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 (7.41 am Monday July 30)
That’s the nominal growth rate the statistician reported on its initial count of US Q2 GDP on Friday night. That’s a big number. Remarkably though because that number was “deflated” by 3% inflation – NOT A TYPO – the “real” GDP reported was 4.1% - lower than expected in both the polls and the whisper number on the street.
Consumers and business did their bit for the economy, as did trade. Though trade seemed to be impacted by the pull forward of sales to avoid the tariffs meaning that it will be less of a tailwind for the US economy going forward given the still strong USD and the reality China doesn’t appear to want to buy as much soy and Europe can’t go close to replacing that demand.
What’s remarkable though is the 3% deflator. 3%! The Fed is not expected to tighten at this week’s meeting. But it must surely be on track to hike rates again in September given the strength of the domestic economy evidenced in this GDP result and that deflator.
The US dollar didn’t get much of a lift. Indeed forex rates for the most part hardly moved given the outcome was mildly weaker than expected by economists and given we are increasingly seeing forex pairs trapped inside their ranges or trend channels right now. To that end EURUSD is at 1.1658 this morning stuck inside the wedge inside the range. USDJPY is at 10.93 as we all await the BoJ’s decision tomorrow. “No change” is the favourite, but “subtle tweaks” is looming at her shoulder as we race to finishing line of the BoJ’s decades long monetary experiment.
Sterling is at 1.3099 and surely destined for a Brexit induced fall at some point, even if Mark Carney and his colleagues at the BoJ ratchet rates higher this week as most expect. The Aussie dollar retook 74 cents on Friday night and it’s just hovering near there at 0.7399 in very early forex trade. The Kiwi is at 0.6791 and USDCAD is at 1.3054 consolidating a little of the recovery from last week’s big fall.
To stocks then and Twitter lost around 20% as investors were somehow surprised that the recent purge of followers we all saw DID actually impact daily users. Facebook ended on the back foot again as well, while Intel was also lower. Not exactly a tech wreck, but the Nasdaq ended down 1.4% to 7,296 and under a little pressure after the clear divergence in outlooks among the generals of the advance.
That has implications for market sentiment more broadly and the S&P500 dropped 0.65% to 2,818, the Dow dipped 0.3% to 25,451, and the Russell 200 fell 1.89% to 1663.
After rallying 0.89%, 56 points, Friday the ASX 200 is likely to open lower given SPI traders followed the US, not European, lead and have knocked 26 points from where prices were Friday afternoon. Speaking of Europe the FTSE 100, CAC, DAX, and FTSEMIB were all up between 0.4% and 0.6%.
Commodity markets saw copper dip back a little once more – HGc1 is at $2.7895 – amid a mixed but mostly positive day for base metals. Miners did okay too. Oil was a little lower with WTI dropping around 90 cents for a fall of about 1.3% to $68.69. Brent was more circumspect at $74.29, down 0.3%.
Gold is at $1223 hardly change and Bitcoin has weathered the SEC decision not to allow the Winklevi ETF rather well. It’s at $8,205 bouncing sharply in the last 8 hours of the week after falling below$7800 at one stage Friday. US 10’sare at 2.96%, the 2’s are at 2.68% and the curve is at 28.
On the day it’s quiet here at home. Retail sales are out in Japan, consumer credit (debt) is out in the UK along with mortgage lending data. In Europe we get Euro area data for business and consumer confidence and sentiment along with inflation expectations before German inflation data for July. Pending home sales and the Dallas Fed manufacturing index is out in the US.
Oh, and over the weekend President Trump threatened to shut down the US government if he doesn’t get the money for his Mexican wall.
Have a great day.
Macro Stuff that affects everyone and everything – either today or eventually
Have a great day's trading.
Chief Market Strategist
The information provided here has been produced by third parties and does not reflect the opinion of AxiTrader. AxiTrader has reproduced the information without alteration or verification and does not represent that this material is accurate, current, or complete and it should not be relied upon as such. The Information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted
Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support