News & Analysis

Dow in the red for 8th session in a row; Oil higher – OPEC meetings continue; USD falls from 11-Month highs

Jun 22, 2018 | Daily Market Outlook

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All Day Oil OPEC Meetings
22:30 CAD CPI – Core Retail Sales

U.S. stocks lower overnight, the Dow Jones closing lower for the 8th day in a row. Trade continues to be a main concern, Caterpillar and Boeing dropped 2.5 percent and 1.5 percent, respectively. Both companies are susceptible to trade tensions given their large exposure to overseas markets. The Dow ended 196 points lower. Energy stocks hurt the S&P500 losing 0.6%, 17.56 points. The NASDAQ was lead lower by losses in Amazon and Alphabet. Amazon shares fell 1.1 percent after the Supreme Court ruled that states can force online shoppers to pay sales tax. The NAS failed to hit new records falling by 68.56 points.

“While I suppose no one wins a trade war, the U.S. is currently ‘losing less’ in its current dispute with China if one uses the respective stock markets as a guide. While the S&P 500 largely stands in place and resides well above its correction bottom from earlier in the year, the Shanghai Composite has tumbled to a twenty-three month low,” said Jeremy Klein, chief market strategist at FBN Securities.

“This divergence should give Washington a bit more leverage in the negotiations and ultimately will lead to a workable solution for both sides,” Klein said.

European shares followed the U.S. lower, the DAX for hard-hit losing 183.25 points. The BoE held rates but appeared more hawkish than expected for possible future rises. The FTSE fell 70.96 points. The Euro Stoxx 50 closed 36.23 points lower. Italian bank stocks Unicredit, Ubi Banca and Intesa Sanpaolo were among the poorer performers following a report that a euroskeptic had been appointed to Italy’s Senate finance committee. Europe’s autos stocks were the worst performing sector, down 3.29 percent for the day on news that Daimlerhad cut its 2018 earnings forecast, blaming global trade tensions.

Daimler said sales of its Mercedes-Benz SUVs would suffer from fresh tariffs on cars exported from the U.S. to China. Trade and OPEC meetings continue to be a key factor.

Gold finished lower but recovered from lows after the USD fell from 11-month highs. Gold tested 1261.04 to the downside before recovering to close at 1266.76. Traders this could be a failed low.

Oil has jumped this morning adding 63 cents, after settling 30 cents higher yesterday in volatile trade. OPEC meetings continue all day today. The producer group is widely expected to agree to pump more, possibly supported by some other producers outside OPEC, including Russia. “How much oil do we need? … around 1 million (barrels per day, bpd) probably,” Saudi Arabian Energy Minister Khalid al-Falih told reporters in Vienna. Falih said the oil market had now rebalanced and his aim was to prevent a shortage of crude in future that could squeeze the market.

The USD retreated from 11moth highs last night. The USD held its ground late into the London session. We watched a real push and shove to the EUR. The EURUSD tested it’s low a few times before buyers found some numbers and forced a reversal. The EURUSD closed 36 pips higher. Bets on a protracted period of monetary policy divergence between the U.S. and European central banks held the EUR lower. Philly Fed business index posts biggest drop in over 4 years knocking the wind out of the USD sails this led to a momentum reversal for risk to the USD. But the CAD failed to close higher, the USDCAD well off highs closed 6 pips higher making it six in a row.

The Bank of England held rates as expected but sent out a shock unexpectedly supporting future hikes. The GBP got a nice boost from this comment jumping by 61 pips to the USD and 28 pips to the JPY. The JPY come back late in the session closing higher to the other majors. The USDJPY retreated from its 110.70 test ending the session 37 pips lower.

Good trading from Eightcap.

Sources; CNBC – All times are AEST

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