Home / Blog / Market Analysis / Markets Morning - Tech selling continues dragging stocks lower, USD weaker, Oil up

Markets Morning - Tech selling continues dragging stocks lower, USD weaker, Oil up

Market Analysis /
Greg McKenna / 31 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 (7.39 am Tuesday, July 31)

3 red candles. 3 down days.

That’s not remarkable for any asset really. But it’s the scale of the sentiment shift for tech stocks which is remarkable over the past week on the back of the disappointments of the Facebook and Twitter earnings, not to mention Intel and Netflix previously.

And so it is this morning that the selling of tech shares continued as traders lighten their very heavy load. That negativity has fed throughout global stock markets and that bout of risk aversion has been seen in divergent moves in forex markets between the Euro, Yen, and Australian dollar.

But it’s not been evident in US bonds or credit markets yet. Though it’s worth noting bunds and gilts were higher. We’ll see how it all plays out I guess.

Anyway, at the close the Nasdaq 100 was down 1.42% at 7,193. To put that in context it’s the lowest close since, well, July 6 this year. The tech part of the S&P 500 was 1.83% lower but the overall index was down just 0.57% as telecom and energy stocks acted as a counterbalance. The Dow was down 0.57% to 25,306 and the Russell 2000 lost 0.61%.

European stocks will likely have a little catch up when they open this afternoon. The DAX was 0.48% lower, the CAC fell 0.37% and the FTSE 100 in London was essentially flat. Those moves came after another poor day with all the indexes besides the SET in Thailand down.

Here at home after the ASX 200 again rejected the range high yesterday to close at 6,278 SPI traders have been pretty circumspect with their expectations about the day ahead only knocking 3 points off prices at the moment.

To forex markets now and the US dollar is weaker. The DXY has lost 0.33% to 94.36 with the Euro gaining a similar amount to regain 1.1700 – German and Spanish inflation prints helped a little as did the move higher in Bund rates. The weight of USD longs could be the enemy of its bull market for a little while.

Anyway, the Pound lifted 0.2% to 1.3129 despite news the UK government is readying plans for the no deal Brexit. Mark Carney in a Bloomberg interview did suggest that rates will rise this week however. USDJPY was flat at 111.04 as we await the BoJ today. ON the commodity bloc there was much divergence. The Kiwi is up half a percent and looking more and more likely to retest and maybe bust 0.6850 resistance, the CAD is 0.15% stronger with USDCAD at 1.3030 while the Aussie has underperformed with a 0.04% game but reclaimed the 74 cent region it lost yesterday – it’s at 0.7405. CNH and CNY are largely unchanged day on day at 6.8272 and 6.8102.

Oil is higher as traders worry a little further about what the Saudis are up to and what the Houthi rebels may or may not be able to do to supply lines. Worth noting though is that in a press conference with Italian PM Conte President Trump said he’ll meet the Iranians. Anyway WTI climbed 1.89% to 1.89% while Brent was 0.78% to $75.34 in LCOc2 terms as the front contract rolls off. Gold is at $1221, copper dipped 0.25% to $2.78.

Bitcoin collapsed a couple of hundred dollars at one point, but it’s back at $8,108 for a loss of 1.4%.

On the day today there is plenty to get our economic teeth into. The global manufacturing canary – South Korea – releases business confidence, construction output, industrial and manufacturing production, along with retail sales. We get Japanese industrial production and unemployment this morning before the BoJ this afternoon and of course we get the NBS China PMI’s for manufacturing and services.

Here at home its private sector credit, and building approvals before we get retail sales in Germany, Euro area inflation for July and GDP for Q2. Canada releases its monthly GDP (yeah I know) as well as PPI and in the United States we get very important employment costs, PCE prices, Personal income, and spending data as well as the Chicago PMI and Case Shiller housing.

Have a great VERY BIG day.

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


  • So the FANGS have had their teeth pulled. That’s increasingly the way it is looking as investors and traders wake up to the fact that maybe these darlings of the stock market can’t grow to infinity – not yet anyway. We’ve had disappointing earnings from Netflix, Facebook, and Twitter. Google did okay, Amazon likewise,  and Apple is out this week.
  • But what seems to have got folks attention more than anything right now is just what a crowded trade the FAANGS have become. Bloomberg ran a story overnight citing Credit Suisse research showing just how overweight relative to benchmark hedge funds are.  Hers’ the relevant table I found on Twitter.
Source: Twitter Screenshot
Source: Twitter Screenshot


  • Anyone who’s traded Aussie dollars for a while knows what comes next. When funds are heavily overweight and decide to get back to bench mark they exit with gusto. And aggressively. Is now that time? It’s an interesting question. But in Nasdaq 100 terms it might be worth thinking about a return toward 6,350/6,400 and maybe even 5,200/5,500.  
  • Remember the chat about the new normal? You know what John Mauldin calls “muddle through” growth where you get low inflation and low levels of growth and more regulation as far as the eye can see. On Bloomberg TV last night Allianz economic adviser Mohamed El-Erian said the “the US on a standalone basis has exited this new normal, and is now finding a higher growth equilibrium, 2.5% to 3” He said on this basis the Fed can comfortably keep raising rates without fear of choking off activity and that any shocks “will come from outside, not within the US”.
  • US treasury secretary Mnuchin is on board with this, he reckons the US can see at least 3% growth for 3-5 years.
  • The US government announced overnight it will be issuing $329 billion of net marketable debt in Q3 which is $56 billion higher than originally forecast. This will then be followed by another $440 billion in Q4. It’s a testament to the bearish tilt on the US economy that rates remain fairly stable and the 10’s are below 3%.
  • Oh, and on trade. US Commerce Secretary Wilbur Ross reiterated what his boss told CNBC in that interview a couple of weeks back overnight. Ross said it was the right time to take an “aggressive stance” right now because the US economy can handle it. He went further and said, “I liken it a little bit to going on a diet: It’s no fun in the beginning, maybe a little bit painful, but at the end of the day you’re kind of happy with the end result”. So the US is aggressively pursuing Beijing but happy to do a deal.
  • Mark Carney is on the front cover of the latest Bloomberg magazine, having given a big interview on how he’s getting ready for Brexit, spoiler it takes up about half his time. I guess it’s gated but you can read it here. The key thing I wanted to draw out for readers this morning however is that  Carney was pretty sanguine about the outlook for the global economy saying that the neutral level has started to rise – or at least “some of the extreme pressures on r* [the neutral level of real interest rates] have begun to abate”.
  • To me that suggests, even though he was speaking globally not specifically for the UK – the interview was conducted a month ago – that he has a bias to tighten in the UK. But he also said, “any given jurisdiction has to take into account its own domestic forces, whether there are headwinds from fiscal policy, headwinds from uncertainty, headwinds from trade discussions or other factors”. The question is whether the mess Mrs May and the UK government seem to be making of Brexit qualifies as a headwind strong enough to dissuade Carney and his BoE colleagues to demur from a rate hike this week. The market thinks not – I’m on the fence.
  • Caterpillar’s results were out overnight. And the good news is that Q1 appears not to have been the high water mark after all. You can read more here.


Have a great day's trading.

Greg McKenna

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

More on this topic

See More News

Open your account. Trade within minutes.

Start your trading journey with a trusted, regulated, multi-award winning broker.

Open Account Try Free Demo