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 (7.41am Tuesday, August 28)
One down, about 50 to go.
Okay, I’m being facetious. But the fact that the US has cobbled together the Mexican end of the NAFTA deal and the fact that there appears to be no formal sunset clause, and that the Mexican’s are now trying to get Canada back in – even as Trump belts them again - has buoyed stocks in the US with a new record for the S&P 500.
But success with Canada, let alone China or the EU remains far from certain. Indeed I’d argue that the EU deal with Junker, this with Mexico, is deck clearing for the major battle.
Anyway, stocks don’t care about that. They are positive that a deal is good and that Fed chair Jerome Powell’s Jackson Hole speech means he is not going to do anything to choke off this US economic expansion prematurely. So this morning the S&P 500 is up 0.76% at 2,897 with all sectors except utilities higher on the day. The Dow is up 1% at 26,049 – a record - while the Nasdaq 100 is up 0.98% at 7,559. The Russell 200 lagged with a rise of just 0.16%.
In Europe the DAX ripped 1.16% higher as risk appetite improved and the Ifo business climate (103.8, 101.9 exp), conditions, and expectations were quite a bit stronger than expected. The CAC was 0.86% while the FTSE 100 was only 0.19% higher.
Here at home even though Chinese stocks ripped higher yesterday with the Shanghai composite up 1.9%, the CSI300 up 2.44%, and the Hang Seng up 2.17% the ASX200 could only manage a 22 point gain. Overnight though SPI traders have added another 21 points after prices yesterday bounced of the little trendline I’ve been watching.
On forex markets the USD is under pressure still as traders continue to bet the message Jerome Powell was sending is a dovish one. In fact what they are actually betting is the yield curve is right and the US economy is slowing because Powell effectively said he’s data dependant. The wash up is the USD Index is down 0.4% at 94.72, with the corollary being a 0.5% rise in the Euro to 1.1682 and seemingly on its way to 1.1750. GBPUSD is up 0.4% to 1.2896 while the Yen has missed out and is at 111.03 for a gain of just 0.13%.
Commodity bloc currencies have been led by the Canadian dollar which posted a 0.53% gain against the Aussie dollar’s 0.3% gain. They sits at USDCAD 1.2958 and AUDUSD 0.7344 respectively. The Kiwi is at 0.6699 up just 0.13%. EM currencies are mostly stronger as well with the Mexican peso, Brazilian real, and South African rand between 0.4% and 0.6% stronger. But the Turkish lira has lost another 1.8% while the Russian rouble is 0.6% weaker.
Oil is higher again. WTi took out resistance and is up 0.3% at $69.94 while Brent is 0.66% to the good at $76.32. Gold picked up another $5 and is at $1210, while copper is at $2.72 in HGc3 terms, up 0.3%. The CRB overall gained 1.04% while Basic Materials was the strongest sector on the S&P 500 with a 1.45% rally.
Bitcoin has gained 1.8% to $6,730 while US 2’s are at 2.645% and the 10’s are at 2.845%. Ohh that means the curve steepened 2 points the hand-wringers can relax for a day. :S
Data wise today, there is close to nothing of note. South Korean consumer confidence is out in our time zone then its Euro Area loan and M3 growth this afternoon before we get the goods trade balance for the US along with wholesale inventories, the Case Shiller house price data, Conference Board consumer confidence and the Richmond Fed manufacturing index.
Macro Stuff that affects everyone and everything – either today or eventually
Have a great day's trading.
Chief Market Strategist
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support