Markets Morning - Oil down, RBNZ holds dovishly, stocks drift

Market Analysis /
Greg McKenna / 09 Aug 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 (8.30am Thursday August 9)

Oil fell out of bed last night as worries over Chinese demand surfaced after the trade data yesterday and in the wake of Chinas hitting back in the tariff war targeting energy products including oil and coal. The result is some big falls overnight with WTI down 3.5% and Brent 3.2% lower.

That fall and the worries about trade seemed to dominate stock trading in the US where the S&P and Dow were a little lower falling 0.03% and 0.2% respectively to close at 2,857 and 25,583. The Nasdaq 100 was up 0.1% at 7,469. Worth noting is that the candles on the S&P these past couple of days are suggestive a rally running out of steam and one that may need a consolidation/pullback.

Stocks in Europe were lower with the DAX off 0.12% and the CAC down 0.35%. But in the UK the FTSE 100 was 0.75% higher as the Pounds continued fall seemed to buoy sentiment for stocks. Equity markets in China were lower yesterday with the Shanghai Composite down 1.25% while the CSI 300 fell 1.6%.

The wash up of these competing moves is that after the ASX rose 15 points yesterday SPI traders for the second day in a row have prices flat to where they were yesterday afternoon.

To forex and the drift in Sterling continues as traders worry that a hard Brexit is indeed on its way. At 1.2882 it’s getting closer to the bottom of the current downtrend channel and is at it’s lowest level in close to 12 months. The other big mover is the Kiwi this morning after the RBNZ held rates but signalled it expects rates to remain at 1.75% through 2019 and into 2020 – NZDUSD is off half a percent since 7am at 0.6708.

The Aussie initially went with the Kiwi but it’s recovered to 0.7432. I’ve just done a number of presentations over the past couple of days on the outlook for the economy, housing, and consumer and I’ve com to the conclusion the RBA won’t be raising rates in 2019 and 2020 either. The CAD is at 1.3019, and USDJPY is down at 110.95 after the “opinions” from the recent BoJ meeting reignited chat the BoJ wants to change rates.

Besides worries about China oil was lower after the EIA showed the draw in crude inventories was lower than expected while gasoline stocks built. Base metals were mostly higher in overnight trade though copper is largely unchanged though with HGc3 up 0.2% to $2.7635. Gold is at $1213. Bitcoin is still struggling now down at $6,287 as traders fret that the SEC deferment another ETF means no one is going to turn up to buy their coins off them. US 2’s are at 2.67%, the 10’s are at 2.96%.

On the day we get machinery orders in Japan as well as Chinese PPI and CPI data. The ECB releases its economic bulletin, Canada releases housing data and then tonight besides jobless claims we get PPI data in the US.

Have a good day.

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

International (briefly today)

  • China hit back at the US announcing it’s own new set of $16 billion worth of tariffs. The tariffs of 25% hit  a diverse list of goods including medical equipment, fuels, fish meal, wood waste, paper and paper waste, metal scraps, cars and bicycles. China also defended its trade with Iran. “China’s commercial cooperation with Iran is open and transparent, reasonable, fair and lawful, not violating any United Nations Security Council resolutions…China’s lawful rights should be protected” the foreign ministry said.  The Germans also hit back at the US saying the Administration needs to think about EU interests.
  • As noted in the forex section below. We heard from Richmond Fed president Barkin saying that rates need to keep rising in the US.
  • The US hit Russia with new sanctions over the Skripal poisoning in the UK last night. That’s even as Prseident Trump  wrote Vladimir Putin a letter pushing for improved dialogue.
  • The ECB released a report last night saying that consumer demand can continue to grow and fuel growth. “As labour markets continue to improve, consumer confidence should remain elevated and private consumption should rise further,” The ECB said.

Have a great day's trading.

Greg McKenna

Chief Market Strategist

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