Stocks, U.S. Yields Gain as Data, Fed Comments Eyed

Stocks

Economic

Summary:

Global stocks rose on Monday, led by US gains to record highs. Investors are watching economic data and Fed comments for clues on future interest rates.

A gauge of global stocks rose for the first time in three sessions on Monday, powered by a rally in U.S. equities, while U.S. Treasury yields climbed after a sharp drop in the prior week as investors awaited comments from Federal Reserve officials.

On Wall Street, U.S. stocks slowly gained steam after a sluggish start to the session to send the Nasdaq Composite and S&P 500 to record highs, led by gains in technology and consumer discretionary shares.

Economic data showed manufacturing activity in the New York region improved in June, but remained in contraction territory with a reading of negative 6. Investors will closely eye retail sales data for May on Tuesday for signs of consumer health.

Stocks, U.S. Yields Gain as Data, Fed Comments Eyed _1

Empire State

"There really isn't an appetite to be a real seller right now because there is a perception that momentum is going to continue, and stocks are going to continue winning," said Daniela Hathorn, senior market analyst at Capital.com.

"The fact that the rally has been driven mostly by a select few stocks, that would mean that the pullback could be even deeper."

The Dow Jones Industrial Average rose 188.94 points, or 0.49%, to 38,778.10, the S&P 500 gained 41.63 points, or 0.77%, to 5,473.23 and the Nasdaq Composite gained 168.14 points, or 0.95%, to 17,857.02.

Goldman Sachs raised its year-end S&P 500 price target to 5,600 from the prior 5,200, while Evercore ISI lifted its price target to 6,000 from 4,750.

U.S. equities had pushed to record levels last week following several inflation readings that indicated price pressures may be ebbing, even as the Federal Reserve adjusted its economic projections to only include one rate cut for the year.

In Europe, stocks edged higher, with banks and technology stocks rebounding from losses last week after markets were startled by political uncertainty in France. The STOXX 600 index closed up 0.09%, while Europe's broad FTSEurofirst 300 index rose 2.52 points, or 0.12%

MSCI's gauge of stocks across the globe rose 3.53 points, or 0.44%, to 800.79, bouncing from earlier lows and following two straight sessions of declines.

FED OFFICIALS

U.S. Treasury yields rose, with the 10-year note coming off its biggest weekly drop of the year in response to inflation data that boosted hopes the Fed would be able to cut rates by at least 25 basis points in September.

Markets are currently pricing in a 61.5% chance for a 25 basis point cut in September, according to CME's FedWatch Tool down from about 70% in the prior session.

The yield on benchmark U.S. 10-year notes rose 6.8 basis points to 4.281%.

"The Empire State helped a little bit, but it's more than that," said Stan Shipley, managing director and fixed income strategist at Evercore ISI in New York. "Yields came down a lot last week and so some people are taking profits here."

Investors will hear from a host of Fed officials this week, including Governor Lisa Cook later on Monday.

Philadelphia Fed President Patrick Harker said on Monday the central bank would be able to cut rates one time this year should his forecast play out.

Central banks in Australia, Norway and Britain are all expected to leave their interest rates unchanged at meetings this week, though the Swiss National Bank could ease given the recent strength of the Swiss franc.

The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, fell 0.19% at 105.34, with the euro up 0.29% at $1.0731.

Against the Japanese yen , the dollar strengthened 0.22% at 157.71, while sterling strengthened 0.14% at $1.27.

U.S. crude settled up 2.4% to $80.33 a barrel and Brent rose to end at $84.25 per barrel, up 2% on the day, building on the prior week's gains as investors turned more optimistic on demand growth in the months ahead.

Source: Reuters

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Samantha Luan

Economic

Cryptocurrency

The Bitcoin ETF Debacle

Last week, Bitcoin ETFs recorded net outflows of $621 million. A dizzying drop, especially after an exceptional week in which these same funds had gained nearly $2 billion.

This brutal oscillation is mainly attributed to the position of the Federal Reserve. Indeed, the predictions of Fed leaders, particularly through the famous “dot plot”, have sown doubt among institutional investors. Their expectations of just one rate cut in 2024, instead of the initially planned three, have had a chilling effect.

High interest rates are traditionally unfavorable to risky assets like cryptocurrencies and stocks.

They rather favor fixed-income assets, such as Treasury bonds, which offer increased security. This preference has led to a marked disaffection for Bitcoin ETFs, now considered too volatile during economic uncertainty.

The Global Impact on Crypto Funds

Beyond Bitcoin ETFs, the entire crypto fund industry has also suffered. Total outflows from all crypto ETFs reached $600 million last week, an unprecedented situation since March. Investors seem to have lost confidence, fearing a too unstable market. Exchange-traded products (ETPs), which encompass ETFs and ETNs, have been particularly affected.

In the United States, ETPs saw the largest net outflows, totaling $565 million. In contrast, Germany showed surprising resilience with net inflows of $17 million. Among the biggest losses, Grayscale’s GBTC fund stands out, with a massive outflow of $274 million. The ARKB fund from Ark Invest and 21Shares also saw a significant outflow of nearly $150 million. However, not everything is bleak: BlackRock’s IBIT fund saw an inflow of $41.6 million, while ProShares’ EETH fund, investing in Ethereum futures contracts, recorded $16.85 million in inflows.

Hidden Opportunities in the Turmoil

Despite this alarming situation, some see this crisis as a golden opportunity. Price fluctuations, though destabilizing, are perceived by some bold investors as buying opportunities. MicroStrategy, for example, announced an increased fundraise to $786 million, largely intended for the acquisition of bitcoins. This strategy shows unwavering confidence in the long-term resilience of bitcoin.

Furthermore, international investment firm Bernstein has raised its price target for bitcoin in 2025, from $150,000 to $200,000. This adjustment reflects an optimistic view of bitcoin’s future value despite current turbulence. This encouraging perspective could revive investor interest and stabilize the market in the medium term.

The current crisis of Bitcoin ETFs and crypto funds is a brutal reminder of the whims of the financial market. The position of the Federal Reserve and high interest rates have undoubtedly shaken investor confidence. However, in this turmoil, opportunities emerge for the bold. Fluctuations can serve as a springboard for those who believe in the longevity of cryptocurrencies.

Bitcoin, despite its recent misadventures, continues to fascinate and attract. The road to widespread adoption and price stabilization is fraught with challenges, but optimistic predictions for 2025 offer a glimmer of hope. The evolution of the situation will depend on future economic decisions and investors’ ability to navigate this volatile environment. What does the future hold? Only time will tell, but one thing is certain: the world of crypto never ceases to surprise.

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Source:cointribune

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Warren Takunda

Economic

Bond yields were little changed early Tuesday as traders awaited the U.S. retail sales report for May.

What's happening

The yield on the 2-year Treasury added less than 1 basis point to 4.778%. Yields move in the opposite direction to prices.The yield on the 10-year Treasury rose less than 1 basis point to 4.290%.The yield on the 30-year Treasury climbed less than 1 basis point to 4.411%.

What's driving markets

The U.S. retail sales report for May is likely to be the main bond market driver on Tuesday, with investors keen to see if households are starting to struggle in the face of the Federal Reserve keeping interest rates at a 23-year high.

After April saw zero retail sales growth, economists expect May spending will have risen by 0.2%.

"This could ease some concerns about the strength of the consumer after the weaker than expected University of Michigan consumer confidence report for June, which fell to its lowest level since November last year," said Kathleen Brooks, analysts at XTB.

There is also a raft of talk from Fed officials on Tuesday, including the first speech as a Fed official for St. Louis Fed President Alberto Musalem. Here's a list of the potential market catalysts for the coming session.

8:30 a.m. Eastern. U.S. retail sales for May.9:15 a.m. U.S. industrial production for May.9:15 a.m. U.S. capacity utilization for May.10:00 a.m. U.S. business inventories for April.10:00 a.m. Richmond Fed President Tom Barkin podcast interview.11:40 a.m. Susan Collins, Boston Fed President gives keynote address.1:00 p.m. Treasury auctions $13 billion of 20-year bonds.1:00 p.m. Dallas Fed President Laurie Logan speaks at Headliners Club in Austin.1:00 p.m. Fed Governor Adriana Kugler talks on the economy and monetary policy.1:20 p.m. St. Louis Fed Pres. Alberto Musalem talks on the economy and monetary policy.2:00 p.m. Chicago Fed Pres. Austan Goolsbee talks on the economy and monetary policy.2:00 p.m. Congressional Budget Office releases updated fiscal year budget forecast.4:00 p.m. Treasury international capital flows for April.4:40 p.m. Susan Collins, Bank of Boston Fed Pres., takes part in Yahoo! Finance interview.

Ahead of all that, markets are pricing in a 91.7% probability that the Fed will leave interest rates unchanged at a range of 5.25% to 5.50% after its next meeting on July 31st, according to the CME FedWatch tool.

The chances of at least a 25 basis point rate cut by the subsequent meeting in September is priced at 61.5%, up from 52.8% a week ago.

The U.S. Treasury market will be closed on Wednesday for the Juneteenth public holiday.

Meanwhile, in France the 10-year government bond yield was little changed around 3.150% as anxiety over the country's looming election faded somewhat.

Source: MarketWatch

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Warren Takunda

Cryptocurrency

Bitcoin saw new one-month lows on June 18 as a push past $67,000 failed to sustain. Buy the Dip? Bitcoin Price Drops to New 1-Month Lows of $64K_1

BTC/USD 1-hour chart. Source: TradingView

BTC price weakness sees $64,000 return

Data from Cointelegraph Markets Pro and TradingView captured volatile BTC price conditions returning during the prior day’s Wall Street trading session.

This produced a trip to local highs of $67,250, but momentum soon stalled as sellers took control to send Bitcoin to $64,050 hours later.

This marked the pair’s lowest level since May 15, and reacting, market observers had little by way of good news to share.

“As we can see here the bounce was led by coinbase spot primarily and some buying from bitfinex,” popular trader Skew explained in market coverage on X.

“Spot Binance spot still seeing sell pressure. I think $66K - $67K key area to gauge if there's ongoing absorption else lower prices will come with price bleeding.”

BTC/USDT order book changes on Binance. Source: Skew

Skew nonetheless reasoned that sweeping lows in the style seen in recent days was “not uncommon” behavior.

“Good sign here is spot premiums & pretty low funding,” he added, referring to current funding rates across exchanges.

Data from monitoring resource CoinGlass meanwhile showed fluctuating liquidity conditions on BTC pairs after the latest lows hit. Buy the Dip? Bitcoin Price Drops to New 1-Month Lows of $64K_3

Buy the Dip? Bitcoin Price Drops to New 1-Month Lows of $64K_3

BTC liquidation heatmap (screenshot). Source: CoinGlass

“Funding rates are slightly positive, showing bullish. Buy the dip,” the platform told X subscribers on the day.

Eyeing whether the price could go lower still, fellow popular trader Credible Crypto delineated what he called a “dream” zone for going long BTC beginning at around $63,500.

The chances of this becoming available to buy, however, were mixed.

“Yes, we can still technically go lower into the ‘dream long’ zone below, but as I’ve previously said it would not surprise me to see that zone front run,” part of X commentary read, telling followers to “watch for a low timeframe impulse” move. Buy the Dip? Bitcoin Price Drops to New 1-Month Lows of $64K_4

Buy the Dip? Bitcoin Price Drops to New 1-Month Lows of $64K_4

BTC/USD chart. Source: Credible Crypto

Bitcoin short-term holders near breakeven point

That area coincided with a key bull market support trendline now on the radar for analysts, including Checkmate, lead on-chain analyst at Glassnode.

As Cointelegraph continues to report, the short-term holder realized price (STH-RP), currently at $63,700, has traditionally buoyed BTC price action ever since the bull market began at the start of 2023.

For Checkmate, price preserving that level dictated sentiment.

“It is hard for me to be too scared of Bitcoin price action when unrealised losses look like this. It could deteriorate for sure...but it hasn’t yet,” he wrote alongside an explanatory chart. Buy the Dip? Bitcoin Price Drops to New 1-Month Lows of $64K_5

Buy the Dip? Bitcoin Price Drops to New 1-Month Lows of $64K_5

Bitcoin relative unrealized profit/loss. Source: Checkmate

Source: Cointelegraph

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Alex

Economic

Central Bank

Inflation in Korea will continue to moderate down the road, reaching a level below 2.5 percent in the second half of the year, but geopolitical risks, weather conditions and other uncertainties still remain, a central bank report said Tuesday.

"Consumer price growth is expected to post a mild slowdown, given current trends in prices of global oil and farm goods," the Bank of Korea (BOK) said. "But there are still uncertainties in the inflation trajectory, such as geopolitical risks, economic trends and weather conditions," it said.

In the first five months of the year, the country's inflation had moderated to 2.9 percent, compared with 3.3 percent during the second half of last year.

Core inflation, which excludes prices of food and energy, stood at 2.4 percent during the cited period, also slowing from 3 percent in the June-December period.

The country's consumer prices, a key gauge of inflation, rose 2.7 percent on-year last month, compared with the 2.9 percent on-year rise a month earlier.

The BOK said global oil prices have recently fallen, but upward pressure still remains amid geopolitical risks.

In terms of domestic demand, inflationary pressure is likely to be limited amid the outlook that private spending will remain weak this year. But a gradual phase-out of fuel tax cuts and a rise in utility costs may add upward pressure on inflation, the central bank said.

Last month, the BOK kept its key interest rate unchanged at 3.5 percent for the 11th straight time. The central bank delivered seven consecutive rate hikes from April 2022 to January 2023.

Earlier, BOK Gov. Rhee Chang-yong said the central bank may consider a potential rate cut if inflation cools down to around 2.3 percent to 2.4 percent. The central bank's inflation target is set at 2 percent. The bank kept its inflation outlook at 2.6 percent for the year.

Last month, the central bank jacked up its growth estimate to 2.5 percent for the year, up from its earlier projection of 2.1 percent, but slashed the 2025 growth outlook to 2.1 percent from 2.3 percent.

Source：Yonhap

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Warren Takunda

Economic

Japan's five-year, 43 trillion yen defense buildup risks being undermined by a weak yen that has cut roughly 30% off the dollar value of this spending in the past 18 months.

When the government made the plan in December 2022 to spend the 43 trillion yen through fiscal 2027, that amount translated to nearly $400 billion. Back then, the assumed exchange rate was 108 yen per dollar.

Now, with the Japanese currency trading near 160 yen to the dollar, it amounts to $272 billion. That raises questions about how far the spending will go, and what level of tax increases may be needed to pay for it.

Defense spending for the fiscal 2023 budget used an exchange rate of 137 yen per dollar to reflect currency levels at the time. But for the next four years starting with fiscal 2024, the rate was assumed at 108 yen per dollar, based on the average over the previous five years.

Few policymakers at the time thought the yen would weaken further.

For about half a century, Tokyo had kept defense spending around 1% of gross domestic product. But the security risks posed by China's growing military power spurred it to go further. The move also signaled to Western nations Japan's resolve to invest more in defense.

Tokyo planned to raise defense spending in stages over five years until the budget was equivalent to 2% of GDP in fiscal 2027, which would be on par with NATO guidelines.

During a February meeting held by the ruling Liberal Democratic Party, lawmakers said the 43 trillion yen figure was not set in stone and should be flexible in light of changes in the exchange rate and materials costs.

Around that time, the Defense Ministry convened a meeting of experts chaired by Sadayuki Sakakibara, an honorary chair of the Japan Business Federation, or Keidanren.

"Given the forex movements, can our defense capabilities be strengthened as needed within the confines of 43 trillion yen?" Sakakibara said at the meeting. "We should not view a reassessment as a taboo subject but instead have a frank debate."

The Defense Ministry's procurement costs have soared. In the fiscal 2024 budget, the advanced F-35A fighter jet costs 14 billion yen per unit, up from the 11.6 billion yen price assumed in 2018.

Ships equipped with the Aegis system form the cornerstone of Japan's missile defense. But acquisition costs have ballooned to 392 billion yen per ship, from about 240 billion yen in 2020 when deployment plans were made.

Even defense equipment made in Japan is subject to exchange-rate-driven inflation since many of the components are sourced overseas. When the first of Japan's Taigei class "great whale" submarines went into service in 2022, the cost had swelled about 35% from the initial estimate to 95 billion yen due to the rising prices for steel and semiconductors.

During a budget hearing last November, opposition lawmakers asked Prime Minister Fumio Kishida whether the defense buildup would exceed 43 trillion yen. The Japanese leader maintained that the plan would not change.

"It is a number that was arrived at and approved by the cabinet to ensure the necessary defense capabilities," Kishida said.

During the planning stage, the government said the cost was based on what is needed to protect the country, and not simply on scale.

The Defense Ministry has told LDP lawmakers that equipment for the Japan Self-Defense Forces will be acquired on a priority basis.

"If we reduce the volume of Tomahawk [cruise missiles] purchased, the 43 trillion yen will cover it," a senior LDP official said in late April.

With few exceptions, Japan has not disclosed the procurement volumes under the plan. Government officials reportedly are considering changing the amounts or postponing purchases.

To support the extra defense spending, the government is looking to increase corporate, income and cigarette taxes over a number of years, but a start date has not been determined.

Source: NikkeiAsia

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Economic

Central Bank

Fed speakers to move the market again?

Amidst a holiday-shortened week, Fed speakers will be out in force, and it will be interesting to see if the hawks adopt an even more aggressive rhetoric. Minneapolis Fed President Kashkari has already commented that "it's reasonable that a rate cut could come in December" with the more moderate Philadelphia Fed President Harker agreeing that "one cut would be appropriate this year".

At least six Fed speakers will be on the wires today including regional Fed presidents Barkin, Collins, Musalem, Logan, and Goolsbee, and Fed board member Kugler. With the exception of Barkin and Logan who are outright hawks and do not vote in 2024, the remaining speakers are probably going to express a more dovish take on the recent developments.

The market is currently pricing 45bps of easing in 2024 with a strong tendency for lower expected rates if the Fedspeak continues to be hawkish. However, as Chairman Powell highlighted at last week's press conference, the data will determine if the Fed cuts rates this year.

US retail sales in the spotlight

The May retail sales report will be published at 12.30 GMT. Strong domestic demand is one of the key reasons for the continued economic outperformance of the US against the remaining developed countries. The market is expecting a positive set of figures today, which are unlikely to be welcomed by the doves.

In more detail, headline retail sales are forecast to record a monthly 0.2% jump. Similarly, the retail control group index, which focuses on retail and food stores, is seen rising by 0.4% and thus reversing April's correction. However, when considering the latest prints from both the Consumer Confidence and the University of Michigan consumer sentiment indices, there is a good possibility of a downside surprise today.

European political risks to continue impacting the market

The US dollar is holding most of its recent gains against the euro as the heightened political risk has receded a tad. The French stock market managed to close in the green yesterday, but it is still around 5.5% down since the June 6 European elections outcome. Similarly, the 10-year yield spread between France and Germany tightened a bit yesterday but remains at its highest level since March 2020. With the first round of France's parliamentary election just 12 days away, headlines from the euro area's second largest economy will probably continue to affect overall sentiment.

RBA meeting held no surprises

As widely expected, the RBA cash rate was left unchanged at 4.35%, with the statement being mostly similar to the May one and acknowledging that inflation is easing more slowly than previously expected. Interestingly, RBA Governor Bullock mentioned that there was a discussion on whether to hike rates, but the committee did not consider a rate cut today. As a result, the aussie/dollar pair is higher again today and a tad closer to its mid-May highs.

The market is clearly not believing that the RBA could hike rates as it is still pricing in 15bps of rate cuts by the end of the year, with the total easing amount rising to 53bps by the end of 2025. Until the August 6 gathering, a plethora of important data will be published with the decisive inflation report for the second quarter of 2024 expected on July 31.

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