JPY continues to weaken…

Thoughts of the Day

There’s a reason why USDJPY is commonly known as the widow-maker among the currency traders. Once again, after convincing JPY bulls that the authorities will strongly intervene if JPY should weaken excessively will their aggressive and sustained intervention at the end of April, the Japanese bureaucrats have once again disappointed people who were foolish enough to believe them. 

Yesterday, the USDJPY broke above the 160.12 level set in April when the Japanese aggressively sold USD and bought JPY to stem the JPY weakness. There was no sign of actual intervention but the same comments about “excessive movements in the FX markets were undesirable” came from the Japanese officials. 

However, without real intervention from them, the weakness of the JPY will likely persist until the Bank of Japan truly exits its ultra-easy monetary policy.

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In world first, Chinese scientists report cell therapy cure in diabetes case
The patient, a 59-year-old man who had been living with type 2 diabetes for 25 years, was at serious risk of complications from the disease. He had a kidney transplant in 2017, but had lost most of his pancreatic islet function which controls blood glucose levels, and relied on multiple insulin injections every day.

“He was at great risk of serious diabetes complications,” Yin Hao, a leading researcher at Shanghai Changzheng Hospital, told Shanghai-based news outlet The Paper earlier this month.

The patient received the innovative cell transplant in July 2021. Eleven weeks after the transplant, he was free of the need for external insulin, and the dose of oral medication to control blood sugar levels was gradually reduced and completely stopped one year later.

“Follow-up examinations showed that the patient’s pancreatic islet function was effectively restored,” Yin said. The patient has now been completely weaned off insulin for 33 months.

Day Ahead

US GDP (GDP Growth Rate: +1.3% Quarter-on-Quarter expected vs +3.4% prev)

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What Happened Yesterday

Market Movements as of New York Close 26 Jun 24
  • The US stock market opened lower from Tuesday. It then traded within a small range through the US session with some positive drift. The S&P 500 ended up +0.16% on the day (high: +0.25%, low: -0.32%), the Dow Jones inched higher by +0.04% (high: +0.18%, low: -0.52%) while the Nasdaq rose +0.25% (high: +0.32%, low: -0.24%).
  • Micron (NASDAQ: MU, -7.98% in after market trading) fell despite the earnings beat (62 cents vs 51 cents expected) and revenue beat (6.81 billion vs $6.67 billion expected) as it provided revenue forecast for the current quarter that was just in line with expectations (earnings of $1.08 on revenue of $7.6 billion forecasted vs earnings of $1.05 on revenue of $7.6 billion estimated by analysts).

The crypto market traded slightly weaker with Bitcoin down -1.61% and Ether down -0.77%.

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Headlines & Market Impact

Biden awards up to $75 million in CHIPS Act grant to Entegris

Notable Snippet:  American Chip manufacturing supplier Entegris (ENTG.O) said on Wednesday that it has inked a preliminary deal with the Biden administration for funding of up to $75 million to aid the development of a new facility in Colorado Springs, Colorado.

“We’re not just bringing leading-edge chip technology and (factories) to the United States, we’re also bolstering the suppliers that make leading-edge manufacturing possible,” U.S. Secretary of Commerce Gina Raimondo said in a statement.

The announcement is the latest in a string of Chips and Science grants as the U.S. seeks to expand domestic chip production and lure away capital that might have been used to build plants in China and the region. Big winners include South Korea’s Samsung, U.S.-based Intel, and Taiwan’s TSMC.

Congress in 2022 approved the Chips and Science Act to boost domestic semiconductor output with $52.7 billion in research and manufacturing subsidies. Lawmakers also approved $75 billion in government loan authority.

According to the Commerce Department, the project’s first phase would support the production of liquid filter membranes and Front Opening Unified Pods (FOUPS), specialised containers invented by Entegris to secure semiconductor wafers when transported during the manufacturing process. Top chip makers including Intel, TSMC, Micron, and GlobalFoundries are FOUP customers, the agency added.

The second phase would support the production of advanced liquid filters, purifiers and fluid handling solutions, Commerce said.

Sanctioned Chinese chip manufacturer SMIC has also been an important customer for Entegris. Reuters reported in February that the Commerce Department halted millions of dollars worth of shipments of chipmaking materials and parts from Entegris to SMIC’s most advanced facility, after SMIC produced a sophisticated chip for Huawei’s Mate 60 Pro phone.

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Amazon plans to launch discount store in bid to fend off Temu and Shein

Notable Snippet:  Amazon plans to launch a new section on its site dedicated to low-priced fashion and lifestyle items that will allow Chinese sellers to ship directly to U.S. consumers, CNBC has learned.

The storefront, announced at an invite-only conference for Chinese sellers on Wednesday, would mark Amazon’s most aggressive attempt yet to fend off growing competition from e-commerce upstarts Temu and Shein, which both have ties to China, the world’s second-largest economy.

Temu and Shein have expanded their presence in the U.S. in recent years, luring an increasing share of American shoppers with their rock-bottom prices on clothing, electronics, home goods and other products.

Amazon’s storefront will feature a range of unbranded items, many priced under $20, according to a presentation to Amazon sellers viewed by CNBC. A mock-up of the storefront showed a gua sha facial massaging tool, arm weights and phone cases, among other items for sale.

Amazon will ship the products directly from China to the U.S., with the goal of delivering them to shoppers within nine to 11 days, the presentation shows. In the past, Amazon sellers in China have relied on the company’s fulfillment services, called Fulfillment by Amazon, to send goods to warehouses in the U.S. before they are dispatched to customers.

The company pitched the arrangement as cost savings for Amazon sellers in China, and said merchants would be able to test new items through small-batch production. Shein uses a similar model, referred to as on-demand manufacturing, producing a limited quantity of goods and manufacturing more as demand increases.

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US new home sales slump; supply at more than 16-year high

Notable Snippet: Sales of new U.S. single-family homes dropped to a six-month low in May as a jump in mortgage rates weighed on demand, offering more evidence that the housing market recovery was faltering.

But the sting from the largest decline in sales in more than 1-1/2 years, reported by the Commerce Department on Wednesday, was softened by a sharp upward revision to data for April, which now shows sales rising instead of falling as previously estimated. Supply was the highest in more than 16 years.

The housing market has been the sector hardest hit by the Federal Reserve’s aggressive interest rate hikes since March 2022. It had, however, pulled out of the slump starting in the third quarter of last year as an acute shortage of previously owned homes boosted demand for new construction.

The resurgence in mortgage rates has also undercut sales of previously owned homes and homebuilding.

New home sales declined 11.3% to a seasonally adjusted annual rate of 619,000 units last month, the lowest level since November, the Commerce Department’s Census Bureau said. The percentage-based drop was the biggest since September 2022.

The sales pace for April was revised up to 698,000 units, a nine-month high, from a previously reported 634,000 units.

Economists polled by Reuters had forecast new home sales, which account for 13.1% of U.S. home sales, would hit a rate of 640,000 units.

New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales slumped 16.5% on a year-on-year basis in May.

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Stock Indices

Phan Vee Leung
CIO & Founder, TrackRecord