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Markets Morning - Facebook drags on S&P and Nasdaq, USD catches a lift from durable goods and Mario Draghi

Market Analysis /
Greg McKenna / 27 Jul 2018

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 (8.29 am Friday July 27)

Facebook’s woes continued to dominate the discussion in US stock markets which saw the Nasdaq drop 1.44% and the S&P 500 dip 0.3% to 2,837 while the Dow was 0.44% higher. Those moves in the Nasdaq and the S&P belied the renewed positivity emanating from European bourses after the previous day’s cooling of trade tensions between the US and Europe.  

That saw the DAX rise 1.83%, lead by the automakers, the CAC rise 1% while the FTSE in London was essentially flat. And while the German move was a reaction to the cooling of tensions and benefitted from the specificity of that the reality is the main game remains China and there is no sign yet that the US is likely to back off. Indeed the EU’s “concessions” are another sign among many to President Trump that his belligerent approach is the right one. As I wrote yesterday, Trump’s winning.

We’ll see how things play out. But it’s worth noting Chinese stocks were lower again yesterday, the offshore Yuan has lost about a percent in the past 24 hours, and Larry Kudlow said this morning that JC Junker agreed that the EU would help the US with China. The main game.

SPI trades reckon it all washes up well, they’ve added 27 points overnight.

To forex markets and the USD caught a bid after both the durable goods print and Mario Draghi’s press conference where he reiterated the ECB is still on the same track it was last month and that market pricing fo the rate hike next year is about right.

As a result Euro has lost 0.74% to 1.1641, GBPUSD is down 0.6% at 1.3107, and USDJPY is up 0.23% to 111.21 as it continues to show less volatility than other members of the big 3 this week.  On the commodity bloc the Aussie did worst losing 1.05% to 0.7375 as the lockstep moves with the Euro continued – though with a little more volatility. The Kiwi reversed off resistance around 0.6850 again and is down 0.8% at 0.6781 while the CAD lost just 0.25% with USDCAD 1.3077 – oil and apparent progress on NAFTA seem to have helped it hold a fair chunk of the previous day’s gains.

Oil is higher, but off the highs, as the closure of Bab el-Mandeb off the Yemeny coast helped keep the bid in the market. Brent is up 0.65% at $74.41 while WTI is at $69.57, up 0.4%. Copper had an ugly reversal after the previous night’s strength and is back down at $2.79. Gold too came under pressure as the USD rose and is 0.72% lower in USD terms at $1222.

Bitcoin was at $8,110 an hour or so ago still consolidating recent gains below overhead resistance. News of the first EFP deal on the CME is interesting and will generate more chat that institutional money is flowing toward BTC. But the hype this week is about ETF’s so news that the SEC has knocked back the Winklevi ETF plan has now seen BTCUSD is down 2%+  to $7963.  

On the day today we get the release of PPI in Australia, Tokyo inflation. Chinese industrial profits, German import prices, and of course the big one tonight is the release of US Q2 GDP. Worth noting the Atlanta Fed downgraded the expectation to 3.8% from 4.5% previously after last night’s durable goods, inventories, and trade data.

Have a good one.

Macro Stuff that affects everyone and everything – either today or eventually


  • China is the main game on trade and tariffs. My sense, I was spruiking this to a trader mate at dinner last week, is that Trump is nudging Putin away from China, he’s fighting with Europe to get results, but also to push them to help him with China. That’s something Larry’s Kudlow seems to have confirmed overnight. So while there is still lots of water to flow under the bridge with Europe - Emmanuel Macron specifically ruled out agriculture overnight - the focus will turn back to China now.
  • So we’ll need to keep watching this space. But behaviourally what’s been happening as nations give concessions to President Trump is that his actions are reinforced and he’s likely to redouble his efforts to get what he wants. So unless we get concessions from China this could get much worse.
  • So where exactly is US GDP right now? President Trump says we’ll get a terrific result tonight but the Atlanta Fed has demurred with a new Nowcast of 3.8% after last nights data. Graver still is the NY Fed’s Nowcast for Q2 GDP of 2.69%. Could the market get caught looking the wrong way? Market forecasts according to the Reuters poll is 4.1%. But my sense is many traders think a higher number is on the cards. We’ll see.
Source: Atlanta Fed
Source: Atlanta Fed


Have a great day's trading.

Greg McKenna

Chief Market Strategist


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