Rise and shine everyone. Happy Friday! There’s no US data of note today.

The S&P 500 saw the biggest one day gain yesterday since November 2022, at 2.3%. That’s remarkable! As of now, it’s crossed above the 100-day moving average and we need to see if this holds. There was no selloff into the close.

Asian markets closed generally higher following the US rally. The Hang Seng Index broke through its 200-day moving average but, closed lower.

US Equity Futures opened higher this morning but, giving up some of their early gains. UST yields are heading slightly lower, as is the USD. Commodities are mostly higher, Bitcoin is pulling back a little.

TSMC is rallying on a report of stronger demand AI chips last month.

Celebrating yesterday’s Jobless Claims

It would seem that yesterday’s Initial Jobless Claims were a reason to celebrate because they came in lower than expected. ⤵

Was it really? The 4-week average increased, and Jobless Claims - both initial and continuing - increased. So, we’re in a situation where we’ll take even the hint of good news to be good news.

I’m all for the market going higher, but it still makes sense to be cautious because data like this will be celebrated until it isn’t. I would recommend hedging somewhat at least.

Inflation Returns to China… and elsewhere

We got inflation numbers from China… and yes we can call it “inflation” since we got positive numbers. PPI also shows a trend towards improvement, i.e., less negative.

The next question is what does this mean for other countries?

Still a mixed picture - but we’re seeing a marginal spike in a few countries. We get US CPI next week, so that’s something to watch. I doubt a slight increase will deter the Fed from cutting in September. Unless there’s something awful in the data, we’re probably still headed for at least a 50-bp cut.

NatGas in focus

European natural gas futures hit an 8-month high of €40/MWh, up 9% for the week, due to concerns over supply stability after Ukraine took control of the Sudzha gas transit station in Russia's Kursk region. Despite the conflict, Russian gas continues to flow through Ukraine, with Gazprom increasing deliveries to 38.5 million cubic meters. With the gas transit agreement expiring year-end, disruption risks loom, but analysts believe both Russia and Ukraine are incentivized to maintain the flow.

Chart of the Day - BofA’s Flow Show

HY is something to keep an eye on. In a growth slowdown, we’re likely to see HY get hit. I’m not surprised that people pulled their money out of these funds.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)