News & Analysis

Stocks flat – DAX drops; Trumps comments hammer USD – Gold – Risk end week in the black

Jul 23, 2018 | Market Updates

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U.S. stocks finished slightly lower of Friday with mixed influences to the end the week. Microsoft reported better than expected earnings Thursday after the close and issued strong revenue guidance. The company’s stock rose 1.8% to reach new records. General Electric also reported a stronger than expected profit, but it still saw a 30% drop year over year. The share price ended 4.4% lower.

So far, about 16.4% of S&P 500 companies have released their latest quarterly results, with 83% of them topping analyst expectations, according to FactSet. “There have been some individual surprises, but it’s still looking like we’re going to get year-over-year growth in the neighbourhood of 20%,” said Ed Yardeni, president and chief investment strategist at Yardeni Research.

The Dow Jones ended 6.38 lower –The S&P500 ended 2.66 lower.

Presidents Trumps comments regarding trade with China had an impact on global stocks in Friday’s session. President Donald Trump said he is ready to put tariffs on every Chinese good coming to the U.S. if necessary. President Trump for a second day commented about the Federal Reserve’s decision to keep increasing interest rates. “The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates – Really?”

This coincides with China’s Currency the Yaun sinking lower on mid-week fixing. During a CNBC interview on Thursday, Trump said a strong dollar puts the United States at a disadvantage and that the Chinese yuan “was dropping like a rock”. Friday’s fixing was the lowest since July 14, 2017, and represented the biggest one-day weakening in percentage terms since June 27, 2016. Lowering the fixed Yuan is one countermeasure to tariffs.

European stocks followed developments in the U.S. ending the week lower. Auto stocks were the worst performers, down more than 2% amid reports that the European Commission is preparing retaliatory tariffs in case the U.S. moves ahead with duties on European carmakers. The Banking sector also saw pressure after U.S President’s comments.

U.K. financial watchdog has told banks to prepare for “a range of scenarios” including for one where there’s no agreement between the U.K. and the European Union. Which could lead to sharp sell-offs in risk assets. The International Monetary Fund warned Thursday that the EU could suffer an economic impact of 1.5% of its annual output if Brexit happens abruptly. Despite all the grey news, the FTSE finished mainly flat losing 5.18 pts. The Eur Stoxx 50 -7.56 pts. The DAX took heavier falls losing 124.87.

Oil rose higher on Friday but still fell for its third weekly loss. Markets edged up in the previous session and early Friday in the wake of Saudi Arabia moving to allay some fears of oversupply. Crude futures moved higher Friday as the dollar slumped after President Donald Trump said Europe, China and others are manipulating their currencies. USOUSD settled 15 cents higher after trimming gains. Buyers hit 68.62 at one in the session. Price remain range bound after a decline, resistance continues from 68.50.

President Trump set the tone for the USD on Friday. His comments sent it sharply lower, strong gains seen on the major risk currencies to end the week. The EUR and AUD jumped over 75 pips and the GBP added over 100 pips. The Majors had a flat to mixed session to the Japanese Yen. The USDJPY was smacked losing 100 pips. USD selling has continued this morning, the $/Y trading lower by another 45 pips back in the 110 handle.

Gold finally closed in the black making its first HH close in eight sessions. Sellers made a move on Friday but failed to test Thursday’s low, once the USD started its retreat Gold buyers got going sending price 8.68 higher. Price slightly higher this morning but sellers active after price tested 1234.

Bitcoin continues to stall around 7560 forming a new range from the daily chart. The range high lines up with May/June previous resistance. Buyers still have the breakout but have work to do to beat these two levels.

Good trading from Eightcap.

Sources; CNBC – All times are AEST

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