Welcome to my daily Markets Musings.
You’ll see things are different from now on. That’s because the full note was approaching 2,000 words some days and I’m breaking it up into a number of reports on the Axi Blog each day now.
That way traders can subscribe to the Axi Blog easily and then cherry pick the yarns and markets of interest
Feedback always welcome
Market Summary (7.42 am Friday August 17)
The Hang Seng was down more than 1% in pre-market trade yesterday morning but news that China is sending a delegation to Washington for trade talks made that news irrelevant for developed markets with the resultant Yuan gains helping currencies rise against the US dollar while the Australian stock market reversed the best part of the losses it had opened with to close down less than 1 point at 6,328
So even though the Hang Seng ultimately finished down 0.8%, the Shanghai Comp lost 0.6%, and the STI in Singapore dipped 0.7% Europe – for the most part – finished in the black while stocks in the US have had a solid bounce.
Thus the S&P 500 has bounced 22 points for a 0.8% gain to 2,841 as its see-saw week continues. Every sector is higher though, every one. The Dow has roared 1.58%, and the Nasdaq is 0.27% higher as tech faded toward the end of the day. The VIX is naturally lower. No point getting bearish US stocks unless or until that ledge of resistance/support gives way at 2,795 in S&P 500 terms.
In Europe the DAX was up 0.6%, the CAC rose 0.83% and the FTSE was 0.8% higher. Watch Italy though folks, the FTSE MIB fell 1.83% largely on corporate news but equally on residual concerns about the political outlook. The Italian/German 10 year bond continued to widen.
Notice I have mentioned Turkey yet!
Anyway, the Turkish finance minister held a global briefing where he said hopefully that Turkey will emerge stronger from the current situation but also promised there would be neither capital controls nor a need for the IMF. As Panglossian as that might be – is – that seemed to ease investor nervousness and the Turkish lira is up about 2.5% against the USD with USDTRY at 5.85. It must be said though that rate is off its lows after Steve Mnuchin said the US has more tariffs in the wings. Of course they do.
But, as you can see the mood was far more positive last night and that helped base metals. Copper is 1.8% in HGc1 terms to $2.60. Though it’s worth noting some of the prices on the LME I’m seeing suggest this was a US based commodity recovery. Basic materials stocks did well in London and New York so that’s good news for the local market here in Australia today. SPI traders have subtracted 2 points though.
To forex markets now and the US dollar is a little weaker against the majors but they are generally off their highs against the Greenback. Euro is at 1.1374 up 0.3% after a 1.1337-1.1409 range over the past 24 hours. The Pound was similarly ebullient at one point with retail sales shooting the lights out. But GBPUSD is at 1,2714 up 0.14%. The Yen is down by 0.14% with USDJPY at 110.90.
Of the commodity bloc its evenly matched between the Aussie and Kiwi for best on ground over the past 24 hours. Both currencies are up about 0.3% from yesterday morning but both currencies are also off their highs of 0.7286 and 0.6608 respectively. AUDUSD is at 0.7262 while NZDUSD is at 0.6585. USDCAD is at 1.3160, up 0.15%.
Oil is higher as prices respect these important support zones for both Brent and WTI. At one point yesterday in Asia both contracts were breaking down. But this morning WTI is up 0.64% at $65.44 while Brent has gained 0.89% to $71.39. Gold is at $1173, the CRB index is up 0.65% overall, and Bitcoin continues to hold the $5765/6,000 support zone. It’s at $6,263 down about 1% after being up 0.6% at $6,409 a couple of hours ago.
On rates US 2’s are at 2.62%, the 10’s are at 2.87% and the curve is at 25. Shoot, cur recession calls.
And on the day RBA governor Lowe speaks before the House of Representatives' Standing Committee on Economics this morning while assistant governor Luci Ellis speaks at the ANU tonight. Ofshore its Singapore trade, Reuters Japan Tankan, inflation in the EU and Canada, and then Michigan consumer confidence in the US.
And just quickly, vale Aretha Franklin. R-E-S-P-E-C-T.
Have a good day
Macro Stuff that affects everyone and everything – either today or eventually
Have a great day's trading.
Chief Market Strategist
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With the Fed content to frame rising US treasury yields as an echo of economic optimism, bond markets take a breather while oil prices have blown off course