Investment Ideas From the Edge of the Bell Curve
ASX LIVE | ASX 200 to Sink, Wall St Down After Data Hints at Fed Hikes
Thats all from me today, have a great weekend
Busy day on the markets!
That’s all from me.
I’ll leave you with today’s Bing AI-generated image showing the surprisingly high number of newly employed US workers turning up on Wall St.
China announces new head of People’s Bank of China
China has announced Pan Gongsheng as the new head of the People’s Bank of China (PBoC).
A Harvard and Cambridge alumni who is known by many as an experienced technocrat.
The news reassured many in China who saw the appointment as a ray of hope that the needle might shift towards more stimulus.
Not everyone is as optimistic.
Goldman Sach’s said on Wednesday that its clients in mainland China have ‘low expectations’ for further stimulus measures this year.
‘While local clients agreed overall policy stand would be more supportive [under Pan] in the near-term compared with Q2, local clients viewed these additional easing measures as “policy put” to reduce growth headwinds, rather than generate strong growth.’ Goldman Sachs noted.
This comes after the PBoC lowered policy rates last month as the country’s economy sputters.
The markets will be closely watching this month’s Politburo meeting in hopes of a larger stimulus package; however, many think it’s unlikely at this stage.
If anything were to shake the calculation, it would be a new leader with fresh ideas moving forward.
Until then, China’s trade with the world continues to fall.
None more significantly than with the US.
US imports by origin #chartoftheday (via @MacroMicroMe)
Share of US imports from China has dropped to 15%, the lowest level since 2006. The European Union has once again become the largest import source for the US. pic.twitter.com/Mfx8x9MSg6
— Smartkarma (@smartkarma) July 7, 2023
China announces new head of People’s Bank of China
China has announced Pan Gongsheng as the new head of the People’s Bank of China (PBoC).
A Harvard and Cambridge alumni who is known by many as an experienced technocrat.
The news reassured many in China who saw the appointment as a ray of hope that the needle might shift towards more stimulus.
Not everyone is as optimistic.
Goldman Sach’s said on Wednesday that its clients in mainland China have ‘low expectations’ for further stimulus measures this year.
‘While local clients agreed overall policy stand would be more supportive [under Pan] in the near-term compared with Q2, local clients viewed these additional easing measures as “policy put” to reduce growth headwinds, rather than generate strong growth.’ Goldman Sachs noted.
This comes after the PBoC lowered policy rates last month as the country’s economy sputters.
The markets will be closely watching this month’s Politburo meeting in hopes of a larger stimulus package; however, many think it’s unlikely at this stage.
If anything were to shake the calculation, it would be a new leader with fresh ideas moving forward.
Until then, China’s trade with the world continues to fall.
None more significantly than with the US.
US imports by origin #chartoftheday (via @MacroMicroMe)
Share of US imports from China has dropped to 15%, the lowest level since 2006. The European Union has once again become the largest import source for the US. pic.twitter.com/Mfx8x9MSg6
— Smartkarma (@smartkarma) July 7, 2023
Market close update
ASX 200 closed down 1.68% today as the XJO joined global markets in the red on renewed fears of a heavy hand approaching from the US Federal Reserve.
Strong US jobs data for June has renewed fears of a series of rate hikes by the Fed coming this year, bringing with it the potential for recession.
ASX 200 Close today -1.68% at 7,042.8
The best individual performers:
- Air New Zealand [ASX:AIZ], up 1.39%
- Amcor Plc [ASX:0.89], up 0.89%
- PSC Insurance Group [ASX:PSI], up 0.83%
- Beach Energy [ASX:BPT], up 0.54%
- Coronado Global Resources [ASX:CRN], up 0.50%
The worst performers:
- Block Inc [ASX:SQ2], down 5.49%
- Pinnacle Investment Management Group [ASX:PNI], down 5.33%
- Ingenia Communities Group [ASX:INA], down 4.94%
- Capricorn Metals Ltd [ASX:CMM], down 4.84%
- Perseus Mining Ltd [ASX:PRU], down 4.27%
Market close update
ASX 200 closed down 1.68% today as the XJO joined global markets in the red on renewed fears of a heavy hand approaching from the US Federal Reserve.
Strong US jobs data for June has renewed fears of a series of rate hikes by the Fed coming this year, bringing with it the potential for recession.
ASX 200 Close today -1.68% at 7,042.8
The best individual performers:
- Air New Zealand [ASX:AIZ], up 1.39%
- Amcor Plc [ASX:0.89], up 0.89%
- PSC Insurance Group [ASX:PSI], up 0.83%
- Beach Energy [ASX:BPT], up 0.54%
- Coronado Global Resources [ASX:CRN], up 0.50%
The worst performers:
- Block Inc [ASX:SQ2], down 5.49%
- Pinnacle Investment Management Group [ASX:PNI], down 5.33%
- Ingenia Communities Group [ASX:INA], down 4.94%
- Capricorn Metals Ltd [ASX:CMM], down 4.84%
- Perseus Mining Ltd [ASX:PRU], down 4.27%
Treasuries slide globally in the wake of renewed fears of central bank rate hikes
Wall Street typically is indifferent to the monthly employment report from the ADP payroll services.
Today, it sparked a global selloff. Why?
The US private sector added 497,000 jobs in June. That was well above the 220,000 forecast by economists polled by The Wall Street Journal.
The Federal Reserves minutes were released yesterday, outlining the Fed’s thinking in its June pause, saying:
‘The economy was facing headwinds from tighter credit conditions, including higher interest rates, for households and businesses, which would likely weigh on economic activity, hiring, and inflation, although the extent of these effects remained uncertain,’ the minutes said.
The unanimous decision not to raise rates came in ‘consideration of the significant cumulative tightening in the stance of monetary policy and the lags with which policy affects economic activity and inflation.’
Well, if anything was going to get the Fed to sit up and take notice, its booming job numbers and the market agreed.
Global equity markets fell, and in many countries, Treasury bond yields are now at, or near 10-year highs.
Economists are scratching their heads as the expected recession seems further away at the same time as data showing impending signs.
That much strength in employment figures has even led some people to question the veracity of the data.
While disbelief remains, all eyes are going to be trained on the US government’s jobs data which is due tomorrow morning US time.
Nadia Lovell, senior U.S. equity strategist for global wealth management at UBS, pointed to their significance today, saying, ‘I think people are on the edge of their seats for tomorrow‘.
If the data is as strong as this report indicates, then the Fed will think it has no choice but to aggressively raise rates and rain on Wall Streets’ unbroken parade.
Will US equities continue their tear, or face the music? Here’s what the biggest players in the S&P 500 look like so far this year.
Souce: Bespoke investment
Treasuries slide globally in the wake of renewed fears of central bank rate hikes
Wall Street typically is indifferent to the monthly employment report from the ADP payroll services.
Today, it sparked a global selloff. Why?
The US private sector added 497,000 jobs in June. That was well above the 220,000 forecast by economists polled by The Wall Street Journal.
The Federal Reserves minutes were released yesterday, outlining the Fed’s thinking in its June pause, saying:
‘The economy was facing headwinds from tighter credit conditions, including higher interest rates, for households and businesses, which would likely weigh on economic activity, hiring, and inflation, although the extent of these effects remained uncertain,’ the minutes said.
The unanimous decision not to raise rates came in ‘consideration of the significant cumulative tightening in the stance of monetary policy and the lags with which policy affects economic activity and inflation.’
Well, if anything was going to get the Fed to sit up and take notice, its booming job numbers and the market agreed.
Global equity markets fell, and in many countries, Treasury bond yields are now at, or near 10-year highs.
Economists are scratching their heads as the expected recession seems further away at the same time as data showing impending signs.
That much strength in employment figures has even led some people to question the veracity of the data.
While disbelief remains, all eyes are going to be trained on the US government’s jobs data which is due tomorrow morning US time.
Nadia Lovell, senior U.S. equity strategist for global wealth management at UBS, pointed to their significance today, saying, ‘I think people are on the edge of their seats for tomorrow‘.
If the data is as strong as this report indicates, then the Fed will think it has no choice but to aggressively raise rates and rain on Wall Streets’ unbroken parade.
Will US equities continue their tear, or face the music? Here’s what the biggest players in the S&P 500 look like so far this year.
Souce: Bespoke investment
Oil prices continue second week gains
Oil prices are up 0.26% so far today, with Brent crude trading at US$ 76.72pb, on track for a second weekly gain, after OPEC+ leaders Saudi Arabia and Russia announced additional supply cuts and US crude stockpiles fell.
WTI Crude was up 0.36% at US$ 72.06pb. Both benchmarks are on track for weekly gains of around 2%.
The gains come after Saudi Arabia announced that it would extend its unilateral 1-million-barrel-a-day supply cut into August. Russia also said that it would reduce its exports by half a million barrels.
These additional supply cuts come at a time when US crude stockpiles are falling. The US Energy Information Administration reported on Thursday that crude inventories fell by 1.5 million barrels last week, to their lowest level since late January.
The combination of falling inventories and rising supply cuts has helped to support oil prices. However, prices are still down about 10% this year, as concerns about a global economic slowdown have weighed on demand.
Analysts say that oil prices are likely to remain volatile in the near term, as the market balances supply and demand. However, they believe that prices will eventually recover, as demand for oil is expected to grow in the long term.
Oil prices continue second week gains
Oil prices are up 0.26% so far today, with Brent crude trading at US$ 76.72pb, on track for a second weekly gain, after OPEC+ leaders Saudi Arabia and Russia announced additional supply cuts and US crude stockpiles fell.
WTI Crude was up 0.36% at US$ 72.06pb. Both benchmarks are on track for weekly gains of around 2%.
The gains come after Saudi Arabia announced that it would extend its unilateral 1-million-barrel-a-day supply cut into August. Russia also said that it would reduce its exports by half a million barrels.
These additional supply cuts come at a time when US crude stockpiles are falling. The US Energy Information Administration reported on Thursday that crude inventories fell by 1.5 million barrels last week, to their lowest level since late January.
The combination of falling inventories and rising supply cuts has helped to support oil prices. However, prices are still down about 10% this year, as concerns about a global economic slowdown have weighed on demand.
Analysts say that oil prices are likely to remain volatile in the near term, as the market balances supply and demand. However, they believe that prices will eventually recover, as demand for oil is expected to grow in the long term.
YTD FY2023 performance update
Interesting chart showing market performance so far this FY.
Bitcoin [BTC] leads the pack by some way.
Whats on your watchlist?
Highlighting the perils of market timing— peacock today, feather duster tomorrow: Cash, which was king in 2022, is near the bottom, just behind investment grade bonds. pic.twitter.com/Ezbz6cjVuR
— Jurrien Timmer (@TimmerFidelity) July 3, 2023
YTD FY2023 performance update
Interesting chart showing market performance so far this FY.
Bitcoin [BTC] leads the pack by some way.
Whats on your watchlist?
Highlighting the perils of market timing— peacock today, feather duster tomorrow: Cash, which was king in 2022, is near the bottom, just behind investment grade bonds. pic.twitter.com/Ezbz6cjVuR
— Jurrien Timmer (@TimmerFidelity) July 3, 2023
Samsung’s operating profit tumbles 96% as chip prices fall
Samsung Electronics, the world’s largest maker of microchips, smartphones, and televisions, reported a 96% plunge in operating profit in the second quarter of 2023.
In a short preliminary earnings statement, it announced today that its operating profit fell to 600 billion won (AU$ 693 million) from April to June, from 14.1 trillion won (AU$ 16.2 billion) a year earlier
The company’s chip division, which is its biggest profit driver, saw losses of around 3 trillion to 4 trillion won as memory chip prices fell further.
Samsung’s shares have fallen 2.23% in trading today but are still up 20% this year on expectations of an industry recovery.
The company’s latest results suggest that the chip market is still struggling to overcome the oversupply that has plagued it in recent months.
The decline in chip prices is being driven by a number of factors, including the slowing global economy and the end of the pandemic-driven surge in demand for electronics. As a result, chipmakers are cutting production and prices are expected to remain weak in the near term.
Samsung is not the only chipmaker that has been hit by the downturn. Micron Technology and SK Hynix have also reported sharp declines in profits in recent months. The chip market is expected to remain volatile in the coming months, but analysts believe that prices will eventually bottom out and start to recover.
Adding to the problems for the sector, China this week imposed a ban on the export of two vital chipmaking metals.
Gallium and germanium will be subject to export restrictions in order to ‘safeguard national security and interests’, China’s Ministry of Commerce and Administration of Customs said on Monday.
In the meantime, Samsung is taking steps to mitigate the impact of the downturn. The company is cutting production of memory chips and focusing on more profitable areas, such as its smartphone business.
Samsung’s operating profit tumbles 96% as chip prices fall
Samsung Electronics, the world’s largest maker of microchips, smartphones, and televisions, reported a 96% plunge in operating profit in the second quarter of 2023.
In a short preliminary earnings statement, it announced today that its operating profit fell to 600 billion won (AU$ 693 million) from April to June, from 14.1 trillion won (AU$ 16.2 billion) a year earlier
The company’s chip division, which is its biggest profit driver, saw losses of around 3 trillion to 4 trillion won as memory chip prices fell further.
Samsung’s shares have fallen 2.23% in trading today but are still up 20% this year on expectations of an industry recovery.
The company’s latest results suggest that the chip market is still struggling to overcome the oversupply that has plagued it in recent months.
The decline in chip prices is being driven by a number of factors, including the slowing global economy and the end of the pandemic-driven surge in demand for electronics. As a result, chipmakers are cutting production and prices are expected to remain weak in the near term.
Samsung is not the only chipmaker that has been hit by the downturn. Micron Technology and SK Hynix have also reported sharp declines in profits in recent months. The chip market is expected to remain volatile in the coming months, but analysts believe that prices will eventually bottom out and start to recover.
Adding to the problems for the sector, China this week imposed a ban on the export of two vital chipmaking metals.
Gallium and germanium will be subject to export restrictions in order to ‘safeguard national security and interests’, China’s Ministry of Commerce and Administration of Customs said on Monday.
In the meantime, Samsung is taking steps to mitigate the impact of the downturn. The company is cutting production of memory chips and focusing on more profitable areas, such as its smartphone business.
CBOE Volatility Index highlights markets reaction to labour data
Vix Index from today showed a real-time reaction to the unexpectedly positive labour data that has sent shockwaves through equity markets as investors now expect a strong Fed reaction by way of rate hikes.
The CBOE Volatility Index, also known as the VIX, or ‘fear index’, is a real-time market index representing the market’s expectations for volatility.
The VIX is calculated using the prices of S&P 500 index options with near-term expiration dates.
A higher VIX reading indicates that investors are expecting more volatility in the market.
As Scott Bauer told Bloomberg this morning, when the ADP data dropped, the chief executive officer at Prosper Trading Academy stopped his gym workout to rush back to his desk.
‘When that number hit, I took a good second and third look at my positions just to make sure that everything was going to be OK,” said Bauer, who leads a firm that coaches clients on trading stocks and options. “This one really, I mean really, is out of the box.’
Source: Cboe.com
CBOE Volatility Index highlights markets reaction to labour data
Vix Index from today showed a real-time reaction to the unexpectedly positive labour data that has sent shockwaves through equity markets as investors now expect a strong Fed reaction by way of rate hikes.
The CBOE Volatility Index, also known as the VIX, or ‘fear index’, is a real-time market index representing the market’s expectations for volatility.
The VIX is calculated using the prices of S&P 500 index options with near-term expiration dates.
A higher VIX reading indicates that investors are expecting more volatility in the market.
As Scott Bauer told Bloomberg this morning, when the ADP data dropped, the chief executive officer at Prosper Trading Academy stopped his gym workout to rush back to his desk.
‘When that number hit, I took a good second and third look at my positions just to make sure that everything was going to be OK,” said Bauer, who leads a firm that coaches clients on trading stocks and options. “This one really, I mean really, is out of the box.’
Source: Cboe.com
Midday market update
ASX 200 is down 1.62% at 7,047.1
Asian markets follow US equities down in a tough day of global trading.
Hong Kong’s Hang Seng shed 0.5%, China’s CSI 300 was down 0.7%, and Japan’s Topix declined 0.3%. South Korea’s Kospi fell furthest, down 1.1%.
ASX midday market update as of 12:30pm AEST
The best individual performers:
- Genesis Energy [ASX:GNE], up 1.19%
- BSP Financial Group [ASX:BFL], up 1.03%
- Amcor Plc [ASX:AMC], up 0.92%
- PSC Insurance Group [ASX:PSI], up 0.83%
- Skycity Entertainment Group[ASX:SKC], up 0.71%
The worst performers:
- Block Inc [ASX:SQ2], down 5.38%
- Pinnacle Investment Management Group [ASX:PNI], down 5.33%
- Ingenia Communities Group [ASX:INA], down 4.42%
- Magellan Financial Group [ASX:MFG], down 4.37%
- Capricorn Metals Ltd [ASX:CMM], down 4.13%
Australian new car sales signal strength in consumer spending
Closer to home, new stats in Australia are signalling strength in consumer spending around items such as cars.
Australian new vehicle sales totalled 124,926 in June 2023, the biggest number of monthly sales since June 2018.
Sales increased by 25% on a year ago and 8.2% in the first half of 2023.
Australia – New Car Sales.
Lowe made a mistake (again) not raising. pic.twitter.com/CYExo3uZNW— hidflect (@hidflect) July 5, 2023
Australian new car sales signal strength in consumer spending
Closer to home, new stats in Australia are signalling strength in consumer spending around items such as cars.
Australian new vehicle sales totalled 124,926 in June 2023, the biggest number of monthly sales since June 2018.
Sales increased by 25% on a year ago and 8.2% in the first half of 2023.
Australia – New Car Sales.
Lowe made a mistake (again) not raising. pic.twitter.com/CYExo3uZNW— hidflect (@hidflect) July 5, 2023
2-year US Treasury yield hits 16-year high
ADP report out today showed the US Private sector grew by 497,000 jobs in June.
This was over double the estimated numbers and well above the May Job numbers of 267,000.
The main sectors seeing growth were leisure and hospitality, with 232,000 new hires, followed by construction, with 97,000.
This isn’t the news the Fed was looking for today as it hoped to cool the jobs market in an effort to reduce inflation.
Expectations in the market now have the Fed aggressively raising rates to battle wage growth and consumer spending.
Wall St tumbled today on these expectations, sending US bond yields to historic highs.
U.s 2-year Treasury bond yields shot up to above 5%, a 16-year high.
Source: Investing.com
While US 10-year Treasury bond yields are above 4%
Source: Investing.com
Yields and bond prices move in opposite directions, giving investors a clear view of the choppy waters ahead as the investors balance a red-hot US equities market with expectations of deeper future cuts from the Fed to reign in inflation.
With strong signals like these employment numbers, the writing is on the wall….st
2-year US Treasury yield hits 16-year high
ADP report out today showed the US Private sector grew by 497,000 jobs in June.
This was over double the estimated numbers and well above the May Job numbers of 267,000.
The main sectors seeing growth were leisure and hospitality, with 232,000 new hires, followed by construction, with 97,000.
This isn’t the news the Fed was looking for today as it hoped to cool the jobs market in an effort to reduce inflation.
Expectations in the market now have the Fed aggressively raising rates to battle wage growth and consumer spending.
Wall St tumbled today on these expectations, sending US bond yields to historic highs.
U.s 2-year Treasury bond yields shot up to above 5%, a 16-year high.
Source: Investing.com
While US 10-year Treasury bond yields are above 4%
Source: Investing.com
Yields and bond prices move in opposite directions, giving investors a clear view of the choppy waters ahead as the investors balance a red-hot US equities market with expectations of deeper future cuts from the Fed to reign in inflation.
With strong signals like these employment numbers, the writing is on the wall….st
ASX continues to fall, down 1.67%
ASX 200 is down 1.67% at the time of writing at 7,043.9.
All sectors are taking a beating this morning as global markets see red.
ASX continues to fall, down 1.67%
ASX 200 is down 1.67% at the time of writing at 7,043.9.
All sectors are taking a beating this morning as global markets see red.
ADP Labor Data Shows Strong Job Growth in June
The U.S. private sector added 497,000 jobs in June, according to data released by ADP on Thursday. This was well ahead of economists’ expectations of 225,000 new jobs.
The strong job growth was led by the leisure and hospitality sector, which added 232,000 jobs. Other sectors that saw strong job gains included construction, trade, transportation, and utilities.
The ADP data is seen as a bellwether for the official government jobs report, which will be released on Friday. Economists were expecting the government report to show that 275,000 new jobs were created in June.
The strong job growth in June is a sign that the U.S. economy is still growing at a healthy pace.
However, it also raises concerns about inflation, as businesses are raising wages in order to attract workers, which will likely further solidify the case for the Federal Reserve to raise interest rates at its meeting later in July
Wall streets Reaction
Treasury yields surged, and the S&P 500, NASDAQ, and DOW slumped following the reports. US 10-year yields are above 4%, while 2-year bond yields sit above 5%.
Bond and stock correlation flipped to negative for the first time in three months, another strong inflationary trading pattern that is worth watching.
The strong job growth in June is a positive sign for the US economy, but it also underscores the challenges that the Fed faces in trying to cool inflation without causing a recession.
The Fed is expected to raise interest rates by 0.75 percentage points at its meeting, which would be the largest increase since 1994.
‘The labour market remains too hot for the Fed’s comfort,’ said Rubeela Farooqi, chief US economist at High Frequency Economics. ‘With little chance that the supply of skilled labour will surge, the Fed will likely need to maintain its higher-for-longer rate posture into next year to suppress labour demand and sustainably rein in inflation.’
The Fed is walking a tightrope, and it will be interesting to see how it navigates the coming months.
Morning market update
Good morning investors!
Lots of news is coming out of the U.S.
Stay tuned as we cover all the biggest stories.
ASX opens down 0.73% at 7,111.3 as stronger-than-expected labour news from the US has raised fears of the Fed raising rates faster than Wall St expected.
All figures shown are from 10:00am AEST
- $AUD up +0.10% at 66.30 US cents
- ASX futures down -0.58% to 6,991.5
- S&P 500 down -0.79%
- NASDAQ down -0.82%
- DOW down -1.07%
- FTSE down -2.17%
- STOXX down -2.42%
- SSE down -0.54%
- Bitcoin down -1.73% to $US 29,978.66
- Spot gold down -0.26% to $US 1,912.02
- Iron ore up +0.87% to $US 111.84
- Brent Crude down -0.18% to $US 76.51pb
Morning market update
Good morning investors!
Lots of news is coming out of the U.S.
Stay tuned as we cover all the biggest stories.
ASX opens down 0.73% at 7,111.3 as stronger-than-expected labour news from the US has raised fears of the Fed raising rates faster than Wall St expected.
All figures shown are from 10:00am AEST
- $AUD up +0.10% at 66.30 US cents
- ASX futures down -0.58% to 6,991.5
- S&P 500 down -0.79%
- NASDAQ down -0.82%
- DOW down -1.07%
- FTSE down -2.17%
- STOXX down -2.42%
- SSE down -0.54%
- Bitcoin down -1.73% to $US 29,978.66
- Spot gold down -0.26% to $US 1,912.02
- Iron ore up +0.87% to $US 111.84
- Brent Crude down -0.18% to $US 76.51pb
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