Daily Game Plan

by Contributor
on August 20, 2024

TODAY’S GAME PLAN:  from
the trading desk, this is not research

TODAY’S ECONOMIC DATA:  ET 8:00 a.m: Mexico June Retail Sales, 8:30 a.m.:
Canada July CPI, 11:30 a.m.: US to sell $75 billion 42-day bills,1:35 p.m.: Fed’s Raphael Bostic speaks.2:45 p.m: Fed’s Michael Barr speaks

HIGHLIGHTS and News:  

  • Mega cap tech stocks still make up the core of hedge funds’ top 20 equity positions, according to new analysis
    of 332 money managers with assets worth more than $1 billion.
  • NASA is expecting to make a final decision before the end of the month as to

    when and how to bring home two astronauts     who have been stuck at the International Space Station for more than two months.

 

 

World stocks were broadly higher, poised for their longest winning streak of the year, bolstered by growing expectations that the Federal Reserve
will begin cutting interest rates, with the MSCI all-country benchmark nearing nine consecutive days of gains, the most since December. In Asia, China is considering issuing special bonds to help local governments buy unsold homes, people familiar said, the
latest measure to prop up the property market.  The BOJ released two research papers that indicate a rate hike is still on the table. Fed’s Michael Barr and Raphael Bostic are also set to speak later today.

 

EQUITIES:  

 

US stock futures are slightly up following a strong rally on Wall Street, as investors look for insights on interest rates from the upcoming Jackson
Hole economic symposium and the Federal Reserve’s recent meeting minutes. The S&P 500 is on the verge of its longest winning streak in two decades, showing how quickly this month’s market turmoil has abated Among the notable premarket movers, Fabrinet shares
surged 8.8% after exceeding first-quarter earnings and revenue forecasts, driven by optimism surrounding AI. Hawaiian Holdings saw an 11% jump following the expiration of the DOJ’s regulatory review period for its merger with Alaska Air, while Vornado Realty
Trust gained 1.7% after an upgrade from Evercore ISI. Conversely, Kymera’s shares fell 3.8% due to a new offering priced at $40.75 per share. Overall, S&P 500 futures remain stable at 5,634.50 as the market digests these developments.
Kroger Co. is tapping the US investment-grade market on Tuesday to help fund its acquisition of fellow grocer Albertsons Cos. in what could be one of the biggest
corporate bond deals of the year. Earnings slated for today from Lowe’s, Coty, Toll Brothers and Medtronic.

Futures ahead of the bell: E-Mini S&P +0.06%, Nasdaq +0.05%, Russell 2000 +0.03%, DJI -0.03%

European stocks slipped on Tuesday, ending a five-day winning streak, as a drop in energy shares outweighed recent optimism over potential interest rate cuts in the
U.S. The Stoxx Europe 600 Index edged 0.1% lower, with Germany’s DAX index flat, capping its longest winning streak since 2014. Technology stocks rallied, but this was tempered by falls across the energy sector amid a weak oil price. Strategists remain optimistic
about European stocks, with a Bloomberg survey predicting the Stoxx 600 will surpass its record high set in May, as investors bet that interest rate cuts will prop up equity valuations. Investors are awaiting the release of U.S. Federal Reserve minutes and
a speech from Fed Chair Jerome Powell at the Jackson Hole symposium later this week for clues on the path of interest rates. Individual movers included Coloplast A/S falling after earnings missed estimates, Norwegian salmon farmer Salmar ASA dropping on disappointing
results, and BT Group Plc’s shares declining nearly 7% after client Sky agreed to use a rival’s broadband network. DAX -0.1%, FTSE -0.7%, Stoxx 600 -0.1%, CAC 40 +0.05%.

Asian stocks advanced for a third consecutive day, buoyed by gains in Japan and South Korea amid optimism surrounding potential Federal Reserve interest rate cuts.
The MSCI Asia Pacific Index rose as much as 0.7%, with major contributors including SK Hynix, Keyence, and Samsung Electronics, while Japanese indices climbed as the yen’s rally against the dollar stalled, benefiting exporters. Despite this positive momentum,
Chinese equities underperformed, with the CSI 300 Index pulling back after three days of gains as Beijing maintained a cautious approach to economic stimulus, keeping benchmark lending rates unchanged despite disappointing economic data. Investor sentiment
has improved as concerns over a potential U.S. recession have eased, with rising expectations that the Fed may signal readiness to cut rates, particularly during Chair Jerome Powell’s upcoming speech at Jackson Hole. Overall, markets have stabilized amid signs
of economic stabilization in the region, although some analysts remain cautious about the outlook for China, anticipating possible earnings cuts for the remainder of the year. Topix +1.1%, Nikkei +1.8%, China’s CSI 300 -0.7%; Hang Seng -0.3%; Kospi +0.8%;
ASX 200 +0.2%

FIXED INCOME: 
 

Treasuries are showing a mixed performance, with the yield curve steepening as the market adjusts from Monday’s flattening in the 2s10s and 5s30s
spreads. Anticipation surrounds a significant corporate bond issuance from Kroger, which is expected to be one of the largest deals of the year, aimed at funding its proposed acquisition of Albertsons. Currently, long-end Treasury yields have decreased by
about 1 basis point, while shorter maturities have seen slight increases, resulting in a steepening of the spreads by more than 1 basis point. The 10-year yield is hovering around 3.87%, with other government bonds, including gilts and bunds, trading in a
similar range. The upcoming economic data includes the August Philadelphia Fed non-manufacturing activity report, and the Treasury will resume issuance with a $16 billion 20-year bond sale on Wednesday and an $8 billion 30-year TIPS reopening on Thursday.

 

 

METALS: 

 

Gold prices climbed, hitting a fresh record high on Tuesday, drawing support from a broadly weaker US dollar and expectations of Fed rate cuts.
Traders will be monitoring US reports due this week, including jobless claims figures on Thursday and Powell’s Jackson Hole speech Friday. However, there are signs that gold’s stellar run may now be weighing on demand in China, after a report showed last month’s
imports fell to the lowest since May 2022. Gold +0.7%, Silver +1.1%

 

 

ENERGY:   

 

Oil prices extended their decline, with Brent crude falling below $77 a barrel after a 2.5% drop on Monday, as the U.S. announced that Israel accepted
a cease-fire proposal in Gaza, potentially easing supply risks amid growing concerns about global demand. The WTI benchmark pared earlier losses; U.S. Secretary of State Antony Blinken indicated that the next step hinges on Hamas agreeing to the deal aimed
at de-escalating the ongoing conflict. The market remains subdued due to China’s deteriorating economic outlook, highlighted by shrinking factory activity and declining oil demand, as the country considers a new rescue plan for its struggling property sector.
Analysts suggest that the hope for a cease-fire in Gaza is a key driver behind the price drop, with expectations that Brent crude could test new yearly lows as bearish sentiments currently outweigh bullish ones. Additionally, oil prices have surrendered most
of their year-to-date gains, as OPEC+ supply curbs and anticipated lower U.S. interest rates have been countered by China’s challenging economic environment. WTI +0.07%, Brent -0.08%, Nat Gas +1.1%.

 

 

CURRENCIES:   

 

In currency markets, the dollar fell against most G-10 currencies, with the yen leading gains. USDJPY fell as much as 1.7% to 145.19 amid rising
JGB yields and algorithmic trading. Sterling rose, supported by a weaker dollar but also potentially due to demand from merger and acquisition activity, according to ING. Traders are adjusting positions ahead of Jackson Hole, with recent U.S. economic data
giving Fed officials like Mary Daly more confidence that inflation is under control, though the economy is “not in an urgent place” for policy changes.US$ Index -0.2%, GBPUSD +0.1%, EURUSD +0.06%, USDJPY +0.9%, AUDUSD +0.3%, NZDUSD +0.3%, USDCHF +0.1%.

 

 

Spot Bitcoin +2.5%, Spot Ethereum +1.2%.

 

 

Colors within the report:
Green is always the 200 period (day, week).
Red is always 21,
Blue = 50,
Brown =
100 *Stars have added importance 

 

 

 

 

 

Data sources: Bloomberg, Reuters, CQG

 

 

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