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European Shares Try to Snap 7-day Losing Streak


Europe Bounces Back

Shares in European were trying to break a seven-day losing streak early in Friday trade, with the Stoxx 600 moving tentatively higher and London, Frankfurt and Paris making gains of around 0.3%. The seven-day run of losses is the worst for the Stoxx 600 since February 2018, though the FTSE 100 rose yesterday as sentiment improved on Bank of England inflation expectations data. Gold trades a tad firmer above the 200-day SMA with real rates down, oil is off a touch for a second day and the dollar is giving back a little but heads for its eighth straight week of gains. Treasury yields were a tad softer with the 2yr under 5% and the 10yr down around 10bps from Thursday’s high above 4.30%. Copper was down all week and sugar and cocoa popped again on supply concerns. 


US Market and Tech Industry Dynamics

Apple weighed on the US market, the company sliding almost 3% amid fears that China is seeking to ban various domestic consumers from iPhones. That helped send the Nasdaq down almost 1% for a fourth day of losses, whilst the S&P 500 fell for a third day. Chipmakers were caught up in the selling, with Nvidia down 1.75% and Qualcomm sliding 7%. Note NVDA CEO Jensen Huang sold $42m of stock, part of a predetermined plan. But insider selling at NVDA has been heavy of late, buying less so.  


Big Apple in Brittle China Town

On Apple – not immaterial concerns around China and a crackdown on the use of iPhones by officials. Greater China accounts for about a fifth of sales, and maybe around 50mn iPhone sales annually. But I'm not convinced a full bazooka is on the cards – for instance an outright Apple product ban doesn’t seems very unlikely. It’s no coincidence that Huawei is back with a new flagship device just before Apple launches the iPhone 15 – Beijing will be happy to let rumours do the rounds to nudge consumers into buying China not America. However, we can also see it perhaps through the lens of the broader tit-for-tat between the US and China, so won’t necessarily be forgotten soon and it will not be immaterial in terms of sales for Apple. 


US Economic Health and Federal Reserve's Stand

There was more of the good news = bad news narrative as US weekly unemployment claims came in at the lowest since February – painting a picture of a labour market still in robust shape. Meanwhile productivity is at its best in three years. The Fed’s Lorie Logan said it “could be appropriate” to skip a rate hike although “there is work left to do”. 

More on this here from a model put forward in a Chicago Fed paper: “According to the model’s forecast, the policy tightening that’s already been done is sufficient to bring inflation back near the Fed’s target by the middle of 2024 while avoiding a recession.” So that is ample cover to stop, you might think. I think we might see the dots revised down to indicate no more hikes this year – market about 50/50 over one last hike in November.


Markets in Flux: Bold Predictions and Economic Litmus Tests

Wells Fargo says Fed will cut a lot next year, beginning in March with a combined 225bps of easing in 2024. They say: “We believe that the Fed's tightening cycle has come to an end. The probability of another rate hike at the Sept. 20 FOMC meeting appears to be low. We acknowledge the FOMC could raise rates again at its meeting on Nov. 1, but we anticipate that the Committee will remain on hold as inflation continues to ease and as the economy decelerates.”

Not a heap of data today to worry about – earlier Japanese GDP growth was revised down, German CPI was down a fraction and yesterday EZ growth was revised down to just 0.1%, underlining the tough task facing the ECB next week.

SPX – H&S top playing out thus far – catalysts for a leap higher seem thin on the ground...seasonality a factor. Multi-year range-bound market for me as inflation won’t go away and the Fed will be forced into maintaining higher for longer, creating stagflationary conditions.


BoE – year ahead CPI expectations down sharp to 4.8% from 5.4% in July, 3yr stickier but still this will be very welcome news for the MPC ahead of its meeting later this month. We saw sterling come down as the dollar caught bid, but so far no strong desire among bears to test the 200-day. 


GBPUSD: 200-day safe for now, MACD looking oversold.



Crude oil came off for a second day but is still heading to close the week higher. Speculators trimmed some positions to take profits and price action seems to be looking to consolidate the gains in the wake of the Russia-Saudi production cut extension. Whilst supplies are tight, inventories low and a tighter deficit predicted, bulls are very much looking over their shoulders at those long and variable lag effects from one of the most aggressive tightening cycles ever committed to by central banks. And don’t forget the impact of the strong dollar.


Real rates slid sharply, with the 10yr TIPS moving from 2% to 1.91% , allowing to gold to recover the the 200-day and kick on a bit.



China’s offshore yuan slipped to its weakest against the dollar since it began life in 2010, moving above the 7.35 level. The US dollar trimmed gains with DXY futures moving slightly away from yesterday’s six-month but is on course for its best weekly run in nine years. AUD and NZD fell for the week on China softness and most Asian currencies end the week lower against the resurgent dollar.

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