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Dollar surge – Yields hit new highs; GOLD – EUR hammered; Stocks mixed – Dow snaps winning streak

May 16, 2018 | Daily Market Outlook

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US markets – the Dow Jones snapped an 8-day winning streak closing 193 points lower. Home Depot contributed to the decline trading 1.6 percent after reporting weaker-than-expected quarterly sales. The S&P500 fell by 18.68 points as healthcare and real estate stocks the weakest sectors. The NASDAQ closed 59.69 points lower, Amazon, Microsoft and Google-parent Alphabet all pulled back by more than 1 percent.

Yields returned to the spotlight last night as the 10-year hit 3.09% its highest level since 2011. The 10-year yield is especially important to investors given its role as a barometer for mortgage rates and other financial instruments. Mortgage rates have also hit 7-year highs. Traders for the first time Monday assigned a 51 percent chance of a fourth interest rate hike this year by the Fed, according to the CME. The strong data Tuesday will only increase the ranks of traders and investors with that belief. Core retail sales (0.3%) and retail sales (0.3%) data missed expectations.

Europe – held up better than the US markets. Earnings and energy continuing to hold index floors. The FTSE added 12 points. The DAX lost 7.67 and the CAC closed 12.48 points higher. Europe’s oil and gas sector led the gains, climbing throughout the afternoon to close up nearly 1 percent. Financial services performed well, closing up 0.9 percent. British firm Hargreaves Lansdown topped the sector to closing close to 2.5 percent higher.

Telecoms stocks led the losses, dropping by 1.9 percent amid earnings news. French telecommunications firm Iliad slumped to the bottom of the benchmark losing 19.5 percent after it reported earnings that missed expectations.

The German ZEW institute said its monthly survey showed a reading of -8.2 ÔÇö its lowest level of economic sentiment since November 2012.

Oil – USOUSD closed slightly lower after hitting new May highs. Buyers reached a high of 71.91 before sellers cut gains and settled 21 cents lower at 71.00. For now, the trend remains up, continued factors are supportive of price. Strong global demand has been outstripping production. The supply overhang of 2014-2017 is virtually eliminated, according to OPEC. Demand for crude oil at Chinese refineries is at the second-highest level on record. But the ace in the pack continues to be US supply, U.S. shale oil production is expected to rise by about 145,000 bpd to a record 7.18 million bpd in June, the U.S. Energy Information Administration said on Monday.

Forex – Yields continued to drive the USD in the New York session after mixed fortunes through-out the day. The USD made a move in the Asian session but as we’ve seen ran out of puff into the London session. Before resurging during the NY session. The EUR and AUD were hardest hit on the risk side. The EURUSD lost 88 pips and touched new May low’s. Believe it or not, it was trading in the positive during the London session. The AUDUSD followed suit losing 55 pips. Data in Europe last night, the ZEW fell and the UK saw a drop in the Average Earnings Index. The GBP held up the best out of the three main risk currencies losing 52 pips but continuing to hold from 1.3500.

The Japanese Yen had a mixed night, higher to the EUR and AUD but lower to the GBP and USD. The USDJPY the big mover breaking through 110.00 to close 70 pips higher at 110.34. Yields driving the USD really hit Gold as it was dumped by just over 22 dollars. Breaking to new 5-month lows. Price settled at 1288.66.

Good trading from Eightcap.

Sources; CNBC All times are AEST

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