News & Analysis

Dow hits new record; Europe jumps; Majors struggle to the Yen; May’s comments sink the GBP

Sep 23, 2018 | Market Updates

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U.S markets finished the week mixed, the Dow added 86 points hitting a new record pushed higher by dissipating trade worries and strong gains from Mc Donalds and Boeing. The S&P500 and Nasdaq ended the session lower after pushing higher. The SP500 lost 1.08 pts and the Nasdaq closed 41.28 points lower.

I’ve been a bit surprised at how robust the rally has been given the chatter on trade,” said Michael Geraghty, equity strategist at Cornerstone Capital. He noted, however, equities are also benefiting from strong corporate profits. “The stock market is strong because the economy is strong and the economy is strong because corporate earnings are strong.”

“A full-blown global trade war may yet erupt and derail the global economic expansion, but the odds of such an outcome appear to be diminishing,” strategists at MRB Partners wrote in a note, adding this is “spurring a risk-on phase.” “Game theory suggests that even President Trump will want a deal with China, or at least has no incentive to take significant economic risks looking out to 2020,” they said. “To this end, Trump has shown that he is willing to do deals, provided he can claim it as a ‘win.'”

European markets ended the weak on a positive note, the FTSE surged higher adding 122.91 the DAX added 10104.40 and the CAC closed 42.58 higher. Political and corporate news some of the key drivers. basic resources outpaced fellow groups, jumping 1.71%. UK Prime Minister Theresa May said Friday that the U.K. and EU were at an “impasse” in Brexit discussions. She added that she wouldn’t overturn the referendum’s result. Sterling hit a session low following the speech.

Oil finished Friday higher, Oil prices gave up gains on Friday ahead of a meeting of OPEC and other large crude exporters. OPEC and non-OPEC countries are discussing raising output by 500,000 barrels per day to counter falling supply from Iran due to U.S. sanctions, a source told Reuters. Sunday’s meeting in Algiers would produce a major policy decision. However, they said top exporter Saudi Arabia faced the challenge of appeasing Trump, who wants OPEC to boost production while maintaining cohesion among the producers, many of whom could be hurt by lower oil prices caused by a supply increase. USOUSD closed 50 cents higher on Friday and jumped higher on this mornings open gapping 50 cents higher. Buyers added to gains rally up to 71.51, buyers have looked thin above 71.20 so it will be interesting to see if price can hold above this level.

Gold closed close to $7 lower on Friday after buyers did touch new weekly highs at 1211. Buyers have been thin this morning price has started the week just over $2 lower. there’s morning going on in this market atm as the USD has had a bad week. Gold has been not seen much buyer support of the back of the USD weakness. We still see 1192.95 as the range low, seen on the daily chart.

Mixed end to the week for risk to the USD and the Yen, earlier rallies failed to hold the EUR lost 24 to the USD and 13 to the JPY after parring a strong rally. The GBP was sunk by May’s Brexit comments. The GBP plunged to both the USD and JPY. This morning price opened with a small gap lower. GBPJPY crashing lower by 198 pips. The USDJPY held in the black but also gave back most of it’s earlier rally. Pairs have been extended to the yen this could be the start of a pullback. The USDCAD closed 12 pips higher, 1.2890 looks to be forming at short-term support.

This morning risk is trading muted with the GBP lower while the AUD is stronger. The AUS200 closed lower in the overnight session and could see further falls if sellers maintain momentum, the 1-hour chart show’s a decent trend break. There are bank holidays in Japan and China. Asian session trade maybe lighter than usual.

Good Trading from Eightcap

Sources; CNBC – All times are AEST

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