Market Report.
📉 Deputy Governor Shinichi Uchida said the BOJ would pause hikes given volatility, magnifying market swings and underscoring communication issues. Politicians have summoned Governor Ueda to explain the hike, with some saying it may have been a mistake given weak data. The BOJ has reversed course before when hastily exiting stimulus, drawing fierce criticism for being too hastily. Raising rates as the Fed likely cuts poses challenges, going against the BOJ’s history of avoiding opposing the Fed. While steadying markets in the short-run, the BOJ’s flip-flopping approach risks undermining its credibility and strategy if not carefully managed going forward.
📉 JP Morgan chief, Jamie Dimon is still predicting a recession. The CEO of JP Morgan, has been warning about an economic recession for several years. In an interview with CNBC this week, Dimon said he still believes a recession is the most likely outcome, but that any recession will probably be “mild”. Dimon puts the chances of a “soft landing” (economic slowdown without recession) at around 35-40% only. Dimon cited current uncertainties like geopolitics, spending and elections that could continue affecting markets. Since 2022, he has been voicing concerns about economic dangers and encouraged the Fed to hold off on rate cuts for now.
🏡 UK property surveyors expect a significant jump in home sales over the coming months following the Bank of England’s interest rate cut last week. The BOE’s first rate cut in over 4 years is seen as changing the mood positively in the UK housing market. Lower borrowing costs are likely to boost demand, with surveyors anticipating a sales surge following the monetary stimulus action.
🔥 Gas crisis: Summer heat waves in Asia and Europe have boosted gas demand globally, while some major producers also face disruptions. Norway, Europe’s top supplier, will enter maintenance works at the end of August that could cause further volatility if extended. Gas futures rose after heavy fighting broke out near a key Russian intake point for flows transiting Ukraine’s pipeline network. Ukraine pushed over 30km into Russia but the advance was halted by airstrikes and artillery fire according to Russia. Russia declared a state of emergency in the border region and said 31 civilians were wounded by Ukrainian shelling. Some analysts suggest Ukraine may be aiming to disrupt gas flows or pin down Russian forces ahead of potential US policy shifts. Largest Ukrainian incursion into Russia since 2022 risks escalating the conflict at a critical time, particularly if it threatens key energy infrastructure near the border.
🇺🇸 Kamala Harris announced who will be her VP. Tim Walz, current governor of Minnesota. Minnesota saw a significant increase in government spending and taxation under Walz to fund new social programs, which has contributed to households fleeing the state. Walz supports expansive social welfare programs like “free” healthcare, college, and services, which critics argue will significantly increase costs for taxpayers. He also has pursued aggressive climate change policies through new carbon restrictions and EV mandates, pledging an important budget without assurances of economic returns. Walz openly embraces the label of “socialist” for his agenda. If elected, the main concerns facing the US economy would undoubtedly be controlling the ballooning US budget deficit.
📉 Market View:
Attempts to regain the levels after Monday’s falls have failed. Although the falls have stopped in equities, attempts to regain the bullish tone have failed.
📉 The SP500 futures, which tried to break above the 5350 level during yesterday’s session, failed to do so and have retreated towards the 5200 level at the moment. Likewise, the Nasdaq 100, which managed to break above 18,400 points yesterday, has retreated towards 17850 points.
📉 The dollar index DXY has also retreated slightly in its attempt to return to 104 points, and stands at 103.15 points at the moment. The eurodollar EURUSD remains above 1.09 for the time being. The US 2-year bond has again lost the 4% yield, indicating that money is still flowing into bonds, which indicates that there are still fears of further falls in equities.
📉 European markets are not doing any better either. The Dax 40 managed to break above 17,600 yesterday, and is now trading below 17,500.
🪙 The bitcoin BTC seems to be holding up better, and would face the challenge of conquering the 58,000 level in the coming hours. Gold and crude oil remain relatively low, with gold trading at $2440 an ounce, and Brent crude at $78.
