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 (8.36 am Thursday, July 19)
Jerome Powell was again upbeat on the outlook for the US economy on the second day of his testimony on Capitol Hill. But the focus overnight as on the concerns of the Trade war and the impact that may have on companies investment plans. He stuck to the base case, but the risk case got a decent airing and was reinforced by the Beige book which showed all 12 Fed districts are seeing varying – but real - concerns about the impact of the trade war on companies.
To a certain extent that, along with a big miss in building permits (-2.2%) and housing starts (-12.3%) in June helped knock the US dollar back from it’s highs in what has been an otherwise mildly positive day of strength for the Greenback. Oh, but it could have been so much stronger. GBPUSD fell to 1.3009 on lower than expected inflation data (Core CPI 1.9% v 2.2% exp) but its back at 1.3069 for a loss of just 0.34%. Rumours this morning the EU is mulling an Article 50 extension for the UK could help it further.
Euro was down at ~1.1601 at one point last night but it’s back at 1.1638 now for a loss of just 0.2%. USDJPY is unchanged at 112.85 after peaking at 113.13 overnight when the USD was at its best.
The commodity bloc is doing better however with a bounce in copper (+0.5% to $2.75 a pound) and oil (+1% for both WTI and Brent) among other commodities, plus the continued rally in metals and mining shares fuelling a little strength. The AUDUSD, which fell to around 0.7342 has bounced half a cent to sit at 0.7399, up 0.18% since 7am yesterday. It’s as if the Chinese Yuan isn’t still falling and the headwinds have abated. Granted, the USDCNH and CNY are off their highs – but this AUD rally is more than just a USD move folks. Likewise, the Kiwi bounced from its lows and is at 0.6795, up 0.2% while the CAD has gained the same percentage with USDCAD at 1.3164.
On stocks earnings and the Fed’s base case of continued economic strength seem to be the main driver. Morgan Stanley’s solid beat helped financials to top spot on the S&P 500 which ended the session up 0.2% to 2,815 – less than 60 points from the record high now. The Dow was 0.32% higher at 25,199 while the Nasdaq fell 0.19% to 7,390. Alphabet – Google’s parent – was among the biggest losers after the company coped a massive fine from the EU.
European stocks were higher with the DAX gaining another 0.82%, the CAC was 0.46% to the good, while the FTSE rose 0.65%. That all washes up to a good lead for the ASX with SPI traders adding another 10 points to yesterday’s rally overnight. Worth noting for our time zone today – although no one seems to be bothered – is that Chinese stocks gave up the ghost yesterday afternoon and couldn’t hang onto gains. The Yuan is still falling also.
To commodities and oil was lower even though the EIA reported a massive 5.8 million barrel build in inventories and a fresh record for US production. Key here was that traders found some good news in the gasoline stats. SO this morning WTI is up 1.18% at $68.88 while Brent is up 1.12% at $72.97. Gold is unchanged around $1221 after falling to $1221 when the USD was at its peak.
US 10’s are at 2.88% with the 2’s at 2.615% which means the curve is around 26 points (rounded). Bitcoin hit a high around $7575ish but has pulled back from there in the past 4 hours and is at $7,267 for a loss of around 0.8% overnight.
And in other news, President Trump appears to have walked back the walk back of his comments in Helsinki, arry Kudlow had a direct pop at Chinese President Xi as the roadblock to a trade deal between the US and China (NO I’M NOT KIDDING) and the Brexit mess endures with Boris telling Parliament the deal can still be saved.
On the day today, the big release is Australian employment for June. The Reuters poll says the market is looking for an increase of 17,000 jobs and an unemployment rate of 5.4%. Australian data has improved a little recently. This is very important for the Aussie dollar and interest rate markets still grappling with exactly where households and consumers are at.
Retail sales in the UK will be important for forex traders and other than that it’s just jobless claims and the Philly Fed manufacturing index in the US.
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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