News & Analysis

Dow & S&P500 snap losing streaks as Lirea fights back; USD continues rally knocking risk lower; Bitcoin bounces off 5850 low

Aug 15, 2018 | Market Updates

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11:30 AUD Wage Price Index
18:30 GBP CPI
22:30 USD Retail sales – Core Retail Sales
00:30 Oil Crude Oil Inventories

US Markets posted recoveries last night, the Dow Jones snapping a 4-day losing streak adding 112.22. The S&P500 added 18.03 point and the Nasdaq closed 51.19 points higher as Apple and Amazon rose 0.4% and 1.2%, respectively. Bank stocks rose as Goldman Sachs, Citigroup and Morgan Stanley all closed more than 1% higher.

Trader sentiment was lifted by a rise in the lirea which added 8% to 6.36 after falling to a record low 7.24 per dollar on Monday. The currency has been under pressure recently as market watchers became jittery over rising tensions between Turkey and the U.S.

Jeremy Klein of FBN Securities thinks the recent decline in U.S. stocks related to Turkey’s turmoil will be short-lived. “Turkey is not a member of the European Union or the eurozone, so it has less hooks into the European banks, which means less trouble for us,” said Klein, the firm’s chief market strategist. “I think it will be well contained.”

Turkey dealing with an economic decline as inflation has surged recently. Last month, Turkey’s inflation rate hit 16%, well above the central bank’s 5% target. The financial issues have sparked fear across Europe.

“This is going to continue for some time,” said Lale Akoner, market strategist at BNY Mellon Investment Management, noting Turkey has to contend with tightening monetary policy around the world as well as key fundamental issues. They have “a huge current account deficit relative to their GDP and surging inflation.”

“The reason the lira is bouncing is because the finance minister said he would talk to foreign investors,” Akoner said. “The fact that he’s willing to talk is good,” but the problems remain.

European shares finished lower to flat after early gains, Turkey continues to keep trader sentiment low. The FTSE lost 30 points, the DAX added 0.13 and the CAC lost 8.91 points. German growth figures rose in the second quarter, but economists expressed concerned that global trade tensions and the ongoing currency crisis in Turkey could bring problems to the economic engine of Europe. Copper producer Antofagasta reported a big slump in core earnings for the first half of the year falling by 6.4%.

Oil traded lower on mixed influences, USD strength due to Turkey pressured traders. Saudi Arabia cuts output in July, raising concerns about OPEC’s ability to meet global demand for crude. Looking at USOUSD price rallied through London trading session adding 98 cents before sellers came flooding back during the NY session. Price lost 79 cents closing at $65.98.

Currencies looked like posting higher sessions to the USD before turning lower during the NY session the GBP AUD and EUR all fell hitting new monthly and yearly lows. The USD continued to gain to the JPY but dropped 77 pips to the CAD. Risk was mixed to the Yen, the GBP and AUD closing higher but the EUR failed to hold gains as the issues from Turkey continue to keep the EUR under pressure. Gold closed flat is a quiet session sitting around yearly lows at 1193.85.

Tonight traders will be looking to key data coming out in the UK (CPI) and U.S. (Retail Sales).

Bitcoin dropped back to long-term support dropped below 6k briefly, this morning price is 220USD higher back above 6200. We’re looking for 5850 to hold as a break sets up a long-term pattern fail.

Good Trading from Eightcap

Sources; CNBC – All times are AEST

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