by Pinchas Cohen
Key Events
Global stocks extended their rebound with a growing risk appetite, as Asian and then European markets climbed following a cooling down of tensions between North Korea and the US.
Global Affairs
Today, safe haven assets declined, including gold and the yen, reaffirming the view that investors are putting risk on again. Further confirmation was seen as the dollar strengthened for its second day after Federal Reserve Bank of New York Chief William Dudley suggested another interest rate hike for this year was in order.
Inexperienced traders, who view Japan as vulnerable to North Korean aggressions, were perplexed as to why the yen rose. What they fail to realize is the JPY climbed on its safe haven status, just like the dollar rose during the 2008 crash, despite being in the eye of the storm. The Wall Street Journal published a North Korean state news report stating that while the country’s leader, Kim Jong-un, praised the military preparedness for a war, he was putting off attacking Guam while continuing to keep an eye on the US.
The euro extended its decline after the German economy’s 0.6-percent expansion missed its expected 0.7-percent growth target. While the EUR is within a rising trend, both the MACD and the RSI provided sell signals last week.
The STOXX 600 climbed for a second day across the board. US futures suggest that—pending any surprises—the US will join world equities and rise.
Oil fell more than 2.5 percent yesterday on a strengthening dollar (which indirectly makes the commodity more expensive), and disappointing domestic consumption data in China, stroking investors’ fears that oil demand is shrinking in the country.
From a technical standpoint, the continuation consolidation we discussed last week has failed to be complete with an upside breakout. However, before we rely upon a continuation of the falling channel which began in February, we would need to see the price cross below $47—the same level as July's peak resistance—while being compounded by the rising trend line since June 21.
As of now, it has found support, after falling to an intra-day low of $47.34, 3 cents above its July 4 peak. After falling below the 200 and 100 dma, the 50 dma (green) is waiting right under the short-term rising channel at $46.43
Upcoming Events
- A crowded US data docket will give some indication of whether second-half GDP will outperform the first half of the year. July retail sales are expected to rise from June, while housing starts and industrial production may be muted.
- On Wednesday, the Federal Open Market Committee will issue minutes from its July policy meeting which may hold clues to the next Fed rate hike. On the same day, Eurozone second-quarter GDP data is due.
- Chinese tech titans Tencent Holdings (OTC:TCEHY) and Alibaba (NYSE:BABA) are among the companies reporting results this week.
Market Moves
Stocks
- Japan’s TOPIX finished the day 1.1 percent higher.
- Australia’s S&P/ASX 200 Index gained 0.5 percent at the close.
- Hong Kong’s Hang Seng added 0.3 percent.
- China’s Shanghai Composite rose 0.4 percent.
- Markets in South Korea and India are closed Tuesday for holidays.
- The STOXX 600 Index gained 0.3 percent as of 8:27 a.m. in London.
- The UK’s FTSE 100 climbed 0.2 percent.
- Germany’s DAX advanced 0.5 percent to its highest in a week.
- S&P 500 Futures increased 0.2 percent.
Currencies
- The Dollar Index gained 0.36 percent at its height, and is now half that at 0.18 percent. The USD is still at its highest level though since July 27’s 93.86 close.
- The euro fell 0.4 percent to $1.1738, its weakest in almost three weeks, after having its biggest fall in a week.
- The British pound decreased 0.2 percent to $1.2942, its lowest in more than a month.
- The Japanese yen dipped 0.7 percent to 110.42 per dollar on its biggest decrease in six weeks.
Bonds
- The yield on 10-year Treasuries increased two basis points to 2.24 percent.
- Germany’s 10-year yield climbed two basis points to 0.42 percent.
- Britain’s 10-year yield gained three basis points to 1.101 percent.
Commodities
- West Texas Intermediate crude decreased 0.1 percent to $47.54 a barrel, its lowest level in more than three weeks.
- Gold declined 0.6 percent to $1,274.30 an ounce on its largest drop in more than a week.