News & Analysis

Dow – Dax gain; Tech drops on FaceBook; ASX200 back around 6300; USD and Yen hammer risk; U.S GDP data due tonight

Jul 27, 2018 | Market Updates

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22:30 USD Advance GDP EXP 4.1% Last 2.0%

Mixed session in the U.S as the Dow Jones added 112 but the S&P500 fell by 8.63 and the Nasdaq dropped 80 points. The Tech sell-off was foreseen due to the FaceBook missing estimates at the end of yesterday’s cash session. The NAS posted its worst one-day loss since June 27, when it lost 1.5%; Facebook suffered its worst day in its history as a public company with shares closing down 18.96%.

The Dow was pushed higher by higher industrial stocks. Caterpillar rose 1.49 after Trump’s announcement calming trade relations between the U.S. and EU. Both regions would start collaborating in order to lower tariffs and avoid a potential trade war. Treasury Secretary Steven Mnuchin also told CNBC on Thursday a deal on NAFTA is coming in the near future. “We hope to have an agreement in principle, clearly, very soon. That’s the first priority,” Mnuchin said on “Squawk Box.”

European shares had a positive session, confidence returning as trade war fears continue to abate. The FTSE added a meagre 4.91 but the DAX soared jumping 229.90 pts higher. Autos stocks were the best performers, up 2.58%. Earnings continued in Europe with good results adding to buyer momentum.

The ECB held rates as expected, ECB President Mario Draghi said at a press conference following the decision that the euro area economy would continue to need “significant monetary policy stimulus.” The bank last month announced it would unwind its massive bond-buying program. This did not play out well for the EURO.

Local shares have had a real shot of confidence so far, the ASX200 is trading 56 pts higher at 6300. Asian shares are mixed with gains seen on the Nikkei but China is in the red. The Hang Seng 121 pts lower.

Trade war fears easing and a stronger USD set the tone for Gold overnight. After buyers failed to break 1235 for the second time, sellers took over driving price $8.60 lower. This morning Sellers continue to pepper the low at 1222.20, a break sets up a new move that could test 2018 lows.

Risk took a battering last night, the USD and JPY fired back knocking basically all sharply lower. Strange to see safe havens charging with stocks! The ECB U turning on a possible stimulus wind down did the EUR no favours after the ECB held rates.

“The dollar is higher across the board and this reflects the lift it is enjoying from fundamental factors, notably higher U.S. yields and higher Wall Street shares amid improving risk appetite,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

The AUD was hit hard losing 77 pips to the USD and 67 to the Yen. The EUR and GBP both lost over 79 pips to the USD. Tonight traders will be looking to the Advanced U.S. GDP data, expected to hit 4.1%. If we see 4.1 or higher it’s going to be interesting to see the USD reaction and how the Fed will react.

Good trading from Eightcap.

Sources; CNBC – All times are AEST

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