Daily Market Outlook, August 7, 2024

Munnelly’s Macro Minute…

“BoJ…The New Plunge Protection Team?”

After Wall Street's generally positive cues overnight, Asian stock markets are basically up on Wednesday. Traders are buying equities at a discount following the recent sharp sell-off that was sparked by concerns that the largest economy in the world will enter a recession.

The Bank of Japan appears to have taken on the role of the infamous ‘Plunge Protection Team’ from the Federal Reserve, as Nikkei investors hope. After an early 3% decline, the Nikkei rebounded 2.8% and nearly returned to its pre-Monday 13% crash level. BOJ Deputy Governor Shinichi Uchida's statement that the central bank would not raise interest rates amid market volatility saved the day and perhaps the fate of the yen carry trade. The dollar surged 2% against the yen, Japanese yields fell, and the probability of a BOJ rate hike in October dropped to just one-in-four, a marked change from last week when the BOJ hiked rates by 15 basis points and signaled further tightening, leading to a surge in the yen and the unraveling of the yen carry trade. As a result, the yen saw a spike in value and the collapse of the yen carry trade, in which investors borrowed money at cheap interest rates to purchase assets with greater yields. Almost everything was rose. Even China's trade figures surprised to th eupside with how strong domestic demand was, as imports exceeded forecasts. Export growth was strong even though it fell short of expectations.

Datawise trade numbers from Germany and the UK's home prices for July. Central banks speakers include Elizabeth McCaul, a board member of the European Central Bank, participating in a panel discussion, and Olli Rehn, the ECB, opens the Bank of Finland seminar.

Today's big earnings in Europe are mixed bag Siemens Energy increased its forecast for free cash flow for the second time in three months, while Novo Nordisk missed its profit margin for the second quarter. In the UK, Lloyd's of London insurer Hiscox H1 earnings is up 7%, while Legal & General has reported operating profit for H1 that is better than anticipated.The Financial Times also revealed that Swiss drugmaker Roche is thinking of selling off its cancer data expert Flatiron Health.

Overnight Newswire Updates of Note

BoJ Deputy Gov: Won’t Raise Rates When Markets Unstable
China Exports Growth Slows Slightly While Imports Boom
SEC Investigating Wall Street Banks Over Lost Interest Payments
New Goldman Sachs Index, Financial Stress Relatively Normal
IMF Reports Progress In El Salvador Talks, Flags Bitcoin Risks
Australian RBA 'Near-Term' Interest Rate Cuts Not On Agenda
US Has Communicated To Not Escalate Conflict
Hamas Picks Yahya Sinwar As New Political Leader
China Implements Tech Innovation National Guarantee Fund
Oil Prices Settle Higher; Signs Of Tighter Supply

(Sourced from reliable financial news outlets)

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0825-35 (1.2BLN), 1.0840-45 (1.04BLN)
1.0850-55 (1.64BLN), 1.0900 (468M), 1.0945-55 (1.13BLN)
1.0960-70 (359M)
USD/CHF: 0.8555-60 (922M), 0.8725 (480M), 0.8750 (310M)
0.8825 (250M), 0.9000 (1.0BLN)
GBP/USD: 1.2650 (450M), 1.2750 (230M), 1.2830 (656M)
EUR/GBP: 0.8400 (557M), 0.8485 (907M), 0.8620 (669M)
AUD/USD: 0.6525-35 (539M), 0.6550 (301M), 0.6660-70 (497M)
0.6745 (861M). NZD/USD: 0.5870-80 (701M)
0.5950 (331M), 0.6015-20 (288M), 0.6085 (300M)
AUD/NZD: 1.0925 (380M), 1.0950-60 (1.04BLN), 1.0975 (382M)
1.1000 (263M)
USD/CAD: 1.3625 (729M), 1.3695 (230M), 1.3735 (220M)
1.3750 (620M), 1.3800-10 (377M), 1.3875 (631M)
USD/JPY: 146.00 (500M), 147.25-35 (1.57BLN)
147.75 (220M), 149.00 (600M), 149.25 (1.32BLN)
150.00 (427M)

CFTC Data As Of 30/7/24

Equity fund managers CUT S&P 500 CME net long position by 55,687 contracts to 938,842
Equity fund speculators trim S&P 500 CME net short position by 32,188 contracts to 248,167
Euro net long position is 17,799 contracts
Japanese yen net short position is -73,460 contracts
Swiss franc posts net short position of -34,520
British pound net long position is 111,471 contracts
Bitcoin net short position is -1,002 contracts