Stocks have had a mixed day on Monday, with the Nasdaq closing up 1% at yet another record all-time high while the S&P finished up 0.3% but just four points from its own record close. The DJI struggled to maintain the pace and dipped lower, down 0.3% on the day.
In the FX markets, the US$ is lower against all counterparts, with the DXY down by 0.3%, currently at 92.83. The dollar was weighed down by the ongoing concerns related to the pandemic situation in the US and also by the souring relationship between the US and China, especially after trade talks scheduled for last weekend were delayed without a new date being arranged. In particular, the Aud$ was a beneficiary of the broad rally seen in commodities and is now back above 0.7200 ahead of today’s RBA Minutes. The rally in the Aud$ has coincided with the MSCI World index reaching highs last seen in February and underpins the traditional positive correlation with risk appetite. With commodity prices accelerating in recent weeks, especially iron ore and gold, further upside in the Aud$ does look possible although the 200 WMA (0.7250) will provide stiff resistance.
The Jpy has also made good gains as some safe haven demand crept back into the markets and was also a beneficiary of lower US yields, with the US10Y now back below 0.7%. Elsewhere, the Euro was up by a few pips but remains below the 6 August high of 1.1915, with traders seemingly sitting on their hands while awaiting the FOMC Minutes, due on Wednesday.
In terms of data, there was not much to go on although there was one bright spot from the US where the NAHB Housing Market Index rose for a third consecutive month in August, matching its highest level ever as record-low interest rates underpin buying interest. On the other hand, the US Empire State manufacturing business conditions index dropped sharply to 3.7 in August, down from 17.2 and well below expectation of 16.5. With regard to the individual components of the index, new orders dropped -15.6 pts and turned negative, to -1.7, while shipments dropped -11.8 pts to 6.7.
Commodities had a solid session, underpinned by the soft US$ and lower Treasury yields, which pushed traders back towards safe haven assets, and Gold and Silver both jumped higher, by 2% and 4% respectively . Copper was up by 1.75%, while WTI rose by 1.4%, joining in the broad commodities rally and also by a media report suggesting that OPEC+ members have complied with production cuts, previously agreed to in May.
Looking ahead, there is not a lot on the calendar on Tuesday, with just the RBA Minutes coming up, and which are likely to be fairly dovish, and with the details likely to reiterate that the RBA are monitoring the situation but could do with more help on the fiscal front from the government, and are most likely to just underline what the RBA Governor said in his testimony last Friday. Later in the day, there is an EU EcoFin Meeting but nothing else from Europe while the US will release the July Building Permits (exp +1.29mm, +6.0%mm) and Housing Starts (exp +1.17mm, +3.7%mm). Most traders however are likely to stand aside while waiting on the release of tomorrow’s FOMC Minutes. The API Weekly Crude Oil Stock Inventory and the Global Dairy Trade Index will also be released during the session. Have a good day.
Economic data highlights will include:
Tue: NZ REINZ House Price Index, RBA Minutes, US Building Permits, Housing Starts, API Weekly Crude Oil Stock Inventory, Global Dairy Trade Index
Market moves, in brief:
FX: DXY 92.83 (-0.30%)
Bonds: US10Y; 0.690% (-2.42%), German 10Y; -0.217% (-6.89%), UK 10Y; 0.217% (-10.39%), Australian 10Y; 0.912% (-3.64%), NZ 10Y; 0.694% (+2.42 %), China 10Y; 2.951% (+0.37%)
Stock Indices: DJI; -0.31%, S+P; +0.28%, NASDAQ; +1.0%, EUStoxx50; +0.02%, FTSE100; 0.61%, Shanghai Composite; +2.32%, ASX200: 000%
Metals: Gold $1985 oz (+2.08%), Silver $27.48 oz (+3.92%), Copper $2.9085 lb (+1.73%), Iron Ore $120.85 per tonne (NYMEX) (+0.52%),
Oil: WTI $42.78 pb (+1.37%)
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|4 Hour||Neutral – Turning Higher?||Turning Lower||Turning Neutral||Neutral – Turning Lower?||Turning Higher?||Turning Higher?|
|1 Day||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Possible Basing Formation||Turning Neutral||Turning Lower?|
|1 Week||Turning Higher||Turning Neutral||Neutral – Turning Higher?||Down||Up||Turning Neutral|
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|4 Hour||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Up||Turning Neutral||Turning Neutral|
|1 Day||Possible Basing Formation||Turning Neutral||Turning Neutral||Down||Turning Lower||Turning Neutral|
|1 Week||Down||Up||Up||Possible Topping Formation||Up||Up|
|1 Hour||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Overbought – Turning Lower?|
|4 Hour||Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Possible Topping Formation|
|1 Day||Bearish Divergence||Turning Neutral||Turning Neutral||Turning Neutral||Turning Neutral||Up|
|1 Week||Turning Higher||Turning Neutral||Possible Basing Formation||Turning Higher||Turning Neutral||Turning Higher?|