Retail Trade, June 2024

Economic

Summary:

Retail sales decreased 0.3% to $65.7 billion in June. Core retail sales were up 0.4% in June.

Retail sales decreased 0.3% to $65.7 billion in June. Sales were down in four of nine subsectors and were led by decreases at motor vehicle and parts dealers.

Core retail sales—which exclude gasoline stations and fuel vendors and motor vehicle and parts dealers—were up 0.4% in June.

In volume terms, retail sales increased 0.1% in June.

Retail sales were down 0.5% in the second quarter. In volume terms, quarterly sales declined 0.3%.

Sales down at motor vehicle and parts dealers

The largest decrease in retail sales in June was observed at motor vehicle and parts dealers (-2.1%). The decrease was led by lower sales at new car dealers (-2.9%), followed by used car dealers (-0.6%). The largest increase in the motor vehicle and parts dealers subsector came from other motor vehicle dealers (+2.5%).

Sales at gasoline stations and fuel vendors (-0.5%) were down in June. In volume terms, sales at gasoline stations and fuel vendors increased 2.6%.

Core retail sales rise

Following a decrease of 1.3% in May, core retail sales were up 0.4% in June on higher sales at food and beverage retailers (+1.2%), which were led by gains at supermarkets and other grocery retailers (except convenience retailers) (+1.8%). Gains at beer, wine and liquor retailers (+0.4%) and specialty food retailers (+0.5%) were offset by lower sales at convenience retailers and vending machine operators (-1.9%).

The largest decrease in core retail sales in June came from sporting goods, hobby, musical instrument, book, and miscellaneous retailers (-0.8%).

Sales down in seven provinces

Retail sales decreased in seven provinces in June. The largest provincial decrease was observed in Ontario (-0.4%), led by lower sales at motor vehicle and parts dealers. In the census metropolitan area of Toronto, sales were up 0.3%.

In Manitoba, retail sales decreased 2.2% in June, led by lower sales at motor vehicle and parts dealers.

The largest provincial increase in retail sales in June was observed in Newfoundland and Labrador (+0.2%). This increase was led by higher sales at gasoline stations and fuel vendors.

Retail e-commerce sales in Canada

On a seasonally adjusted basis, retail e-commerce sales were down 2.4% to $3.8 billion in June, accounting for 5.7% of total retail trade, compared with 5.8% in May.

Advance retail indicator

Statistics Canada is providing an advance estimate of retail sales, which suggests that sales increased 0.6% in July. Owing to its early nature, this figure will be revised. This unofficial estimate was calculated based on responses received from 53.4% of companies surveyed. The average final response rate for the survey over the previous 12 months was 89.6%.

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Alex

Commodity

(Aug 26): Gold’s record-setting rally above US$2,500 (RM10,871.88) an ounce looks to have further to run as the US Federal Reserve (Fed) prepares to chop rates, traditional drivers such as lower yields return, and Western investors pile back in.

“Everybody thought the Fed was going to be the last to cut, but now they are getting in line,” said Jay Hatfield, the chief executive officer of Infrastructure Capital Advisors, who recently went long on gold options for the first time in years. Chair Jerome Powell’s Jackson Hole speech — which promised rate cuts — was a watershed moment for bullion, according to Hatfield.

Bullion has dazzled this year, setting a procession of records that marked out the precious metal as one of the strongest performers among major commodities. Its ascent in the first half came courtesy of strong central-bank buying plus Asian purchases, which offset the drag from a rising US dollar, higher Treasury yields, and outflows from bullion-backed exchange-traded funds (ETFs). Now all three of those drivers may run in gold’s favour.

“That opportunity cost of holding gold is coming down,” said Rajeev De Mello, a global macro portfolio manager at GAMA Asset Management SA. “This very fast decline in real yields, and the weakening of the dollar generally, makes me quite happy to use gold as another currency to be short on the dollar.”

So far in 2024, spot gold has rallied by more than a fifth, with banks including Goldman Sachs Group Inc saying as far back as April that prices had the scope to hit US$2,700 an ounce. After Powell’s roadmap at the Jackson Hole symposium last Friday, US 10-year real yields have now retreated to the lowest since December last year. That benefits gold as it doesn’t pay interest.

Among investors, interest has become more widespread. Hedge funds and speculators have been adding bullish wagers on Comex — with net-long bullion positions hitting the highest in more than four years, according to Commodity Futures Trading Commission data.

There are also signs of a revival in demand for gold-backed ETFs. Holdings in SPDR Gold Shares, one of the leading products, have expanded for the eight straight weeks, the longest run of inflows since mid-2020.

To be sure, even with Western investors warming to the precious metal, prices may be vulnerable to softening consumption in Asia, where lofty prices have hurt demand. China’s central bank also recently paused its substantial monthly purchases, weakening two of the pillars that helped lift gold in the first half.

For now, Citigroup Inc sees inflows into ETFs expanding “significantly” over six to 12 months, with demand bolstered by looser monetary policy, as well as a potential increase in volatility amid recessionary risks. Gold may reach US$3,000 by mid-2025, the bank said in a note before Powell’s address.

The market can expect large ETF flows, as well as ongoing speculator demand, when the Fed actually makes its first rate cut, according to UBS Group AG, which sees prices at US$2,600 for the last quarter of 2024. Increasing geopolitical risks should also lift demand for portfolio hedges, said Wayne Gordon, a commodities strategist at UBS Global Wealth Management.

“It’s really notable that people are actually starting to move to that physical gold ETF side now,” said Ryan McIntyre, a managing partner of Sprott Inc, a Toronto-based precious metals and critical minerals asset manager with US$31.1 billion in assets under management. “Buying through the ETFs is going to be a big, big part of gold’s story.”

Source: The edge markets

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Gfk

Economic

GfK's long-running Consumer Confidence Index stood at -13 in August, the same as July. Three measures were up and two were down in comparison to last month's announcement.

Joe Staton, Client Strategy Director GfK, says: “The Overall Index Score is unchanged at -13, although there are interesting contrasts behind this headline. On the one hand, our expectations for the UK’s economy are down for the first time since February, with this measure registering a four-point decrease to -15. There’s a three-point drop in how consumers view the economy last over the past year too. At the same time, there are strong personal financial expectations for the coming year with a three-point uptick in this measure to +6. This more positive outlook may be due to a mortgage friendly interest rate cut at the beginning of August – and hopes of more to come. The three-point jump in the Major Purchase Index is great news for retailers with more shoppers agreeing that now is a good time to buy big-ticket items. The wider point beyond the contrasts is that all the key numbers this month are significantly more encouraging than 12 and 24 months ago. But as we move into autumn and winter, how much further will this slow improvement in the mood of the nation run?”

UK Consumer Confidence Measures – August 2024:The Overall Index Score stood at -13 in August, the same as July. Three measures were up and two were down in comparison to last month’s announcement.

Personal Financial Situation:The index measuring changes in personal finances during the last year is up one point at -7; this is eight points better than August 2023.The forecast for personal finances over the next 12 months is up three points at +6, which is nine points higher than this time last year.

General Economic Situation:The measure for the general economic situation of the country during the last 12 months is down three points at -35; this is 17 points higher than in August 2023.Expectations for the general economic situation over the next 12 months are down four points at -15; this is 15 points better than August 2023.

Major Purchase Index:The Major Purchase Index is up three points to -13; this is 11 points higher than this month last year.

Savings Index:The Savings Index has increased six points to +33; this is six points higher than this time last year.

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

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Samantha Luan

Economic

Financial Performance

Netflix’s Q2 2024 earnings report highlights a robust performance, demonstrating a 17% growth in revenue and a notable increase in operating margin to 27.23% from 22% in the same quarter last year. The intense growth in the operating margin during the past two decades is shown in the chart below. The revenue growth was primarily driven by a 16% increase in the average number of paid memberships.

The revenue and operating margin increase signals Netflix’s effective strategy in expanding its subscriber base and optimizing operational efficiency. These results suggest a positive outlook for Netflix, as the company has surpassed expectations and demonstrated its ability to capitalize on its growing global footprint.

Netflix Poised for Continued Growth Despite Overbought Levels_1

Moreover, the company’s decision to enhance its TV homepage and introduce various hit series and films has attracted a larger audience. The success of series like “Bridgerton S3” and movies such as “The Roast of Tom Brady” contributed to Netflix achieving its largest live audience to date.

By focusing on popular content and user experience, Netflix is positioned well to retain and grow its subscriber base. This strategic emphasis on content and platform innovation is bullish for the company, suggesting sustained user engagement and revenue growth.

Netflix’s steady progress in scaling its advertising business also bodes well for its future growth. The 34% quarter-on-quarter growth in ads tier membership indicates a significant new revenue stream still in its early stages of development.

Netflix plans to test an in-house ad tech platform in Canada in 2024. They intend to expand this platform more broadly in 2025, setting the stage for a more diversified and robust revenue model. This strategic move into advertising could unlock substantial value for the company and its shareholders, further supporting a bullish outlook.

Finally, the impressive year-over-year growth in EPS, from $3.29 to $4.88, reflects Netflix’s enhanced profitability. Including a $43 million non-cash unrealized gain from foreign exchange remeasurement adds to the strong earnings performance, highlighting Netflix’s effective financial management amid currency fluctuations. This financial resilience, combined with strategic growth initiatives and content innovation, underscores a bullish case for Netflix as it continues to expand its global presence and revenue streams.

On the other hand, Netflix’s forecast for the remainder of 2024 also indicates an optimistic outlook, with an expected revenue growth of 14% to 15%, up from the previous estimate of 13% to 15%. This revision reflects the company’s confidence in solid membership growth and the resilience of its business model despite foreign exchange challenges.

Netflix also projects an operating margin increase of 26%, driven by improved revenue expectations and disciplined expense management. These factors suggest a bullish trend for Netflix as it continues to expand its profitability and market presence, demonstrating strong financial health and the ability to navigate global economic conditions effectively.

Technical Performance

The technical outlook for Netflix is strongly bullish, as seen in the monthly chart below. It shows that the stock price has remained within a bullish trend throughout the 21st century. This trend is observed using the blue trend lines, and the price has continuously traded within this channel for the past two decades. During this period, two strong buy signals were observed within this bullish trend. The first buy signal was at the low of $7.544 in 2012, while the second occurred in 2022 at $162.71.

The RSI was nearly oversold when these signals emerged, and the price resulted in a continued rally following these signals. The stock price has continuously risen since the 2022 bottom, indicating that it may achieve a solid upward move in the next few months. The chart shows that the RSI is approaching overbought levels, but there are no signs of a top formation. Historically, Netflix has continued to move upward, even within overbought market levels.

Netflix Poised for Continued Growth Despite Overbought Levels_2

To further understand the above analysis, the calculations show that Netflix has the potential to continue its bullish momentum for longer period due to the confirmation of a bottom. This scenario is illustrated in the chart below, which shows that the 2004 drop in Netflix was a 78% decline, resulting in a bottom in Q1 2005 at $1.2729. The 2012 drop was an 83% decline, leading to a bottom at $7.5443, while the 2022 drop was a 77% decline, resulting in a bottom at $162.71.

These bottoms initiated a rally of over 1500% from their respective lows toward the cycle top. Therefore, Netflix’s bottom in 2022 will likely continue higher, reaching new highs. The rally has not yet exceeded a 500% gain from the respective bottom, suggesting there is much more potential for growth in the next months.

Based on the above explanation, Netflix’s stock price is still likely to remain elevated at higher levels, and every short-term correction is likely to be bought. Despite the overbought conditions, the price is likely to continue moving higher.

Netflix Poised for Continued Growth Despite Overbought Levels_3

Risk Analysis

Despite Netflix’s strong financial and technical performance, several market risks could impact its future growth and profitability. One significant risk is the potential for increased competition in the streaming industry, which could lead to a slowdown in subscriber growth or even a decline in market share.

Competitors like Disney+, Amazon Prime Video, and HBO Max continue investing heavily in content creation and distribution, which may dilute Netflix’s market presence and pressure its pricing power. Additionally, changes in consumer preferences, such as a shift away from streaming services or a preference for competitors’ offerings, could negatively affect Netflix’s revenue growth and subscriber base.

Another market risk relates to macroeconomic factors and foreign exchange fluctuations, which Netflix has acknowledged as potential challenges. Given the company’s substantial international operations, currency volatility can significantly impact its reported financial results. For example, a strengthening U.S. dollar against other currencies could reduce the value of Netflix’s international revenues when converted back to dollars, negatively impacting its profitability.

Furthermore, global economic downturns or recessions could reduce disposable income, lowering demand for discretionary services like streaming subscriptions. This risk is particularly relevant as Netflix continues to expand its presence in emerging markets, where economic instability could have a more pronounced effect on consumer behavior.

Bottom Line

In conclusion, Netflix’s Q2 2024 earnings report demonstrates strong financial and technical performance, supported by impressive revenue growth, an expanding subscriber base, and effective cost management. The company’s focus on content innovation, user experience, and a diversified revenue model, including an expanding advertising business, positions it well for continued growth.

While the technical analysis shows a bullish trend with significant potential for future gains, market risks such as increased competition, macroeconomic factors, and currency fluctuations could pose challenges. Nevertheless, Netflix’s strategic initiatives and financial resilience suggest it is well-prepared to navigate these risks and capitalize on growth opportunities, maintaining a positive outlook for its future performance. The cycle’s bottom in 2022 for Netflix’s stock price suggests that the stock will likely move higher, and investors may consider buying on dips.

Source:FXEMPIRE

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

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Warren Takunda

Cryptocurrency

Bitcoin heads into the August monthly close with a welcome recovery as BTC price action targets $65,000.

The largest cryptocurrency has delivered a remarkable show of strength over the past week, and traders hope the good times will continue.

A sideways weekend aside, BTC/USD is cementing its gains and is now up an impressive 40% from the month’s $45,500 lows.

The coming monthly candle close should thus provide an interesting trading environment as anticipation grows over a breakout from a consolidation phase which has lasted nearly half a year.

Can Bitcoin finally retackle all-time highs?

Month-to-date, BTC/USD is now almost back at its starting position, but plenty of volatility catalysts await.

Macroeconomic data will come thick and fast toward the end of the week, presenting a fresh test of nerve for the increasingly risk-averse Bitcoin short-term holder cohort.

Fundamentals, meanwhile, look good, with mining difficulty due a modest uptick in the coming days.

Sentiment is back in neutral territory, with the average crypto investor leaving their cold feet behind with impressive speed.

Cointelegraph takes a closer look at the state of play on Bitcoin ahead of a key week for the cryptocurrency which just a fortnight ago was battling calls for a fresh bear market.

Bitcoin monthly close in the spotlight

Bitcoin is firmly bouncing back after a harrowing start to August, but traders’ attention is now on the monthly close. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_1

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_1

BTC/USD 1-hour chart. Source: TradingView

Such events constitute volatility triggers on their own, and while up 40% versus the month’s lows, BTC price action has much to contend with.

“Bitcoin Fought its way back to an almost break even August,” popular trader Daan Crypto Trades summarized on X alongside data from monitoring resource CoinGlass. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_2

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_2

BTC/USD monthly returns (screenshot). Source: CoinGlass

Order book liquidity insights nonetheless show formidable resistance lingering overhead, with spot BTC price separated from all-time highs by a wall of asks. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_3

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_3

BTC liquidation heatmap (screenshot). Source: CoinGlass

“Now let's see if there's also fuel to actually push higher for a change,” Daan Crypto Trades continued.

A further post acknowledged the unprecedented length of BTC price consolidation following its last all-time high in mid-March.

“Bitcoin It has been close to 6 months of ‘Consolidation’ at the previous cycle high,” he told followers.

“This is by far the longest time it took to break a previous all time high. It was also the quickest price has made a new all time high in a cycle (before the halving). It all balances out.”

BTC/USD 2-week chart. Source: Daan Crypto Trades/X

Fellow trader Crypto Tony joined those calling for a solid reclaim of support to sustain further recovery moves. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_5

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_5

Source: Crypto Tony/X

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD at the time of writing at around $63,700, having stayed flat throughout the weekend.

PCE week arrives mid countdown to Fed rate cut

The Fed’s “preferred” inflation metric forms one of the week's macroeconomic data highlights as markets become more confident over financial policy easing.

The July print of the Personal Consumption Expenditures (PCE) index is due on Aug. 30, a day after US Q2 GDP data.

Both will follow a key earnings report from NVidia — an event which has become a yardstick for tech industry health this year.

Trading resource The Kobeissi Letter thus told X followers to “buckle up for a wild week ahead.”

“Nvidia earnings and PCE inflation in the same week make for great trading conditions,” it wrote. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_6

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_6

Fed target rate probabilities. Source: CME Group

PCE comes at a time when markets have baked in 100% odds of an interest rate cut in mid-September while also giving increasing credence to this cut being more than the minimum 0.25%.

The latest data from CME Group’s FedWatch Tool puts the odds of a 25-basis-point and 50-basis-point cut at 61.5% and 38.5%, respectively.

“Rate cuts are confirmed for Sep but there was no indication on how much, so August Payrolls will be critical,” trading firm QCP Capital wrote in an update to Telegram channel subscribers over the weekend.

“A 25bp cut is likely to be bullish, while a 50bp cut could indicate the Fed is taking acute action to prevent the economy from falling flat.”

Mining difficulty set to resume uptrend

Bitcoin network fundamentals show signs of an about-turn after testing conditions over the past month.

The latest estimates from monitoring resources BTC.com and MiningPoolStats show the mining sector forging a path higher despite reports of a profitability squeeze.

Mining difficulty, which dropped by 4.2% at its last automated readjustment, is set to recover by 2.8% this week.

This will leave the metric inches from a new all-time high, canceling out the effects of the early-August BTC price slump below $50,000. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_7

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_7

Bitcoin network fundamentals overview (screenshot). Source: BTC.com

At the same time, raw hashrate readings suggest an uptrend still firmly in place for the processing power dedicated to mining, with a new all-time high spike recorded on Aug. 23. This totaled 774 exahashes per second (EH/s), with known pools contributing 682 EH/s. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_8

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_8

Bitcoin hashrate raw data (screenshot). Source: MiningPoolStats

Earlier, Cointelegraph reported that despite miner sales tailing off in recent weeks, their overall impact on BTC price action has become dwarfed by institutional investment forces.

Short-term BTC holders distribute $10B in a week

Bitcoin’s short-term holders (STHs) have distributed coins to the market over the past week as prices recover.

Data from onchain analytics platform CryptoQuant shows that the week-on-week net position change for the STH cohort was more than $10 billion lower as of Aug. 25.

“This indicates an increase in selling by STH,” contributor Amr Taha wrote in one of the platform’s Quicktake blog posts, referencing a chart by fellow analyst Axel Adler Jr. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_9

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_9

Bitcoin STH net position change (screenshot). Source: CryptoQuant

STH entities are those hodling a given amount of BTC for 155 days or less, and correspond to the more speculative end of the Bitcoin investor spectrum.

Recent BTC price volatility hit the cohort hard, with mass selling at a loss recorded into the six-month lows on BTC/USD.

Now, the STH aggregate cost basis is in focus as a potential line of support should a new price dip begin.

The combined STH cost basis currently stands at $63,600, per data uploaded to X by investment firm MS2 Capital.

Among the speculators, those hodling for up to a month have a lower cost basis of between $60,000 and $62,000. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_10

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_10

BTC/USD 1-day chart. Source: MS2 Capital/X

Crypto launches higher from brink of "extreme fear"

Perhaps unsurprisingly, last week’s BTC price recovery had an instant effect on crypto market sentiment.

This is reflected in the Crypto Fear & Greed Index, which has more than doubled its readings in a matter of days—from 26 100 on Aug. 21 to 55 100 at the time of writing.

The sentiment shift to which that change corresponds suggests that the average crypto investor’s mindset has gone from the verge of “extreme fear” to knocking on “greed.” BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_11

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_11

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

The recovery is echoed by a CryptoQuant metric dedicated to Bitcoin futures market sentiment. This narrowly avoided a trip to “extreme fear” in August. BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_12

BTC Price Dip Gone by September? 5 Things to Know in Bitcoin This Week_12

BTC futures sentiment index (screenshot). Source: CryptoQuant

Source: Cointelegraph

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Warren Takunda

Economic

An expected U.S. interest rate cut next month is unlikely to help the overvalued Indian rupee, even as its emerging market peers gain, bankers said.

The rupee was nearly flat on Monday after Federal Reserve Chair Jerome Powell on Friday endorsed an imminent start to rate cuts.

The move was in line with the rupee's recent underperformance as the currency has failed to gain from the dollar's broad slump.

The Indian currency has weakened slightly this month, despite a more than 3% drop in the dollar index.

Meanwhile, peers Brazilian real, Thai baht, Indonesian rupiah and Malaysian ringgit have climbed about 5%.

India's central bank will likely welcome the underperformance as the rupee's real effective exchange rate (REER) - a measure of its competitiveness - rose to a near 7-year high last month.

The rupee's 40-currency REER was at 107.3 in July, signaling that the rupee was overvalued by about 7%, according to the Reserve Bank of India's latest monthly bulletin.

The overvaluation means the Reserve Bank of India will likely prevent a large appreciation in the rupee's exchange rate.

"Despite broader USD weakness, the Reserve Bank of India has been keeping the currency stable. In our view, this provides an opportunity for the REER to come down," Akshay Kumar, head of global markets at BNP Paribas India, said.

Indian Rupee Likely to Miss Fed Pivot-Fueled Emerging Market Rally_1

"From a policymaker's perspective, the higher (REER) reading would be a risk to India's export competitiveness," private lender HDFC Bank said in a note.

India's merchandise trade deficit jumped to a 9-month peak in July, hit by sluggish exports.

The rupee has declined 0.7% this year and was quoted at 83.88 to the U.S. dollar at 2:00 p.m. IST.

There is "little chance" of the rupee rising past 83.50, a senior trader at a public sector bank said.

The RBI had bought dollars near that level in July and was likely to do so again, he said.

Analysts have retained their negative outlook on the rupee even as bullish bets on most Asian currencies rose in August, according to a Reuters poll.

Indian Rupee Likely to Miss Fed Pivot-Fueled Emerging Market Rally_2

Asian currencies' performance against US dollar over 2024

Source: Reuters

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Danske Bank

Economic

‘The time has come for policy to adjust, and the direction of the travel is clear’ said Federal Reserve (Fed) Chair Jerome Powell at his Jackson Hole speech on Friday. He didn’t give any guidance regarding the size of the coming rate cut despite speculation of at least one jumbo rate cut before the end of the year. Instead, he kept the door open for large cut bets. ‘The pace of rate cuts will depend on the incoming data, the evolving outlook and the balance of risks’ he said.

And Chicago Fed’s Governor Goolsbee said that it’s time to pay more attention to the employment side, making it clear for everyone that – as the inflation side seems to be under control – the developments in the employment leg will determine the size of the cuts. And the employment data of late has been weak – no alarmingly weak just yet but weak enough – to keep the doves in charge of the market after Powell’s dovish speech last Friday. The US yields and the US dollar index further dived. The yields and the dollar are now waiting impatiently next week’s jobs data update – as the jobs data gains importance after a long focus on inflation.

But before that, we will be watching the US GDP update this Thursday and the core PCE index – the Fed’s favourite gauge of inflation on Friday. The US GDP is expected to have rebounded to 2.8% in Q3, from 1.4% printed a quarter earlier. But Atlanta Fed’s GDP Now index suggests that the Q3 growth may be slower than that – around 2%.

The expectation of a 50bp cut has been rising slowly but surely. And the risk assets are surfing on that vibe in the absence of a major stress. The S&P500 and Nasdaq extended gains by more than 1% and the Russell 2000 index jumped more than 3% on Friday. I remain convinced that a 25bp cut is the right dose of dovishness to help keep appetite intact in the stock markets.

In the FX, the US dollar’s further dive pushed the EURUSD to 1.12 on Friday, but the pair sees resistance at this level in Asia this morning, and I still believe that the euro’s recent surge is overdone against the US dollar and a correction would be healthy at the current levels. This week, the Eurozone countries will be releasing their preliminary CPI numbers for August and the expectations are weak. EZ headline inflation may have eased from 2.6% to 2.2%, while core inflation is still seen a bit sticky slightly below the 3% mark. But inflation in Europe seems to be in check as well – a situation that should allow the European Central Bank (ECB) to continue cutting the rates. European economies need the rate cuts more than the US does, but the ECB is expected to cut by 50bp before the year ends vs 100bp cut expected for the Fed. Hence there is a growing room for a dovish adjustment for the ECB expectations.

Finally, crude oil gained on Friday along with risk assets, and bulls are joining in this morning on news that Israel has declared a 48-hour state of emergency after launching a pre-emptive strike on Hezbollah sites in Southern Lebanon, in anticipation of a response to last month’s assassination of its military chief.

Nvidia reports on Wednesday

Nvidia earnings are due after the Wednesday’s closing bell, and the expectations remain sky-high. The company has pointed at $28bn sales in Q2 when it released earnings last quarter – double the amount it made a year earlier, and the market consensus is around $28.7bn.

Although the worries regarding the Big Tech’s big AI spending have been mounting as the AI investments haven’t yet improved the company profits just yet (except at Meta), the big AI spenders like Meta and Google who account for 40% of Nvidia’s revenue said that they’d rather overspend in AI than underspend to make sure not to miss the decisive AI turn. Hence, Nvidia could announce another blowout quarter. But Nvidia cannot afford any missteps at current valuations. Everything from the numbers to guidance should be perfect the keep the rally going. And this is where, the rising competition and impatient investors – who could force the big spenders to spend less on AI – become growing challenges.

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