A daily market update from FS Insight — what you need to know ahead of opening bell

“Gold is the corpse of value.” — Karl Marx

Over the Weekend

Hamas murders six hostages; Israel is blamed WSJ

U.S. says it captured an ISIS leader in Syria Centcom

Futures drop as markets brace for data-heavy week RT

Americans’ economic mood brightens – a bit WSJ

August bond issuance hits record at nearly $50 billion BB

Kamala Harris calls for U.S. Steel to remain American-owned WSJ

Bank of Canada poised to cut rates for third straight time WSJ

German chancellor reacts to ‘bitter’ far-right election victory FT

U.S. researchers find probable launch site of Russia’s new nuclear-powered missile RT

France prepares to start up long-delayed Flamanville nuclear reactor FT

A war between two strands of capitalism – green and brown FT

Thousands of hotel workers launch strike after talks with top chains stall NPR

Pivotal week ahead in Kroger-Albertsons case after FTC lands early blows WSJ

Intel considers selling Altera as part of plan to shed assets, cut costs RT

Intel’s Dow status under threat as struggling chipmaker’s shares plunge RT

Huawei’s buggy software hampers China’s efforts to replace Nvidia in AI FT

Fidelity cuts valuation on X by another 4% TI

ByteDance in talks with banks for $9.5 billion loan TI

Airbnb should be a sleeper hit WSJ

New York business elite rally in favor of fashion merger FT

Game over: Microsoft rolled out AI PCs that can’t play top games – and there’s no quick fix WSJ

Disney pulls content from DirecTV ahead of the final week of the U.S. Open TI

You read that right: Volkswagen mulls German plant closures to cut costs WSJ

Ireland’s luxury problem: what to do with its €8.6bn surplus FT

U.K. retail sales boosted by warm weather in August FT

Investors step up calls to cut use of antibiotics in food chain FT

Private equity warns U.K. capital gains tax overhaul could be ‘tipping point’ FT

Nigerian fintech chief fined $250mn after holdings described as a ‘fiction’ FT

Young people are taking over the workplace, and that’s a problem for bosses WSJ

Nuclear weapons always stopped invasions; then Ukrainian troops poured into Russia WSJ

A key Western ally is buckling under Russian pressure WSJ

Tunisian presidential candidate arrested ahead of Oct 6. election FT

Venezuelan strongman’s $13 million plane seized, flown to Florida WSJ

Silicon Valley’s hot talent pipeline is an Israeli army unit WSJ

Austria’s ‘Beer Party’ started as a joke; now it could determine an election Semafor

Oregon ends first-in-nation, 4-year experiment decriminalizing possession of small amounts of fentanyl, heroin, meth, other hard drugs TH

Feeling suddenly older? Scientists see aging ‘waves’ at 44 and 60 WSJ

Likely a women’s record, 22 hours and 48 minutes is what it took British endurance swimmer Sam Farrow (2 jobs, 2 kids) to swim the 45.2-mile length of Lake Geneva Semafor

Visualizing fall foliage predictions UT

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

• July Core PCE came in at +0.16% MoM and the details are good:
  – the two biggest upside contributors were housing and financial services (+0.07 and +0.04, of +0.16, respectively)
  – financial services is due to stock market rising and not the inflation that worries the Fed.
• U Mich 1-yr inflation expectations fell to 2.8%, and that is not only stable but anchored to pre-pandemic levels.
• To us, this gives Fed more confidence to focus on its labor mandate, i.e. keep the job market healthy, and thus it can lower rates with confidence back toward neutral – to 2.5%-3.0% from 5.5% now. Moreover, this strengthens the Fed put. After all, falling stock prices threaten the labor market.
• This gives us another reason to see Sept rate cut as the catalyst to trigger a rotation:
  – into cyclicals XLF0.88% XLI0.90%
  – small-caps IWM0.43%

Click HERE for more.

TECHNICAL

August has come to a close with a show of the fourth straight month of gains, markets are also entering the seasonally difficult month of September. Before delving into average seasonality trends or what September might look like, we’ll share the daily S&P chart below.

As can be seen, SPX is trading less than 50 points away from 8/19/24’s daily close of 5608.24. While prices managed to rally into Friday’s close to finish the month of August up more than 1.8%, SPX requires a move over 5651 to help the August rally extend to new all-time highs. Conversely, moving under 5560 would postpone gains, suggesting a bit more consolidation might be needed initially.

However, bottom line: despite the neutral pattern over the last couple of weeks, it remains difficult to “short a dull market” as the saying goes, and it’s still right to expect our neutral pattern to be resolved higher, given Friday’s strong finish.

Click HERE for more.

CRYPTO

The Hong Kong Monetary Authority (HKMA) has initiated a new sandbox program for Project Ensemble, a wholesale CBDC project, as they prepare to test new tokenization use cases within traditional capital markets. Wholesale CBDCs are designed for financial institutions for large interbank settlements or large-value transactions compared to retail CBDCs, which are designed for everyday payments and transfers. The sandbox program will focus on four key areas: fixed income and investment funds, liquidity management, green and sustainable finance, and trade and supply finance. The sandbox should pave the way for tokenization experiments for both interbank payment-versus-payment and delivery-versus-payment settlement. Banks and companies participating in Project Ensemble include the Bank of China, HSBC, Hang Seng Bank, Standard Chartered, Blackrock, and Franklin Templeton, among others. Project Ensemble was established in March as part of Hong Kong’s digital currency pilot, and the HKMA said it is seeing encouraging results and is excited to expand into new tokenization use cases to help transform the financial industry.

The Safe Ecosystem Foundation (SEF) has submitted a governance proposal to introduce a new licensing fee for any protocols utilizing Safe Wallet’s Native Swaps feature. Safe offers one of the premier multi-sig wallets within crypto, securing over $55.5 billion in assets and deploying over 10 million accounts. Native Swaps is a feature that allows for in-wallet swapping without needing to navigate to decentralized exchanges. The proposal suggests charging a fee on Native Swaps transactions, varying on the size of the swap. Fees would be used to purchase SAFE tokens on the open market and put into the DAO’s treasury. SEF projects that the fee would generate about $2.5 million in yearly fees for the DAO, also representing the DAO’s first revenue stream, enhancing SAFE utility, and improving the project’s economic sustainability.

Click HERE for more.

First News

Montes Auri. A study newly published in Nature Geoscience has showered us with the intelligence that earthquakes may be responsible for the conditions that allow raw gold to coalesce from gold particles suspended in quartz. The theory is that earthquakes provide the electrical charges necessary to clump gold together. The study posits that earthquake-related deposits are responsible for 75% of all the gold ever mined. Surely there’s a startup being formed even now (on the basis of the founder’s relationship to a cousin whose father-in-law is in the fracking business) which will seek to stimulate gold production through earth shaking.

Penniless and glad of it

Strangely enough, one way to make money from metals is to stop making pennies. For some reason, as the world turns increasingly cashless, pennies keep being made (at a loss; more on that below) then caught in a Twilight Zone where people are given them but generally have no need to spend them. This means that while the American one-cent piece is the single most-produced coin in the history of coinmaking, an estimated 240 billion of them are just lying around the United States, practically doomed to never be used – i.e. ~$7.24 in extraneous pennies for everyone here. What’s worse, the U.S. Mint has shamefacedly disclosed that (as of two years ago) it cost 2.72 cents to produce each penny – a jump of nearly 30% over the prior year’s cost that the Mint attributes to the higher cost of constituent metals copper and zinc. But, wait – there’s more strange news.

It turns out that the locations of Coinstar terminals are central to the life cycle of the coin no one in the U.S. wants or uses, and which costs a fortune to produce to boot. Roughly 92% of Americans live within 5 miles of a Coinstar machine, which turns out to be the main coin-recycling pathway – not the Fed or the Mint, as one would think. Pennies tend to make up ~49% of the average jar of coins, yet just 6% of its value. And so, people are given pennies they don’t use, then hand them to Coinstar to ship to warehouses, which then give return then to banks and businesses, which foist them upon customers, who keep them around for years until the next trip to Coinstar. Incidentally, Coinstar long ago changed its name to Outerwall and is publicly traded under the ticker OUTR. Science, NYT