📉 Market Tremors: PCE Data the Key to Stability?

Good Morning!

Asian stocks are on a rollercoaster ride today. Tech's taking a nosedive, but the S&P 500 and Nasdaq 100 futures are climbing back from yesterday's stumble. The yen's zigzagging like a caffeinated squirrel ahead of next week's Bank of Japan meeting. It's a financial juggling act, with traders trying to keep their eyes on multiple balls: Fed rate cut expectations, tech sector woes, and the ever-unpredictable global economic recovery.

In today’s email:

• AI: Market’s maturing

• Bitcoin: Bitcoin hanging around $67k

• US PCE: Markets await PCE data

• BlackRock: Limited future for crypto ETFs

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THE BIG IDEA

Investors are shifting from AI giants to less obvious beneficiaries across various sectors as the technology's impact broadens

The AI-driven market rally is experiencing a significant shift. As concerns over sustainability and geopolitical tensions mount, investors are rotating out of tech behemoths and into smaller stocks and defensive sectors. This trend reflects AI's expanding influence beyond chips and software.

Utilities and real estate have emerged as surprising beneficiaries, with power demand for data centers skyrocketing. The International Energy Agency estimates that data centers, AI, and cryptocurrency usage may double to over 1,000 terawatt-hours by 2026, equivalent to Japan's power consumption. This surge has put focus on utilities worldwide, from Dominion Energy in the US to YTL Power International in Southeast Asia.

Enablers and Adopters

Equipment suppliers, particularly transformer manufacturers like General Electric and Schneider Electric, are seeing increased interest due to severe shortages. Renewable energy stocks are gaining attention as well, with companies involved in solar, hydro, wind, and nuclear power mentioned as potential beneficiaries.

Commodities are not immune to the AI effect, with copper emerging as a key player due to its use in electric cables and data center cooling systems. Data center REITs and telecom firms expanding into this space are also attracting investors.

Beyond these "enablers," market strategists are eyeing potential "adopters" - companies implementing AI to boost productivity, particularly in industrials and healthcare. Morgan Stanley estimates these adopters' shares could see an average boost of 27% this year.

This rotation signifies a maturing AI market, where investors are looking beyond the obvious players to capitalize on the technology's broader economic impact. As the AI revolution unfolds, it's reshaping investment strategies across diverse sectors, from agriculture to drug development.

MARKETS AT A GLANCE

TOP NEWS

US stocks ended mixed as tech losses deepened, despite strong GDP growth and cooling inflation data

Wall Street's feeling a bit bipolar today. We saw a rollercoaster ride with stocks giving up early gains to end mixed. The Dow managed to eke out a win, but tech stocks are still nursing a hangover from yesterday's beatdown. On the bright side, our economy's flexing its muscles with a 2.8% GDP growth, surpassing expectations. Inflation's cooling too, but tech giants like Tesla and Alphabet are still giving investors heartburn. All eyes on today's PCE data – it could be the market's next mood swing catalyst.

Yen volatility is rising due to summer holidays and anticipation of potential Bank of Japan policy changes

The yen's been doing the cha-cha lately, and it's about to turn into a full-on tango. Summer vacations are thinning out the trading floors, making every move more dramatic. Add in the suspense of a possible Bank of Japan rate hike, and you've got a recipe for some serious currency acrobatics. Traders who were shorting the yen are now scrambling like cats in a bathtub. It's financial theater at its finest - grab your popcorn and watch the yen swing!

Oil prices edge up but remain on track for a third week of decline due to weak Chinese demand and potential Gaza ceasefire

Black gold's on a slippery slope, folks. We're looking at a hat-trick of weekly declines in oil prices. China, our usual oil-guzzling champion, is suddenly on a diet, with demand dropping faster than a hot potato. Meanwhile, whispers of a Gaza ceasefire are getting louder, potentially turning down the heat in the Middle East powder keg. Even Uncle Sam's surprisingly perky economy couldn't oil these squeaky wheels. Brent and WTI are barely treading water, proving sometimes, you can't drill your way out of a slump.

Markets await US PCE data for rate cut clues, while major currencies show mixed performance against a weakening dollar

The forex market's acting like a pendulum today, swinging between optimism and caution. All eyes are on the upcoming US PCE data – it's the Fed's favorite inflation gauge and could be the key to unlocking a September rate cut. The greenback's looking a bit wobbly, while the yen's flexing its muscles. Meanwhile, the pound's feeling the heat from potential BoE rate cut whispers. Gold's shine is dimming a tad, and oil's trying to claw its way back up. It's a financial tug-of-war, and PCE data could be the deciding factor.

CRYPTO

BlackRock exec sees limited future for crypto ETFs beyond Bitcoin and Ethereum

BlackRock's Mitchnick dropped some truth bombs at Bitcoin 2024. Don't expect a crypto ETF buffet soon - Bitcoin and Ethereum are the big players, with others barely registering. He sees them as complementary, not competitive. While crypto's here to stay, the SEC's drawing lines. It's a new world, but not everyone's invited to the party.

aPriori, a Monad-based liquid staking platform, secures $8 million in seed funding, reaching a $100 million token valuation

Looks like aPriori's hitting the crypto jackpot! This Monad blockchain upstart just raked in $8 million, with big names like Pantera Capital leading the charge. They're cooking up a tasty MEV-powered liquid staking platform, aiming to make validator incentives juicier than a well-done steak. With a $100 million token valuation, aPriori's not just playing in the sandbox - they're building castles. Keep your eyes peeled for their launch when Monad's mainnet goes live!

Galaxy raises $113M for crypto venture fund, targeting $150M goal

Galaxy's new venture fund, led by Novogratz, raised $113M for early-stage crypto startups. Aiming for 30 investments, it's already backed projects like Ethena and Monad. The fund hopes to hit $150M by next year, signaling renewed VC interest in crypto amid rising prices and potential regulatory shifts.

Trump's upcoming Bitcoin 2024 speech sparks market optimism and attracts significant crypto donations

Trump's "crypto president" pivot has Bitcoin nearing all-time highs. His campaign's $4 million crypto war chest, including major Bitcoin donations, signals growing industry support. With running mate JD Vance on board, Trump's Nashville speech this Saturday could be a game-changer. Will he announce a strategic Bitcoin reserve?

GOLD

Gold and other commodities tumble as China's demand weakens and strong US economic data surprises markets

Gold prices plunged to 3-week lows, driven by vanishing Shanghai premiums and robust US GDP figures. China's lackluster stimulus and waning household demand, especially for gold jewellery, exacerbated the sell-off. Industrial metals and global stocks also took a hit, with copper at 4-month lows and the MSCI World Index down 0.5%.

DAILY ECONOMIC CALENDAR (ET)

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