by Pinchas Cohen
Key Events
- Global stocks mixed
- Yuan surges
- Oil on course for 4th straight daily gain
- Gold, yen and Treasuries all rise ahead of Yellen remarks
Global Affairs
Global stocks opened on a positive note in Asia today, led by Japanese stocks which rose on a weak yen. The situation changed later on in the day when the safe haven currency moved up in an expression of investor concern regarding interest rates and the American economy, ahead of an appearance later today in the US by Fed Chief Janet Yellen. Still, after retreating from the high of the day, Japanese shares nevertheless closed at their highest level since August 2015.
Hong Kong's Hang Seng was dragged down due to a regulatory investigation while South Korean retailers jumped as consumer confidence reached a six-year high.
In Europe, shares slipped, as automobile manufacturers' stocks retreated and brought down averages.
On Monday, gold traders were at the receiving end of a rude awakening when the price of gold plunged sharply at 9 AM London, after 1.8 million ounces of gold were exchanged in just a minute of trading. While the cause is unknown, a “fat finger” phenomenon appears to have occurred, aptly named after a perceived scenario in which an investor's finger is stuck on the trade button.
Unlike gold, the yuan surged at 20:00 EDT Monday, amid speculation of a China Central Bank intervention, when it instantly climbed one-third of a percent and plunged right back down at 20:35. Today, the yuan rose again, at 2:15 EDT, setting the USD/CNY on a decline that set it back after almost three days of gains. It was its first loss in eight trading sessions.
Today, trading in Hong Kong added to the flight out of equity positions. By midday, 16 companies tumbled by more than 50 percent, losing a combined HK$39.8 billion ($5.1 billion) in market value. Traders pointed to links between some of the small cap companies and the Lerado Financial Group Co., a brokerage that’s under regulatory investigation.
US durable goods orders dropped 1.1 percent in May for a second-straight month, almost double the expected drop of 0.6 percent, confirming the fears of some that the economy is in a slump. Treasuries further backed this claim by extending their advance after an unexpected decline in orders for business equipment.
These unexpected contractions undermine the Fed's efforts to convince traders that a reflation is occurring. Investors have already been disappointed following President Donald Trump’s failed reflation, and their pessimistic economic outlook has solidified time and again since the release of data revealing Q1's shockingly disappointing growth. Traders have only just begun to move out of safe havens and into risk assets, but after last week’s oil crash and its bleak implications for inflation, they have retreated back to isafe havens.
Nevertheless, with a thin economic calendar, right now Yellen's address will be most beneficial for clues on policy.
Health-care equities declined all over the world, due to three US Republican senators who sigaled that they are prepared to block the administrations current version of the GOP healthcare bill.
Upcoming Events
- Tuesday - Bank of England Policy Committee releases a stability report, followed by a press conference by Governor Mark Carney.
- Wednesday - The Fed will announce athe results of the second part of its annual US bank stress test.
- Friday- China PMI released – expected June decline, after flat May, after government offers to cut overcapacity and leverage.
Market Moves
Stocks
- The Stoxx Europe 600 slipped 0.4 percent as of 8:54 a.m. in London. Declines in automakers overshadowed a rally in basic resources shares, as oil extended a fourth daily gain.
- Japan’s TOPIX climbed 0.4 percent, to its highest closing level since August 2015.
- South Korea’s KOSPI added 0.1 percent, with E-Mart (KS:139480) and Lotte Shopping (KS:023530) advancing more than 4 percent. |Consumer confidence rose to its highest since January 2011 as exports grow and the new president’s policies on job creation are spurring optimism.
- Hong Kong’s Hang Seng fell 0.1 percent.
- China's Shanghai Composite advanced 0.2 percent.
- S&P 500 futures slipped 0.1 percent. The underlying gauge rose less than one point on Monday.
- The NASDAQ 100 fell 0.4 percent.
Currencies
- The offshore yuan jumped 0.4 percent in the country's afternoon spike, after spending much of the earlier part of the day stagnant. The yuan traded in Shanghai’s onshore market climbed a similar amount before rising 0.2 percent.
- The yen advanced 0.2 percent to 111.67 per dollar, after losing 0.5 percent on Monday.
- The Dollar Index fell 0.4 percent to 97.02 after gaining 0.16 percent in the previous session.
- The British pound was steady at $1.2725.
- The euro is up on ECB President Draghi's optimistic remarks on the eurozone economy at this morning's ECB Forum.
Commodities
- West Texas Intermediate crude rose 0.5 percent to $43.61 a barrel, adding to a three-day rally following oil’s drop into a bear market.
- Gold increased 0.4 percent to $1,249.72 an ounce. The yellow metal sank almost 1 percent on Monday.
Bonds
- The yield on 10-year Treasuries fell one basis point to 2.13 percent, after dropping less than one basis point on Monday.