US stocks rallied strongly for the 3rd consecutive session Monday, underpinned by a rise in the banking and technology stocks, with chip makers leading the tech sector higher after the US administration extended its reprieve on penalties for doing business with Huawei. President Trump had a busy day on Twitter, indicating that the US was “doing very well with China, and talking”, and adding that the White House is laying the groundwork for a new round of trade talks with Beijing, all adding to the positive mood of the day.
Trump would have been less impressed with the US$, which also saw a late squeeze to the topside. It was the 5th rally in a row, and ended with the DXY ending at 98.36, as risk appetite staged a recovery due to various headlines regarding the possibility of added stimulus in order to stave off the prospect of a recession. China had already indicated that it will reform rate system to lower lending costs, while there were also reports that Germany is considering stimulus measures. On top of this, Trump was on his Twitter account again, suggesting that US rates are too high and urging the Fed to cut by 100bp and to restart its crisis-era quantative easing, money-printing program. Elsewhere, the Fed’s Eric Rosengren gave fairly hawkish commentary which has been partially attributed to the US$ remaining underpinned.
On the other side of the coin, Gold was lower, down 1%, under pressure from the firm dollar, while oil headed in the other direction, +2.5% on the back of the positive spin on US/China trade talks and also on reports of a Yemeni drone attack on a Saudi oilfield..
Tuesday will again be rather thin for meaningful, market moving data, and the highlight is likely to be the Minutes from the recent RBA meeting, which may provide a little volatility although I doubt that there will be any major moves this week ahead of the Jackson Hole Symposium due on Thursday/Friday. Other notable events on today’s calendar will include the German PPI (exp -0.1%mm, July, +1.4%yy), the Swiss Trade Balance for July, EU Construction Output for June and a speech from the Fed’s Quarles. The Global Dairy Trade Index and API Weekly Crude Oil Stock Inventory will also be released. Have a good day.
Economic data highlights will include:
Tue: RBA Minutes, German PPI, EU Construction Output, UK CBI Distributive Trade Survey – Orders, Global Dairy Trade Index, API Weekly Crude Oil Stock Inventory, Fed’s Quarles Speech
FX: DXY 98.36 (+0.17%)
Bonds: US10Y; 1.606% (+3.55%), German 10Y; -0.648% (+5.28%), UK 10Y; +0.483% (+4.89%), Australian 10Y; 0.923% (+3.54%), NZ 10Y; 1.045% (+3.47 %), China 10Y; 3.054% (+1.52%)
Stock Indices: DJI; +0.96%, S+P; +1.21%, NASDAQ; +1.35%, EUStoxx50; +1.20%, FTSE100; +1.02%, Shanghai Composite; +2.10%,
Metals: Gold $1495 oz (-1.18%), Silver $16.88 oz (-1.35%), Copper $2.598 lb (+0.43%), Iron Ore $94.36 per tonne (NYMEX) (+0.80%),
Oil: WTI $56.20 pb (+2.61%)
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