Canadian Consumers May Be Struggling to Maintain Spending Momentum — Market Talk

1125 ET - The premiminary reading that Canadian retail sales declined 0.8% on-month in July would mark the first decline this year and highlights the risks consumer face in keeping up momentum amid trade- and war-driven uncertainty, Bank of Montreal's Shelly Kaushik says. The economist says consumers showed in June, pushing sales up 0.6% for the month, 0.2 percentage point better than Statistics Canada's prior flash estimate. Sales volumes rose 1.5%, the most in over a year. Kaushik says this has monthly GDP tracking better than the initial estimate of 0.2% growth for June, given firmness in manufacturing and wholesale volumes that month. ([email protected]; @RobbMStewart)1113 ET - The further rise in U.K. PMIs and consumer confidence at its highest level in two years suggests households and businesses have taken the Iran war and government change of administration remarkably well, RSM U.K.'s Thomas Pugh says. "If we're not careful, we might have to stop talking about resilience and actually start talking about a reasonable economic performance this year," he says in a note. The second half looks more challenging, with oil prices rising again and inflation set to climb to 3.5%. The government's budget announcement has the potential to make or break the final quarter, Pugh says. "A repeat of the confidence-sapping speculation about tax rises will cause growth to slow sharply. However, the economy is clearly holding up so far this year." ([email protected])1036 ET - Bitcoin has gained nearly 25% this week, but may have finally encountered a price point that's too high in the short-term at $80,000. Bitcoin spiked at $79,258 overnight, and has since retreated to around $77,000. It's a new near-term resistance level, serving as both a psychological and technical resistance point, says Lacie Zhang of Bitget Wallet. "A clean daily or weekly close above $80,000 would likely shift attention to the $82,000 to $84,000 supply area next," says Zhang. If bitcoin retreats back toward $70,000, that "would suggest this was more of a fast positioning squeeze than the start of a durable new leg." Bitcoin is up 5.5% to $76,685, according to LSEG data. ([email protected])1017 ET - U.S. Bitcoin and Ether exchange-traded products saw net sales of $608 million and $184 million, respectively, on Thursday, J.P. Morgan analysts estimate, as crypto investors jump on positive signals from U.S. regulators and a weaker dollar. These flows were an acceleration from already-strong flows on Wednesday, they write. Flows were concentrated in BlackRock's Bitcoin ETF, which saw inflows of $504 million, they say. Funds managed by Fidelity and Bitwise also saw significant inflows. Trading volumes totaled $5.405 billion Thursday, well ahead of the running daily average of $3.22 billion, they say. Bitcoin rises 5.4% to $76,965.03, while Ether--the token of blockchain network Ethereum--adds 2.3% to trade at $2,379.82. ([email protected])1012 ET - Statistics Canada's early estimate on July retail sales — a 0.8% month-over-month drop — indicates that consumer strength has waned with gas prices on the upswing, says Thomas Ryan, economist at Capital Economics. Gas prices rose in July following the resumption of U.S. military attacks on Iran. That increase "has already taken the steam out of spending," Ryan says. He adds consumer spending is likely to continue slowing, and should calm any worries among Bank of Canada policymakers about any overheating of the Canadian economy. ([email protected]; @paulviera)0950 ET - U.K. public-finances data continues the recent run of bad news on the fiscal front and highlights the limited scope for extra public borrowing, Capital Economics' Ashley Webb says in a note. The 1.8 billion pounds of public borrowing for July was worse than consensus and puts the borrowing overshoot to official forecasts in the fiscal year so far at 2.3 billion pounds. This "will probably get bigger as real GDP growth weakens and the government announces more cost-of-living support in the budget later this year," Webb says. With market interest rates having already reduced the government's headroom by about 7 billion pounds since March, there will be little scope to raise borrowing, he says. ([email protected])0942 ET - Bitcoin ETFs have had a net inflow exceeding over $1 billion in the past two days, according to data from CoinGlass. With a net inflow of $606.3 million on Thursday, it's now $1.61 billion in net inflows reported over the past four days. This week has seen a resurgent appetite in cryptocurrencies, thanks to more attention coming from the Trump Administration and actions from the Treasury Department resurrecting the "dollar debasement" trade. It's a change from the trading that has dominated the crypto space all summer. "The current Bitcoin bear market is getting a little long in the tooth," says Zach Pandl of Grayscale Research in a note. Bitcoin spiked over $79,000 overnight, and was recently up 5.8% to $76,865. ([email protected])0939 ET - Bitcoin's rally is being fueled by rapid inflows and increased speculation, XS.com's Simon-Peter Massabni says. Spot bitcoin funds are on track for their strongest week of inflows since last October, adding over $1.6 billion, the analyst writes, quoting cryptocurrency tracker SoSo Value data. At the same time, open positions in bitcoin futures reached $54 billion, up by $10 billion from lows in late June according to CoinGlass, Massabni says. The inflows coincided with short-position liquidations, totaling over $1.6 billion between Thursday and Friday, the analyst says. Bitcoin rises 5.1% to $76,692.83. ([email protected])0926 ET - The prospect of lower interest rates boosts bitcoin, according to 21Rates. The crypto information firm says in a note that falling borrowing costs also cheapen bitcoin-backed loans. "Many bitcoin lending platforms price their floating-rate products against Fed funds or SOFR benchmarks," 21Rates says. "A sustained compression of long-end yields, if it continues, would mechanically reduce the rates borrowers pay on platforms like Arch and Coinbase Credit over time." Long-dated Treasury yields decline from multiyear highs as the government plans to increase its long-term bond buybacks. Bitcoin rises 6%. ([email protected]; @ptrevisani)0924 ET - Business sentiment in the eurozone has stabilized at moderate growth, with services flat in August but manufacturing rising to its highest in four years, Commerzbank's Vincent Stamer says in a note. The composite flash PMI increased marginally to 52.1 from 52.0 in July, above consensus. "Apparently, the uncertainty caused by the conflict in the Persian Gulf and the resulting rise in energy prices are currently weighing significantly less on businesses in the eurozone than they did in the spring," Stamer says. The PMI remains in a range where the economy has historically experienced moderate growth. The manufacturing pickup was likely due to public investment in Germany, where manufacturing sentiment rose to a multiyear high, he says. ([email protected])0922 ET - Canada retail sales rose by a solid 0.6% in June. But the significant takeway from Statistics Canada's June retail report is that momentum through 2Q appears to have stalled in July, says Andrew Grantham, economist at CIBC Capital Markets. The data agency's early estimate for July indicates a 0.8% month-over-month drop on a nominal basis. Grantham says the result for July will likely be weaker on a volume, or price-adjusted, basis, given that gasoline prices rose in the month alongside a resumption of U.S. attacks targeting Iran. For 2Q, Statistics Canada reports retail-sales volume rose by 0.4% nonannualized. ([email protected], @paulviera)0922 ET - U.K. macro data published Friday hints at resilience in consumer demand to stronger headwinds in the third quarter of the year, Investec's Sandra Horsfield says in a note. Perhaps most significant is there was only a moderate 0.5% drop in retail sales after two months of firm gains, she says. Consumer confidence unexpectedly improved in August, with the gauge of propensity to make major purchases reaching its highest since December 2021. All subcomponents of the confidence index are now higher than prior to the outbreak of the Iran war, despite little visibility on a resolution, Horsfield says. But with consumers still facing rising energy prices, third-quarter GDP growth will likely prove weaker than in the first half, she says. ([email protected])