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 (Monday August 20 7.30am)
President Trump is winning again.
That’s the takeaway he’s likely to get from news that China’s resolve may be cracking and the trade delegation being sent to Washington is not as low level as many thought. It is, the Wall Street Journal, Bloomy and other reported Friday, an advance party for a Trump/Xi summit later this year and the hope of trade tensions being settled by November.
Last week’s data on retail sales, investment, and industrial production and the associated collapse in the Yuan through 6.90 in USDCNY terms as it raced toward 7.0 may have been a lightbulb moment for Beijing. We’ll see, but the rally in risk assets continued as a result of the news breaking on Friday.
Most of the ebullience was felt in assets like the Aussie dollar and copper, but stocks in the US certainly closed higher also. The question for the week ahead is whether the S&P 500 can take out the recent high at 2,864 and then have a run at the record high.
We’ll see I guess. But on Friday the S&P 500 was 0.33% higher to close the week at 2,850.The Dow was 0.43% higher and the Nasdaq rose just 0.04% - keep your eye on this one – with the 100 inex finishing the week at 7,377.
Europe will likely open higher for the week given it missed out on the US rally with the FTSE flat, the DAX off 0.22%, and the CAC down 0.1%.
But, the positivity, the rally in risk assets, and the sentiment shift in markets helped SPI traders add 28 points to Friday’s already solid close on the ASX at 6,339. This is a genuine technical breakout folks. The ASX could run if a bid comes back into the miners. It hasn’t happened yet though, not on Friday night anyway with Metals and Mining stocks finishing the week at the lowest ratio relative to the overall MSCI world market since June last year. Value anyone????
On forex markets the USD reversal continued under the heavy weight of positioning and data flow. The DXY, which touched 97 last week ended Friday at 96.13. The Euro which bounced from around 1.13 intra week closed at 1.1437 while the pound climbed back to 1.2750. USDJPY is mixed however because of the USD swoon and sits at 110.49.
Of the commodity bloc as noted above the Aussie fairly roared with a 0.8% gain to close the week at 0.7316. It might be time for a run if the tensions between Beijing and Washington are seen to be lifting. Or at least if traders think that way. Of course this is against a backdrop of overall USD strength in the medium term. The Kiwi was almost equally as solid with a 0.76% rally to 0.6636 while USDCAD respected that downtrend line again and is at 1.3055.
On commodities the USD move has lifted some of the weight off gold which is at $1184 while the copper price rose close to 2% in HGc3 terms but was up just 0.36% in HGc1 terms to $2.62. Oil was higher on the day Friday but slipped on the week. WTI ended at $65.91 while Brent was at $71.83 with gains of 0.7% and 0.6% respectively.
Bitcoin is around $6,400 for a more than 3% gain as it holds important support below $6,000 while US treasuries were largely unchanged with the 2’s at 2.62% and the 10’s at 2.87%.The curve is 25 points.
It’s quiet on the dat front today, indeed this week save for the minutes of the RBA, ECB, and FOMC meetings. The flash PMI’s later this week might be of interest as well. ON the day though it’s German PPI and a speech from Atlanta Fed President Bostic which are the highlights. We haven’t heard from the Fed in a while. That might be interesting.
Have a great 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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Stocks soar, powered by first-rate earnings and a dazzling run of economic data; Gold plays catch as G10 falls flat while oil basks in the afterglow