News & Analysis
Dow drops on fears Deputy AG Rosenstein is resigning – trade tensions continue to bite – Europe drops; Oil surges adding 2%; BOJ Kuroda to come today
Upcoming high impact news:
15:35 JPY BOJ Gov Kuroda Speaks
23:00 USD CB Consumer Confidence
A mixed session for U.S stocks on Monday, the Dow Jones lost 181 pts after China cancelled trade talks, further political news sent the Dow to session lows. Reports said Deputy Attorney General Rod Rosensteing was resigning from his post. The White House later said in a statement Rosenstein and President Donald Trump will meet on Thursday amid the conflicting reports. Netflix shares gained 2.3% helping the Nasdaq hit a positive close, the index adding 6.29 pts. Sharp losses in GE and Boeing added to the overall somber mood, the S&P500 closing 10.30 for the session.
“Certainly the fact that you have such contention within the administration is not the sort of stability markets like to see. To have a such a high-level official resign is a part of that,” said Bruce McCain, chief investment strategist at Key Private Bank.
European shares finished lower U.S tariffs coming into effect and China cancelling trade talks weighted on sentiment. Comcast won the auction for a takeover of U.K. broadcaster Sky on Saturday, submitting a much higher bid than Twenty-First Century Fox. Sky’s share price surged 8.6% on the deal. The U.K. government has denied reports that it was planning to call a new snap election in November. The Auto sector was in the worst performers following renewed uncertainty over U.S.-China trade relations. The DAX lost 80 pts – the FTSE dropped 31.38 and the CAC closed 18 pts lower.
Oil surged overnight adding 2%, OPEC declined to announce an immediate increase in production despite calls by U.S. President Donald Trump for action to raise global supply. OPEC leader Saudi Arabia and its biggest oil-producer ally outside the group, Russia, on Sunday ruled out any immediate extra increase in output, effectively rebuffing a call by Trump for action to cool the market. “This is the oil market’s response to the OPEC+ group’s refusal to step up its oil production,” said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt. USOUSD closed 104 cents higher above $72. Buyers tested 72.59 during the session, we haven’t seen a close above $72 since July!
Gold finished flat after buyers tested 1204. Price remains range bound between 1192.40 and 1207.20. Price remains in short and longer term stalemate.
The USD spent most of the day under pressure, “The dollar rally needs fresh legs and that will have to come from either a big change in rate hike expectations or upside surprises in inflation and wage data,” said Lee Hardman, a currency strategist at MUFG in London.
Analysists are looking to the Fed to raise interest rates for the eighth time since late 2015, speculators had ramped up bets that interest rate differentials between the United States and other major economies, particularly Europe, will stretch wider. “We typically see this brief window before a U.S. rate meeting when hedge funds buy the dollar, and the trade war headlines are also aggravating that trend,” said Viraj Patel, an FX strategist at ING in London.
Risk tried to rally during the day, the EUR was given a boost by more hawkish comments from the ECB but buyers failed to hold the rally. The EUR finished flat to the USD and added 48 pips to the JPY. The GBP pulled back some of Friday’s losses adding 40 pips to the USD and 97 pips to the JPY. Despite higher oil prices and mixed USD sentiment, the USDCAD closed 31 pips higher. The USDJPY had a good session adding 36 pips. Buyers have returned to a solid high that starts from 112.86, this area ended the last rally in July. It’s a level to watch in the short term.
This morning the ASX200 is trading 10 pts lower and the USD is slightly lower to risk. Traders will be looking to the Bank of Japan when Governor Kuroda speaks at 15:35.
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Sources; CNBC – All times are AEST
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