among other things, market participants’ expectations for the July decision on the key rate and its further path. Both credit and deposit rates have increased. High market interest rates support the propensity to save but do not sufficiently constrain lending. In 2024 Q2, lending activity remained high in both retail and corporate segments.

Credit and deposit rates will continue to adjust to the growth in money market rates and OFZ yields already in place. Monetary policy will help to additionally increase the savings rate, including by returning lending to more balanced growth rates. In the retail segment, bank lending conditions will also tighten as a result of the cancellation of the non-targeted subsidised mortgage programme from 1 July and the entry into force of previously adopted macroprudential measures.

Over the medium-term horizon, the balance of inflation risks is still tilted to the upside. The key proinflationary risks are associated with changes in terms of trade (including as a result of geopolitical tensions), persistently high inflation expectations and an upward deviation of the Russian economy from the balanced growth path. Disinflationary risks are primarily related to a faster slowdown in domestic demand growth than expected in the baseline scenario.

The Bank of Russia assumes that the announced fiscal policy normalisation path in 2024 and further on will remain unchanged. Changes in this path may require a revision of the monetary policy parameters.

Risk Warnings and Disclaimers

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Warren Takunda

Commodity

Oil prices edged up in Asian trading on Friday, heading for a weekly gain of more than 3% as U.S. jobs data calmed demand concerns and fears of a widening Middle East conflict persisted.

Brent crude futures rose 2 cents, or 0.03%, to $79.18 a barrel by 0651 GMT. U.S. West Texas Intermediate crude futures were up 10 cents at $76.29 per barrel.

Both Brent and WTI were set to gain more than 3% on a weekly basis.

"Risk sentiment recovered from the market rout in the Asian session today, with the Chinese inflation data offering positive signals in the economy," said independent market analyst Tina Teng, adding that U.S. jobs data was also bullish for oil.

China's consumer price index (CPI) rose last month at a rate slightly faster than expected, Friday statistics bureau data showed, edging up 0.5% from a year earlier in July, versus a 0.2% rise in June. That topped the expected 0.3% increase in a Reuters poll of economists.

The inflation data prompted a rise in China stocks, even though analysts attributed higher prices to weather disruptions that affected food supplies, and cautioned there was little sign of a pick-up in consumer demand.

Sentiment in the United States was buoyed after data showed the number of Americans filing new applications for unemployment benefits fell more than expected last week, suggesting fears that the labor market was unraveling were overblown and easing recession concerns.

The dollar on the jobs data. A stronger dollar usually tends to lower oil prices, however, as buyers using other currencies have to pay more for their dollar-denominated crude.

Israeli forces stepped up airstrikes across the Gaza Strip on Thursday, killing at least 40 people, Palestinian medics said, in further battle with Hamas-led militants as Israel braced for potential wider war in the region.

"Crude oil continued its recovery from its recent plunge as elevated geopolitical risks came into focus," said ANZ analyst Daniel Hynes.

The killing last week of senior members of militant groups Hamas and Hezbollah had raised the possibility of retaliatory strikes by Iran against Israel, stoking concerns over oil supply from the world's largest producing region.

Iran-aligned Houthi militants continued attacks this week on international shipping near Yemen, in solidarity with Palestinians in the war between Israel and Hamas.

On Thursday, the United Kingdom Maritime Trade Operations (UKMTO) agency said it had received a report of an incident near the coast of Mokha, a port city in Yemen.

Lending further support to prices, Libya's National Oil Corp. declared force majeure at its Sharara oilfield from Wednesday, the company said in a statement, adding that it had gradually reduced the field's output because of protests.

Also in the Middle East, the king of Saudi Arabia, the world's largest oil exporter, decreed that the cabinet could convene in the absence of himself and the prime minister, his son Crown Prince Mohammed bin Salman, state media said on Thursday.

The 88-year-old King Salman was treated for lung inflammation in May. Prince Mohammed, 38, has been the de facto ruler since 2017.

Markets in key oil trading hub Singapore were closed for a public holiday.

Source: Reuters

Risk Warnings and Disclaimers

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Samantha Luan

Economic

What may appear to be chaos in financial markets may actually just be a normalization that will ultimately help protect investment portfolios rather than leaving them in trouble.

There's no doubt that a bubble has burst amid the wild swings of the past week.

But this bubble mainly exists in high-octane trades, which not only depend on low market volatility but also help keep volatility low - at least for a while. So what we may be seeing now is a rapid return to historically familiar, albeit somewhat noisy, levels of volatility.

The average investor should take some comfort in how most traditional mixed-asset portfolios perform during turbulent times.

Stock and bond prices have generally risen and fallen in tandem over the past year. This positive correlation has long been a major concern for many because it reduces the benefits of holding both assets. But what we just saw is a return to negative correlation.

Bonds and stocks once again become natural hedges against each other, somewhat protecting the common "60/40" stock/bond portfolio.

Chart: U.S. stock-bond correlation returns to "normal" negative correlation

From the beginning of the month to Monday, the S&P 500 index fell 8%, while U.S. Treasury price indexes , gained about 4%.

This is still a total hit for traditional 60/40 portfolio investors, but otherwise the losses from such extreme stock moves could be much greater. This is crucial to avoid the kind of feared "de-risking" of portfolios that could well contribute to the very economic downturn they are trying to avoid.

In other words, the "good news is bad news" trading bias is once again reversed.

Against a backdrop of high inflation and interest rate hikes over the past two years, anything that exacerbates this situation tends to hit borrowing costs, bond and stock prices simultaneously.

But that appears to have changed now, with inflation almost back near the Fed's target and Fed Chairman Jerome Powell taking off the reins. Cyclical worries about economic growth - such as last week's unexpectedly sharp rise in unemployment - could weigh on elevated stocks but also push bond prices higher as they increase the likelihood of the Federal Reserve easing policy. The Market May Be Sinking, Not Drowning_2

The Market May Be Sinking, Not Drowning_2

Figure: VIX rises sharply, does it mean a reversal?

Additionally, we appear to be seeing a normalization of the key "fear gauge," Wall Street's equity volatility index - the VIX. After Monday's surge, the index appears to be returning to historically normal levels. Before Monday, it had been well below normal levels for nearly 18 months.

After the VIX index itself set a record single-day gain, VIX futures expiring at the end of this year have also calmed down and have fallen back to a level almost in line with the 30-year average.

As GAM Investments strategist Julian Howard commented on Thursday: "Market volatility is inevitable and is not a reason for mass hysteria."

Chart: Futures lower U.S. interest rate outlook

Historic or hysterical?

The market's rapid reset doesn't offer many clues about the likelihood of a future recession or whether the heady valuations of tech giants and their new AI toys can be sustained.

But it helps recalibrate the market away from extreme positioning. Extreme positioning is likely to trigger shocks when consensus thinking is challenged; and as of late this type of thinking has taken for granted that we will see continued economic expansion and low-volatility trading is likely to continue to run wild.

Chart: The Federal Reserve is about to cut interest rates, and the U.S. "GDPNow" still predicts that the economy will grow by 2.9%

Regarding recession scores, consider JPMorgan's latest view that there's about a one-in-three chance that the U.S. will be in recession over the next year. And this somewhat bearish forecast still assumes that the most likely outcome is a "soft landing," where inflation is contained without triggering a painful recession or a sharp rise in unemployment. Keep in mind that the chance of a recession in any future year is typically 20%.

Given that the Atlanta Fed's real-time "GDPNow" tracking model still predicts the U.S. current quarter growth rate as high as 2.9%, the chances of outside predictions of a recession next year coming true are still slim.

What seems certain is that the Fed will start cutting interest rates next month anyway, mainly because it believes that inflation is now back under control and that current "real" interest rates are too restrictive for a weak labor market.

The extent of the easing cycle may be smaller than this week's freefall in bond yields and money markets suggests. But the Fed's ability to prevent a recession by lowering interest rates will have a huge impact on the stock market regardless.

Stephen Dover of Franklin Templeton Investment Institute points out that even in the event of a recession, the average stock market return in the year after the Fed's first rate cut is close to 5%. In the absence of a recession and interest rate cuts, this return would have been 16.6%.

On the other hand, high equity valuations and skepticism about artificial intelligence may cause investors holding mixed-asset funds to rebalance and reduce their equity positions in an environment of more normal volatility and heightened recession fears.

If this shift occurs, it could create significant headwinds for the stock market.

Chart: Fed's interest rate path

JPMorgan analysts noted that global equity allocations remain well above average despite the stock market's plunge over the past week. If these valuations simply returned to the averages of the past decade, they believe the stock price could fall another 8%.

There's always the risk of a dramatic burst of volatility having a ripple effect, especially because nervous investors may start asking a fundamental question: "What if it happens again?"

"The biggest takeaway from this week's price action is that all risk managers now have to simulate a 50-point rise in the VIX over two business days, forcing every sensible investor to Investors deleverage."

Then again, maybe risk managers always said this extreme scenario was possible.

So while the last few days have been filled with sound and fury, a return to more "normal" market behavior amid the noise is likely to lead to a safer and more sustainable environment for investors.