Weekly News 2023/07/31-2023/08/04

 U.S. stocks fell on Friday. The Dow fell 150.27 points, or 0.43%, to 35065.62; the Nasdaq fell 50.48 points, or 0.36%, to 13909.24; the S&P 500 fell 23.86 points, or 0.53%, to 4478.03 point. The S&P 500 fell for a fourth straight session. All three major indexes posted losses for the week. For the week, the Dow fell 1.11%, the Nasdaq fell 2.85%, and the S&P 500 fell 2.27%.

Investors ushered in dense earnings report this week. Amazon jumped 8.3 percent after the company beat profit expectations and provided positive guidance. Apple closed 4.8 percent, with its market value falling below $3 trillion, after the company announced after the market closed on Thursday that its revenue was below year-ago levels. 84% of S&P 500 companies have reported earnings so far, and 80% of them have beaten expectations. Aside from the earnings report, traders are closely watching Friday's non-farm payrolls data to gauge the strength of the labor market and U.S. economy, and their implications for the path of the Federal Reserve's monetary policy.

The U.S. Department of Labor reported on Friday that the number of non-farm payrolls increased by 187,000 in July, a 32-month low, lower than the expected 200,000; the unemployment rate recorded 3.50% in July, compared with 3.60% previously and expected.

According to analysts, the non-agricultural employment data shows that the US labor market is still relatively tight, the unemployment rate is stable near the low point in decades, and wage growth maintains a relatively fast growth rate. Data last month showed resilient consumer spending and annual inflation slowed sharply in June. Economists who have been predicting a U.S. recession in the fourth quarter of this year are increasingly convinced that the Fed's “soft landing” scenario is possible.

 On Friday, Apples (NASDAQ: AAPL) stock price fell nearly 5%, and its market value fell below the $3 trillion mark. Apple announced its third-quarter performance report for fiscal year 2023 on Thursday, showing its third consecutive quarter of revenue decline and predicting a similar performance for the current quarter. Apple became the first company to hit a $3 trillion market cap in June.

Qualcomm (NASDAQ: QCOM), NXP(NASDAQ: NXPI), Infineon(ETR: IFX), Nordic Semiconductor (SGX: MR7) and Bosch (NSE: BOSCHLTD) issued a joint statement announcing that they have jointly established a joint venture to promote the global adoption of RISC-V architecture by supporting the development of next-generation hardware. The initial application focus will be automotive, but will eventually expand to mobile devices and the Internet of Things.

UBS (SWX: UBSG) is restructuring its technology, media and telecom investment banking team to increase its share of the deal-making market, according to media reports citing sources. UBS is in discussions to appoint Laurence Braham as global technology co-head, who is expected to be partnered with Christian Lesueur, who has been global head of investment banking for technology, media and telecoms. Steve Pettigrew, who joined the firm from Bank of America, will lead the software M&A business, reporting to Braham. Some Credit Suisse technology bankers may lose their jobs as a result of the restructuring, people familiar with the matter said.

Alphabet(NASDAQ: GOOGL), the parent company of Google, said on Friday that it had cut its stake in Robinhood by nearly 90%. A few days ago, the AOL brokerage platform announced its first post-IPO profit. Alphabet said in a regulatory filing that it owned about 612,214 shares of Robinhood as of June 30, compared with 4.9 million shares in the first quarter ended March 31.

 Bitcoin is down 0.26% for the week. The world's largest cryptocurrency by market capitalization has been trading below $30,000 since July 24, falling to $28,799 on Tuesday, its lowest level since June 21. Ethereum fell 1.77% for the week to $1,833.

Lucas Kiely, chief investment officer of digital asset platform Yield App, said that the price of bitcoin fell from several key levels, indicating that the market trend is bearish. “Despite the positivity of the exchange-traded fund filing and the XRP ruling, given the price weakness, investors may be considering whether its time to cut their losses or weather this turbulent period,” Kiely said. Sentiment is still down significantly. The Securities and Exchange Commission seems to be suing another crypto company every week, which seems to turn investors away.

On the macroeconomic front, credit agency Fitch Ratings downgraded the U.S. long-term credit rating to AA+ from AAA on Tuesday, citing the country's “expected fiscal deterioration” over the next three years. “The U.S. government has $32 trillion in debt and trillions in interest. Meanwhile, the economy is growing only marginally. Fitch downgrades pushed up bitcoin prices, but bitcoin faces resistance at the $30,000 level.” Kiely said.

On Friday, the global cryptocurrency market cap was $1.16 trillion. Trading volume was down 1.69 percent from $1.18 trillion a week earlier, according to CoinMarketCap. Bitcoin has a market cap of $566 billion, or 48.7 percent of the market, while Ethereum has a market cap of $220 billion, or 18.9 percent.

 Gold prices climbed on Friday after a slightly weaker-than-expected U.S. jobs report sent the dollar and U.S. Treasury yields lower, providing some respite for the metal, but notched its worst week in six.

The Labor Department's closely watched jobs report showed nonfarm payrolls rose by 187,000 in July. David Meger, director of metals trading at High Ridge Futures, said: “The employment report made the market think that the possibility of the Fed raising interest rates is unlikely. Therefore, we have seen U.S. bond yields fall along with the dollar, which has undoubtedly supported gold prices.”

The dollar fell 0.5 percent after the data, with U.S. 10-year yields retreating from nine-month highs. According to CME Group's FedWatch tool, the probability that the Fed will keep interest rates unchanged at its Sept. 19-20 meeting is now around 85%, up from around 78% before the data.

Vandana Bharti, assistant vice president of commodities research at SMC Global Securities, said the resilience of the U.S. economy has led to growing expectations that the Federal Reserve will continue to raise interest rates, further weighing on gold.

Chicago Fed President Goolsbee said on Tuesday that the Federal Reserve is on track to reduce inflation without triggering a deep recession, but whether it can achieve this goal without raising interest rates again will depend on data. He also said the Fed needs to see sustained steady progress towards its 2 percent inflation target, which is a difficult path.

Spot silver rose 0.1% to $23.58 an ounce, while platinum rose 0.6% to $919.36. Both were set for a third straight weekly decline.

 Oil prices rose more than $1 a barrel on Friday, posting their sixth straight weekly gain after top producers Saudi Arabia and Russia extended supply cuts until September, fueling concerns over supply shortages.

Saudi Arabia on Thursday extended its voluntary 1 million bpd oil production cuts until the end of September and opened the door to another extension. Russia has also opted to cut oil exports by 300,000 bpd next month.

UBS analysts wrote in a note: “With the extension of the production cut period, we expect the market gap to exceed 1.5 million barrels per day in September, while the gap in July and August is estimated at around 2 million barrels per day.”

On the demand side, Russian Deputy Prime Minister Novak said on Friday after an OPEC+ ministerial group meeting that global oil consumption could rise by 2.4 million bpd this year.

The meeting did not make any changes to output policy. The UBS report added that the panel noted that it could take additional steps at any time, which could mean additional production cuts if market conditions deteriorated. UBS said it expected Brent oil prices to trade between $85 and $90 a barrel in the coming months.

“The strong dollar is weighing on crude oil prices and everyone is wondering if the hot labour market will force the Fed to tighten policy further,” said OANDA analyst Edward Moya, referring to a possible Fed rate hike.

Oil prices were weighed on by data on Friday showing the U.S. economy maintained a modest pace of job growth in July, but solid wage growth and a drop in the unemployment rate pointed to continued tight labour market conditions.

 The dollar fell on Friday, erasing nearly all of its gains for the week after data showed U.S. job growth slowed in July, boosting hopes of a soft economic landing, but rising wages suggested the Fed may need to stay elevated for longer. The U.S. economy added fewer jobs than expected in July. However, solid wage growth and a drop in the unemployment rate to 3.5% suggest that the labor market remains tight.

Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, said the weaker-than-expected job growth paused this week's surge in bond yields and prevented the dollar's recent gains.

However, ahead of next week's release of the Consumer Price Index (CPI), Chandler cast doubt on the market's view that the economy will achieve a soft landing. He said the CPI could show inflation rising year-on-year for the first time since June 2022.

The U.S. dollar index , which measures the greenback against six major currencies, fell 0.459%, its biggest one-day drop in three weeks. The dollar climbed to 102.84 on Thursday, its highest since July 7.

Long-dated U.S. Treasury yields hit nine-month highs on Thursday on the back of heavy supply and data showing a more resilient labor market. The yen has been sensitive to higher U.S. Treasury yields as the Bank of Japan keeps Japanese government bond yields low. Traders are trying to gauge how fast and how high the Bank of Japan will let Japanese government bond yields climb after it unexpectedly adjusted monetary policy last week.

The Swiss franc has been the biggest G10 currency gainer against the dollar this year, reversing losses after the U.S. jobs data. USD/CHF was down 0.18%. Sterling was last trading at $1.2755, up 0.33% on the day.

OnePro Special Analyst

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