Markets turned a bit mixed on Thursday following the sharp moves of the previous session, although risk aversion remains the underlying theme. The US stock indices, DJI and S+P, closed a little higher as the US 2Y/10Y spread recovered very slightly (+0.023%), avoiding another market panic although the Nasdaq and the major European stocks ended the day slightly in the red. The US 10Y yield did finish lower again and is currently struggling to hold on to 1.5%, while the 30Y yield is now at 1.959%.
In the FX markets, the Euro took a dive on the back of some dovish ECB comments and the German 10-year yield hitting another record low of -0.710%, and ended the day at the lows, suggesting further downside at today’s European open which would keep the pressure on the Euro. The ECB’s Rehn hinted at a sizable stimulus package at the next monetary policy meeting by saying “It is important that the ECB come up with a significant and impactful policy package in September”. The market didn’t have to think twice and the Euro dived below 1.1100, where it has currently pulled up stumps.
The other FX pairs were mixed but the DXY has ended slightly higher again, currently at 98.10.
In the other markets, WTI ended down by around 0.5%, and Gold up by 0.5%, with safe have demand providing a firm base on any dips.
There was plenty of data out from the US and most of it was dollar supportive, while the UK Retail Sales were also higher than expected. The UK retail sales including vehicles and fuel rose by 0.2%mm, 3.3%yy in July, above expectation of -0.2%mm, 2.5%yy.
From the US, the US retail sales were up by 0.7%mm in July, well above expectation of 0.3%mm, while the ex-auto sales rose strongly by 1.0%mm, versus expectation of 0.4%mm. The Empire State Manufacturing index rose to 4.8, up from 4.3 and beat expectation of 1.9, while the Philadelphia Fed Business Outlook dropped to 16.8, down from 21.8 but beat expectation of 10.0. On the other side of the coin, the US industrial production dropped -0.2%mm vs expectation of 0.1%mm and the capacity utilization dropped to 77.5%, below expectation of 77.8%.
Looking ahead, Friday sees a thin calendar. The NZ Business PMI (exp 51.8) is the only item on the agenda in Asia, while Europe has just the EU Trade Balance for June for inspiration. Things warm up a little in the US, with the release of the July Building Permits (exp +5.6%) and Housing Starts (exp -1.7%), and with the Michigan Consumer Sentiment Index (exp 97.2) being the other item on the agenda, but that is about it. Have a good weekend.
Economic data highlights will include:
Fri: NZ Business PMI, EU Trade Balance, US Housing Starts, Building Permits, Michigan Consumer Sentiment Index,
Market moves, in brief:
FX: DXY 98.10 (+0.15%)
Bonds: US10Y; 1.504% (-5.31%), German 10Y; -0.710% (-892%), UK 10Y; +0.404% (-8.72%), Australian 10Y; +0.90% (-5.21%), NZ 10Y; +1.025% (-7.66 %), China 10Y; 3.005% (-1.57%)
Stock Indices: DJI; +0.39%, S+P; +0.25%, NASDAQ; -0.09%, EUStoxx50; -0.18%, FTSE100; -1.13%, Shanghai Composite; +0.25%,
Metals: Gold $1524 oz (+0.48%), Silver $17.26 oz (+0.35%), Copper $2.5912 lb (-0.02%), Iron Ore $93.76 per tonne (NYMEX) (-2.04%),
Oil: WTI $54.60 pb (-0.50%)
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