Spot values at a glance:
Most Asian stocks rose following gains from commodity producers. Crude oil futures traded above $50/bbl for the first time since May. The US dollar held onto declines triggered by political turmoil in Washington. Gold pared Monday’s declines back towards the $1,270/Oz handle.
- Anthony Scaramucci was removed from his new job as White House communications director on John Kelly’s first day as chief of staff, just 10 days after the financier joined President Donald Trump’s staff. His ousting is seen as a sign that Kelly, a retired general, will wield significant power within the administration. Trump told reporters on Monday that Kelly will do a “spectacular job” in his new role; he also has the support of Trump’s daughter Ivanka and son-in-law Jared Kushner.
- A top income-tax rate of 44% for Americans earning more than $5 million per year isn’t under consideration, a White House official said Monday, knocking down a proposal said to be backed by top Trump adviser Steve Bannon. The official stated that he doesn’t “believe that raising taxes is the way to encourage growth”.
- The Chicago purchasing manager index in July slipped to 58.9, from 65.7 in June, lower than the 60.0 estimated.
- Pending home sales in June gained 1.5% from a month ago, reversing from a 0.7% drop in May and exceeding the median estimate of 1.0%.
- Equity bears hunting for excess in the stock market might be better off worrying about bond prices, Alan Greenspan says. That’s where the actual bubble is, and when it pops, it’ll be bad for everyone. He added that real long-term rates are much too low and unsustainable, hence when they move higher they are likely to move faster than expected.
- US bond yields were largely unchanged for the day overnight; the benchmark 10yr Treasury yield rose less than 1bp to 2.29% in New York, and added another to 2.3% during Asia trade earlier today.
- The US dollar continued to sell off following President Trump’s abrupt firing of ex-Communications Director Scaramucci 10 days into the job; the Bloomberg Dollar Spot Index shed 0.3% and a further 0.1% earlier today to reach a fresh 15-month low. The more-watched Dollar Index declined 0.4% to 92.863 in New York.
- The S&P 500 Index (-0.1%) inched lower on the opening session of the week. The tech-heavy Nasdaq 100 (-0.4%), which investors had fled the previous five sessions at a pace not seen since 2007, suffered more sizeable losses. The Dow Jones Industrial Average (+0.3%) bucked the trend and continued to make new highs.
- According to a Bloomberg report, CEOs are becoming increasingly worried about Amazon, even more so than President Trump. Looking at the last 90 days of earnings calls and other corporate events such as investor days, a trend emerges. Amazon comes up a lot. It was mentioned a staggering 635 times over that time frame, while President Trump came up just 162 times and wages were discussed 111, the earnings call data show. It’s become even more pronounced over the past 30 days, with Amazon garnering 165 mentions compared with 32 for Trump and 22 for wages.
- Pimco is predicting that Canada’s central bank will turn cautious after raising interest rates this month. Ed Devlin, head of the Canadian portfolio at the second-biggest US fixed-income manager, said 2yr government bond yields are likely anchored around current levels after soaring since the Bank of Canada unexpectedly turned hawkish in mid-June and raised rates July 12. 10yr and 30yr bond yields could rise another 25bps to 30bps. He added that the BOC “wants to be cautious in its communication and the tightening of policy especially given the enormous strength of the Canadian dollar”.
- Banks may need to find $30 billion to $50 billion of additional capital to support new European units in the aftermath of a hard Brexit, according to Oliver Wyman Inc. The extra money is equivalent to 15% to 30% of the capital that wholesale banks currently commit to the region, the management consultant said in a report published Tuesday. In addition, operating costs could rise by $1 billion as functions previously handled in London are duplicated on the continent, the company said.
- The RBA is due to keep its cash target rate unchanged later today at 1.50%, although analysts and traders have been pulling forward their expectations regarding the timing of an interest rate hike from the central bank.
- Goldman Sachs Asset Management is calling the top of the Aussie rally, selling the currency after it jumped to a two-year high on what the firm sees as unrealistically strong expectations for interest-rate increases by the central bank. It further noted that AUDUSD’s rise to above 0.8000 reduces the odds for RBA hawkishness, because it’s likely to hurt growth and keep inflation below the bottom of the central bank’s target of 2% to 3%.
- The Caixin China manufacturing PMI for July rose to 51.1, from 50.4 in June, beating the consensus estimate of 50.4.
- The appeal of owning the Chinese currency is growing, after 2 years of depreciation wagers. Selling the greenback and using the proceeds to buy yuan has delivered Asia’s highest Sharpe ratio, a measure of returns adjusted for price swings, over the past 3 months, according to a Bloomberg report.
- Spot gold pared almost all of its previous session’s decline to rise by as much as 0.2% to $1,270.74/Oz earlier today. The precious metal is trading near a 6-week high, helped on by a weaker US dollar that has been sold off due to continuing political instability in the White House.
- Demand for gold bars in China, the world’s biggest bullion market, soared by more than half in the first 6 months of the year as investors sought a haven from financial and geopolitical risks. Sales climbed 51% to 158.40 metric tons from a year earlier, the China Gold Association said in a press statement. Overall gold consumption climbed almost 10% to 545.2 tons, including 330.8 tons for jewellery sales, while industrial demand and other uses increased 9%.
- Spot gold is currently testing a key downward multiyear trendline, in play since 2011. An upward move above the $1,300/Oz handle should confirm the break above the trendline and signal the start of a new long-term upward trend.
- Silver for immediate delivery gained as well, rising 0.8% to $16.882/Oz.
- Crude oil futures expiring in September held onto gains above $50/bbl, rising 0.4% to $50.36/bbl earlier today. Futures had closed above the $50/bbl handle last night for the first time since May.
- US government data is expected to show crude stockpiles decreased by 3.3 million barrels last week, a fifth weekly drop. Stockpiles have declined by almost 26 million barrels since the end of June.
- In a nod to the market’s firming fundamentals, Saudi Arabia’s state-owned oil company hiked its official pricing for September sales to its Asian buyers.
- Meanwhile, hedge funds’ bets that oil will fall sank to their lowest level in three months, according to positioning data released Friday.
- Spot 1.3556
- USDSGD dropped 0.2% to 1.3545, on the back of continued US dollar weakness.
- The next key support lies at 1.3500, where the base of a double-top formation on the pair’s multiyear technical chart lies.
- Spot 0.8033
- AUDUSD advanced 0.9% to 0.8043 earlier, ahead of the RBA’s monetary policy decision due later today and amid speculation any attempt by the central bank to weaken the currency in its policy statement will fail to offset a slumping USD.
- The next resistance target resides at the 2-year high of 0.8164. To the downside, 0.7875 provides some near-term support.
- Spot 1.2500
- USDCAD showed further signs of stabilization, rising by as much as 0.4% earlier to 1.2529.
- The pair has been well supported above the 1.2400 handle, even despite continued USD weakness as well as crude oil prices gaining to above $50/bbl. A rebound back up to the 1.2600 is expected.
- Spot 6.7315
- The PBOC strengthened its fixing by 0.20% to 6.7148 per US dollar earlier today, its strongest level since October.
- USDCNH declined 0.3% to 6.7163, the pair’s lowest level since October last year.
- Spot 110.17
- USDJPY slipped 0.5% to a fresh 6-week low of 110.01, as a sagging US dollar continues to pressure the currency pair amid more political shakeups in Washington.
- The 110 level is currently being tested, as expected. Further downside is possible with the base of a rising wedge pattern, since April, providing further support around 109.50.
- Spot 1.3217
- GBPUSD reached its highest level in more than 1o months, after adding 0.8% to 1.3224 earlier.
- The next resistance lies around 1.3450, however further upside for the currency pair may be limited given that investors are keeping an eye out for Thursday’s BOE policy decision.