Weekly News 2023/07/10-2023/07/14

 U.S. stocks closed mixed on Friday. The Dow rose 113.89 points, or 0.33%, to 34,509.03; the Nasdaq fell 24.87 points, or 0.18%, to 14,113.70; the S&P 500 fell 4.62 points, or 0.10% at 4505.42 points.

The three major U.S. stock indexes all recorded gains this week, with the Dow up 2.29%, the S&P 500 up 2.42%, and the Nasdaq up 3.32%. The market pays close attention to the second quarter earnings report of US stocks.

On Friday, JPMorgan Chase, Wells Fargo and Citibank announced their financial reports one after another, officially kicking off the second quarter earnings report for US stocks. Although JPMorgan Chase, Wells Fargo and Citigroup's Q2 financial reports all exceeded expectations, the market's expectations for this quarter's earnings report are pessimistic. Analysts predict that the earnings of S&P 500 companies will fall by about 7% year-on-year.

The U.S. producer price index (PPI) released on Thursday showed a weaker-than-expected increase in inflation, further confirming market perceptions that Wednesday's weaker-than-expected U.S. consumer price index (CPI) pointed to a steady decline in inflation, leading people to believe that Traders were optimistic that the Federal Reserve had finally won the fight against inflation and that the rate hike cycle was coming to an end. But the Fed will still be likely to raise its benchmark interest rate later this month.

UBS chief investment officer Mark Haefele said: “The U.S. data is certainly encouraging, and with every data pointing to stronger economic growth and lower inflation, the chances of a soft landing by the Fed are increasing.” Investors are now considering whether the strong economy portrayed by recent data will drive stocks higher by the end of the year.

 The start of the U.S. banking earnings season underscores the divergence in the performance of the sector this year. JPMorgan (NYSE: JPM) posted a record quarterly profit and other big banks signaled stronger-than-expected income from their lending business. Nationally, small and medium-sized banks experienced turmoil in the first half of the year as rising interest rates eroded the value of assets on their balance sheets. That has prompted corporate and wealthy clients to shift deposits to banks perceived to be stronger. Revenue growth was fueled by big banks taking on new clients and increasing lending, with JPMorgan Chase also buying the collapsed First Republic Bank. Big bank executives believe their lending business is in top shape, with revenues growing faster than bad loans are being generated.

Citigroup's (NYSE: C) total loans in the second quarter of the fiscal year were US$660.6 billion, analysts expected US$656.29 billion; consulting revenue in the second quarter was US$162 million, US$244.9 million expected; debt underwriting income in the second quarter was US$288 million, US$298.7 million expected.

Tesla Inc (NASDAQ: TSLA) is returning to the U.S. asset-backed securities (ABS) market for the first time in more than a year, closing on a $1 billion premium car leasing deal. Tesla is doing upfront marketing ahead of the deal. It's Tesla's first asset-backed security deal since it gained blue-chip status in March. The company has not entered the U.S. asset-backed securities market since September 2021, and a sale in March 2022 was suspended.

 For the week, bitcoin rose 3.46 percent to $31,222 on Friday. The world's largest cryptocurrency by market cap has been trading above $30,000 all week. Ethereum is up 6.88% this week to $1,992.

Positive news, Europe's first bitcoin exchange-traded fund (ETF) is expected to go public this month, following a 12-month delay. The news follows a flurry of spot bitcoin ETF applications in the U.S. from financial giants including BlackRock, WisdomTree and Fidelity Investments.

Jonas Betz, a cryptocurrency market analyst and founder of advisory firm Betz Crypto, said a similarly positive catalyst is needed to boost investor sentiment and keep bitcoin above $31,000.

“Approval of a Bitcoin ETF would be an important step toward mainstream acceptance of Bitcoin, signal regulatory confidence, and potentially pave the way for significant institutional investment. News like this could spark a bullish market reaction, pushing Bitcoin above $31,000.” Betz wrote in a statement shared with Forkast.

Standard Chartered Bank predicts that Bitcoin, the world's largest cryptocurrency by market value, may reach $50,000 this year and $120,000 by the end of next year. Standard Chartered Bank predicted that Bitcoin is expected to reach $100,000 by the end of 2024, as the cryptocurrency winter is over. Analyst Kendrick said that the increased profitability of encrypted miners per unit of Bitcoin means that they can reduce sales while maintaining cash inflows, which will reduce the net supply of Bitcoin and push up the unit price of Bitcoin. Entering 2023, the price of Bitcoin has risen by 80%, but the current price of US$30,000 is still less than half of its peak of US$69,000 in November 2021.

 The price of gold fell back on Friday, but it had its biggest weekly gain since April. The price of gold fluctuated and climbed this week, and the price of gold stood at $1,950. The U.S. CPI and PPI fell, and the Feds interest rate hike expectations cooled, and gold prices were supported. Christopher Wong, FX analyst at OCBC Bank, said the sharp slowdown in U.S. CPI is in line with our view that there will be a shift in trading strategy.

Gold prices hit their highest since June 16 earlier this week after data showed U.S. consumer prices rose at their smallest year-on-year increase in more than two years in June, stoking bets the Fed could soon end its cycle of rate hikes.

Daniel Pavilonis, senior market strategist at RJO Futures, said: “As inflation retreated, expectations of further rate hikes fell slightly, which helped gold this week. But gold prices fell today as U.S. Treasury yields rose. Gold prices will be stuck in a near-term Range. If the Fed starts to say we don‘t need to raise rates further, we’ll see further gains in gold.”

Benchmark U.S. Treasury yields rose, making non-yielding gold less attractive to investors. But the dollar was on track for its biggest weekly loss since November, limiting gold's losses.

Silver rose 0.4% to $24.95 an ounce, notching its best week since mid-March. Platinum was up 0.1% at $974.03 and palladium was down 1.4% at $1,277.18, but both were up for a second straight week.

Next week, investors will focus on China's second-quarter GDP, as well as UK CPI and PPI data. At the same time, the G20 finance ministers and central bank governors' meetings are also worthy of attention.

 Oil prices fell more than $1 a barrel on Friday, with WTI crude oil futures down 0.16% to $76.77/barrel; ICE Brent crude futures fell 0.12% to $81.26/barrel. The two markets rose by more than 4% in a week, hitting a new high since late April, reaching US$77.33/barrel and US$81.75/barrel respectively. The benchmark crude contract posted its third straight weekly gain as oil traders took profits after a strong rally as the dollar strengthened. John Kilduff, partner at Again Capital, said, “This seems to be just some profit-taking, and as the dollar rebounds, some demand concerns are back in focus.”

The U.S. dollar index rose after hitting a 15-month low as investors consolidated positions ahead of the weekend. A stronger dollar makes crude more expensive for holders of other currencies, reducing oil demand.

However, Rob Haworth, senior investment strategist at Bank of America Wealth Management, said the oil market could resume its rally next week as factors such as easing inflation, plans to replenish strategic reserves in the U.S., supply cuts and disruptions could support the market.

Oil prices rose nearly 2% on the week after supply disruptions in Libya and Nigeria fueled fears the market would tighten in the coming months. Several oil fields in Libya were closed on Thursday as a local tribe protested the kidnapping of a former minister. Separately, Shell suspended the loading of Nigerian Fercados (Nigeria) crude oil due to a possible leak at a terminal. PVM analyst John Evans said the loss from the Libyan crude supply disruption was estimated at 370,000 bpd, while the Nigerian crude supply disruption was estimated at 225,000 bpd.

Commerzbank analysts added that Russian oil exports have also fallen sharply, and if this trend continues next week, it could push prices further higher as Russian oil exports are set to fall by 500,000 bpd in August.

 The dollar rebounded on Friday after falling sharply over the past few days as investors consolidated losses ahead of the weekend, but the greenback remained biased to the downside as the Fed is seen nearing the end of its rate-hiking cycle amid softening inflation. The dollar still posted its biggest weekly loss against a basket of six major currencies since November. The dollar index rose 0.2 percent to 99.923, having hit a 15-month low of 99.574 earlier. The index fell 2.3% for the week.

The dollar's losses this week were exacerbated by data on U.S. producer and consumer inflation for June that showed easing price pressures. Data on Thursday showed U.S. producer prices barely rose in June, the smallest annual gain in nearly three years, and Wednesday's report showed consumer prices rose only slightly in June.

Fed Governor John Waller said he was not ready to lift the alarm on U.S. inflation, favoring further rate hikes this year.

Investors have been betting for months that the dollar will turn lower, with short positions more than doubling in the month to July 7 but still well below 2021 levels, according to Commodity Futures Trading Commission data. The euro hit a 16-month high of $1.1245 EUR against the weaker dollar before flat at $1.1229.

USD/CHF rose 0.4 percent to 0.8621 franc from an eight-year low of 0.8568 franc. The dollar was on track for its biggest weekly percentage loss against the Swiss franc since December.

USD/JPY rose 0.5% to 138.805 but was headed for its worst week since January.

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