Munnelly’s Macro Minute…

"September Starts With A Seasonal Slump In Sentiment, Stocks Sink”

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US equities fell sharply Tuesday, replicating the sell-off seen at the beginning of August, marking the beginning of one of the seasonally worst months in markets. The S&P 500 sank more than 2%, the tech-heavy Nasdaq fell 3.25%, and the Dow slid 1.5%. Investors' enthusiasm for AI continues to wane; NVIDIA's stock fell by 9.5%, marking the largest one-day market capital decline in history. Bloomberg News revealed that NVIDIA has been served with a subpoena by the US Department of Justice, which seeks proof that the AI heavyweight broke antitrust laws. 

Following the overnight sell-off on Wall Street, most Asian stock markets saw significant losses on Wednesday. These markets included those in Australia, Japan, South Korea, Hong Kong, Singapore, and Taiwan. The markets were also affected by weakening commodity prices, worries about the expansion of the world economy, and uncertainties on the rate of U.S. interest rate path. 

September has a strong seasonal tendency for market volatility, as the US came back online yesterday after the Labor Day holiday; data indicating a persistent fall in U.S. industrial activity in August caused traders to react negatively, paring risk exposure, with the data raising further fears about the state of the economy. Although there is some dispute on the pace of rate decreases, the US Fed is likely to drop rates at its next meeting later this month. The FedWatch Tool from CME Group indicates a 37.0% possibility of a half-point rate decrease and a 63.0 % chance of a quarter-point rate cut on September 18th.

Stateside, later in the day, the Fed's Beige Book survey results, trade, employment openings, and factory orders data from the are expected to be released. Job openings, the rate at which people leave their jobs—is one of the details to pay attention to, as a decline in the number of persons taking up new positions could indicate further cooling of the labor market and an increase in unemployment. The timing of the noteworthy price action (10-year UST yield down 10bps to 3.82%) in relation to yesterday's data suggests that the driving force was less about the problems facing the US manufacturing sector and more about evaluating the possibility of a 50bp rate cut from the Fed in September as opposed to just a 25bp move. Squeezing rate doves and US currency bears could be the result of Friday's recovery from last month's weather-related decline in employment growth. The release of the August jobs report on Friday is the most eagerly awaited event of the week. After adding 114,000 jobs in July, economists now project a gain in employment of 165,000 jobs in August. After increasing to 4.% in July—its highest level since October 2021—the unemployment rate is predicted to marginally decline to 4.2%

Locally, later in the session, the final composite Purchasing Managers' survey data from the U.K. and the Euro area are expected.

Overnight Newswire Updates of Note

• Australia’s Economy Sluggish As Consumer Spending Slows

• China’s Caixin PMI Services Growth Slows In August

• Japan's PMI Service Activity Extends Gains In August

• Yoshimasa Hayashi Enters Japan LDP Leadership Race

• UK Chancellor Reeves: Will Raise Taxes At The Budget

• Aussie Trims Losses To Retake 0.6700 After Australian GDP

• Yen Holds The Rebound Near 145.50 Despite Risk-off Flows

• Bitcoin Dives Under $56K As Asian Equities See Red

• Ukraine Undertakes Biggest Government ‘Reboot’ Of War

• Israeli Hostage Deaths Alter Ceasefire Talks

          (Sourced from reliable financial news outlets)

FX Options Expiries For 10am New York Cut 

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

• EUR/USD: 1.1000 (657M), 1.1020 (877M), 1.1050 (751M), 1.1100 (831M),

• 1.1125-35 (1.1BLN)

• USD/CHF: 0.8400 (290M), 0.8425 (325M). EUR/CHF: 0.9395 (377M)

• GBP/USD: 1.3075 (380M), 1.3110 (200M)

• AUD/USD: 0.6665 (250M), 0.6740-45 (921M), 0.6775 (383M)

• USD/CAD:1.3515 (2BLN)

• USD/JPY: 145.00 (1BLN) , 145.75-80 (372M), 146.25-35 (1.7BLN)

• AUD/JPY: 97.55 (209M), 98.10-20 (335M)

CFTC Data As Of 4/9/24

• Swiss Franc posts net short position of -24,612 contracts

• British Pound net long position is 89,931 contracts

• Euro net long position is 92,838 contracts

• Japanese Yen net long position is 25,868 contracts

• Bitcoin net short position is -166 contracts

• Equity Fund Managers raise S&P 500 CME net long position by 15,425 contracts to 989,851

Technical & Trade Views

SP500 Bullish Above Bearish Below 5550

• Daily VWAP bearish

• Weekly VWAP bullish 

• Below 5510 opens 5470

• Primary support 5460

• Primary objective is 5740

EURUSD Bullish Above Bearish Below 1.11

• Daily VWAP bearish

• Weekly VWAP bullish 

• Below 1.09 opens 1.0850

• Primary support 1.0850

• Primary objective 1.09

GBPUSD Bullish Above Bearish Below 1.3190

• Daily VWAP bearish

• Weekly VWAP bullish 

• Below 1.2950 opens 1.29

• Primary support is 1.2870

• Primary objective 1.3390

USDJPY Bullish Above Bearish Below 143.70

• Daily VWAP bullish

• Weekly VWAP bearish 

• Below 142 opens 140

• Primary support 140

• Primary objective is 151.80

XAUUSD Bullish Above Bearish Below 2450

• Daily VWAP bearish

• Weekly VWAP bullish

• Below 2450 opens 2400

• Primary support 2300

• Primary objective is 2598

BTCUSD Bullish Above Bearish Below 54000

• Daily VWAP bearish

• Weekly VWAP bearish

• Below 54000 opens 50000

• Primary support is 50000

• Primary objective is 70000

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