Following on from the stop loss driven selloff at the Asian open on Monday, markets have stabilised somewhat, with the US equity markets closing near the day’s highs after Donald Trump sought to ease trade tensions with China, while also striking a more conciliatory note on the final day of the G7 summit, where other world leaders have pressured him to de-escalate the trade war. Trump also made an attempt to sooth Middle East tensions by saying that he is open to meeting with Iranian President Hassan Rouhani under certain circumstances.
The overall effect on the markets was positive, and the US indices closed up by around 1%. The FX markets steadied after the early Asian gyrations and the US$ Index has regained some of its lost ground, up by 0.8%. The Jpy was the biggest mover of the day, with the US$ spiking to a new 8 month low before recovering equally sharply, to end the day near the highs, above 106.00. The Commodity currencies also recovered from their lows to finish near session highs, and not too far from levels seen last week. On the other side of the coin, Gold, after having spiked to a new 6 ½ year high at 1555 is now $30 oz lower, back where it started the day, while WTI had a wild ride, in rising by around $2.30pb in the first half of the session before giving back most the gains, to end the day at just below $54pb.
In terms of data, the slump in German business confidence extended once again in August, where the IFO survey fell to 94.3 from 95.8, its lowest levels in seven years, and gave yet another indication of a recession. Not good for the Euro, where a rate cut from the ECB looks ever more likely at the September meeting.
US durable goods orders rose 2.1% in July well above expectations of 1.0%. Total new orders for manufactured durable goods rose USD 5B to USD 250.4bio. However, ex-transport orders dropped -0.4%, below expectation of 0.0%. Ex-defense orders, though, rose 1.4%. Transport equipment rose 7.0%.
The Dallas Fed manufacturing index outpaced expectations in rising to +2.7 from -6.3.
Tuesday will again see a thin economic calendar although the German Q2 GDP is due for release, which is unlikely to make for very positive reading (exp exp -0.1%qq, +0.4%yy). Later on, from the US it will be mostly secondary data, Consumer Confidence, House Price Index, Richmond Fed Mfg Index, Case Shiller House Price Index all on the agenda. The RBA’s Debelle will be speaking at lunch time – Sydney. Have a good day.
Economic data highlights will include:
Tue: RBA’s Debelle Speech, German Q2 GDP, US Consumer Confidence, House Price Index, Richmond Fed Mfg Index, Case Shiller House Price Index
FX: DXY 98.06 (+0.80%)
Bonds: US10Y; 1.543% (+1.08%), German 10Y; -0.666% (+1.06%), UK 10Y; 0.488% (+0.04%), Australian 10Y; 0.898% (-8.92%), NZ 10Y; 1.055% (-7.86 %), China 10Y; 3.092% (+0.82%)
Stock Indices: DJI; +1.05%, S+P; +1.10%, NASDAQ; +1.32%, EUStoxx50; +0.44%, FTSE100; -0.47%, Shanghai Composite; -1.17%
Metals: Gold $1528 oz (+0.09%), Silver $17.66 oz (+1.51%), Copper $2.5370 lb (+0.28%),
Oil: WTI $53.80 pb (-0.07%)
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