Wall Street edges higher as July’s CPI report awaited

“Headline inflation likely strengthened month-over-month as well as energy prices are expected to rebound post sharp declines in May/Jun. Our unrounded core CPI forecast at 0.14 per cent month-over-month suggests larger risks toward a rounded 0.2 per cent increase.”

While the VIX, or Wall Street’s most recognised fear metric, continued to retreat, former Treasury Secretary Lawrence Summers urged the US Securities and Exchange Commission and relevant exchanges to investigate why it spiked at the start of the week.

“My understanding is that because there are some illiquid instruments that go into the calculation of the VIX, the VIX had a somewhat artificial move on Monday,” Summers told Bloomberg. “Since that is so widely watched an indicator, issues of liquidity, issues around how it settles, I think should be studied by the relevant parties in the industry and the regulator — the SEC.”

The VIX recorded an unprecedented surge that took it above 65 — a level associated with outright investor panic. It closed down 3.42 points or 14.4 per cent to 20.37 in Chicago on Friday (Saturday AEST). It has traded roughly between 12 and 20 for most of the year until last Friday.

Stocks in focus

Profit season calendar and results Here is a list of dates Australian companies are reporting earnings results this month.

Market highlights

ASX futures up 59 points or 0.8% to 7781 near 7am AEST

• AUD -0.2% to 65.78 US cents
• Bitcoin +0.8% to $US60,144 at 7.18am AEST
• On Wall St at 4pm: Dow +0.1% S&P +0.5% Nasdaq +0.5%
• In New York: BHP +1.2% Rio +0.5% Atlassian +1.9%
• Tesla +0.5% Microsoft +0.8% Apple +1.4% Nvidia -0.2%
• Alphabet +1% Amazon +0.7% Meta +1.6%
• VIX down 3.4 points or 14.3% to 20.39 QQQ +0.5%
• Stoxx 50 +0.1% FTSE +0.3% DAX +0.2% CAC +0.3%
• Spot gold +0.2% to $US2431.32/oz at 4.59pm in New York
• Brent crude +0.7% to $US79.73 a barrel
• Iron ore +1.5% to $US100.90 a tonne
• 10-year yield: US 3.94% Australia 4.06% Germany 2.22%
• US prices as of 4.59pm in New York

Iron ore hit by slowing China demand: Goldman

Goldman Sachs commodities analysts led by Aurelia Waltham said a decline in iron ore supply is likely needed to prevent the market moving further into oversupply. “With India still exporting, we view a price of under $US100 a tonne as likely needed to trigger a sufficient supply response.”

Waltham also said Mysteel’s sample of 247 steel mills showed a 2 per cent week-over-week drop in consumption of imported iron ore, reflecting a similar decline in hot metal output.

Meanwhile, flat steel output slid by 5 per cent week-over-week, the largest such drop since early 2022. “Despite this, inventories remained flat, implying that consumption is moving lower (and/or exports, with July steel exports down 10 per cent month-over-month). Given negative steelmaking margins (only 5 per cent of mills surveyed by Mysteel reported that they were profitable this week), a further reduction in output could be ahead.”

Waltham said China July trade data came in weaker than expected for export value growth. She said there are rising risks to Chinese exports of steel (both ‘direct’ and ‘indirect’ via manufactured products), and “we continue to view this as a key potential headwind to Chinese hot metal production being able to maintain high levels in 2024 H2 and 2025”.

“Our China team’s findings that, in response to poor profitability and uncertainties around limitations to market access to the US and EU, Chinese manufacturers are preemptively adjusting the pace of future additions of capacity, which also has the potential to slow demand growth for industrial metals in China (and battery metals - lithium battery Capex plans are currently 41 per cent lower for 2024 and 28 per cent lower for 2025 than what was planned one year ago). Planned Capex has also been revised down in the construction machinery, electric vehicle and solar module sectors.”

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