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 (7.47am Monday August 13)
After the Turkish Lira fell around 20% last week as the argument with the US over the release of a Pastor intensified and as the ECB becomes increasingly worried about EU exposures to Turkey, the Lira has opened up in early Asia was down another 10% earlier at 7.09 but it’s caught a bid now and has “only” lost 5.38% at 6.77 as more traders enter the fray.
It’s only early Asia and it is a Monday. So this could be a head fake and get washed away in the next 24 hours.
But comments from the Turkish President that this is economic war and news he’s trying to bully business over the weekend hve intensified the pressure as we open the new week. Also it’s equally clear from comments of Finance Minister Berat Albayrak [Erdogan’s son-in-law] this morning that the government is not backing down and may introduce capital controls. He echoed his father-in-law saying the Turkish currency is directly being targeted by the US president and that Turkey wouldn’t convert or seize FX deposits. Cue the rush for the exits.
Anyway, it was the troubles in Turkey which were responsible for the risk off tone in markets Friday.
The S&P 500 dropped 0.71% to 2,833. The Dow was down a similar amount at 25,313 while the Nasdaq 100 dropped 0.79% to 7,408. Those losses were pretty tame compared to European markets where the DAX lost 1.99%, the CAC dropped 1.59%, and the FTSE 100 lost 0.97%.
I’m not exactly sure what SPI traders were doing or watching because somehow they added 11 points where prices on the ASX 200 closed Friday in local trade. My sense is the ASX200 won’t see those gains and will come under some heavy pressure likely testing and breaking the uptrend at 6,260.
On forex markets the trouble in Turkey and the risk of sentiment helped the USD break out and close above significant resistance in DXY terms and below the head and shoulders neckline in EURUSD terms. This morning the DXY is at 96.27 while the Euro is down again – Turkish Lira impact – in early Asia trade at 1.1371. That US July CPI Friday printed 2.4% in core terms and 2.9% in headline terms (post crisis high) also helps the USD as it reinforces the Fed’s tightening cycle.
Elsewhere on forex markets the Yen is a little stronger with all the market funkiness and is trading at 110.47 this morning. Naturally that also means the Aussie dollar is lower and is currently trading 0.7268 off half a per cent in trade so far this morning. Sterling is down just 0.14% at 1.2749 while the Kiwi has lost about the same and is at 0.6571 and USDCAD is up 0.2% at 1.3169.
On commodity markets gold still cant take a trick and is at $1210, copper was lower Friday and is at 2.75 in HGc3 terms. Oil bounced a bit after the IEA said replacing the Iranian oil the US is sanctioning is “very challenging”. WTI is at $67.63 while Brent is at $72.81.
Bitcoin is at $6325, up 2.3% while US rates are lower as you’d expect with the funky market. 2’s are back down at 2.6% while the 10’s are now down at 2.86%.
Looking ahead it is very quiet on the data calendar front. Chinese loan and money supply data is about it. All eyes are gong to be on Turkey and worries of contagion. For the moment that’s not happened to the extent we’ve seen in the past.
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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