News & Analysis

NASDAQ continues making record highs; Oil breaks losing streak; Gold holds support; EUR reverses after ECB QE news

Jun 6, 2018 | Daily Market Outlook

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11:30 AUD GDP
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The NASDAQ continued its record-breaking run, Amazon and Netflix driving the gains as they added 1.1% and 1.9%. Mylan another contributor rising 3.8%. The Tech heavy index closed 0.4% higher at 7,637. The rest of the market lagged the NASDAQ, the Dow lost 13.71, Merck the worst performing stock on the index. The S&P500 made slight gains but buyers were nervous due to ongoing trade tensions between the U.S. and China, Canada and Mexico.

“This thing keeps dragging and dragging and dragging,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “No one wins with tariffs like this. Steel prices have gone up a lot and there are more users of steel that producers of steel.” White House economic adviser Larry Kudlow said President Donald Trump is considering having separate talks with Canada and Mexico as NAFTA negotiations continue.

“His preference now, and he asked me to convey this, is to actually negotiate with Mexico and Canada separately,” Kudlow said. “He may be moving quickly towards these bilateral discussions instead of as a whole.”

Canadian government official replied they will continue negotiating NAFTA as a trilateral agreement.

Europe ended mixed, banking sector the worst performer. RBS dropped to the bottom of the sector, after losing more than 5%. News hit that the U.K. Government plans to sell part of its stake for 2.6 billion pounds. Resulting in a loss as it returns the lender back to private ownership after its bailout in 2008. tech stocks hit a multi-year high on Tuesday. The positive sentiment towards tech was supported by record high shares of Apple amid its WWDC conference and Microsoft’s acquisition of software coding firm GitHub. Many analysts also believe the sector is far from hitting a bubble and the high valuations are justified.

The Italian FTSE MIB lost more than 1%, following a speech by the country’s new prime minister in parliament. Political outsider Giuseppe Conte promised “radical change” in his speech and said the anti-establishment government would introduce universal basic income and crack down on immigration. The main indexes; FTSE -54.49 DAX +16.38 EURO STOXX50 -9.67

Oil broke lower during the European session falling to three-week lows. Buyers returned to N.Y. session. USOUSD finishing 61 cents higher at $65.45.

The U.S. government had asked Saudi Arabia and other major exporters to increase oil output, Bloomberg News reported. Some market participants were “a little bit slow putting the pieces together,” Kilduff said, but the Trump administration appears to be leveraging the goodwill it built with the Saudis after pulling out of the Iran nuclear deal and restoring sanctions against Tehran, Saudi Arabia’s chief regional enemy. “With the midterm elections coming up, obviously he wants lower gasoline prices, but at the same time, he’s alienating himself from the rest of the world … so is anybody, apart from Saudi Arabia, maybe going to listen, or comply or cooperate?” PVM Oil Associates strategist Tamas Varga said. Supply and current output continue to be the main market drivers.

After a soft start, the EUR bounced back into the N.Y. interbank session, following a report that the European Central Bank will debate winding down its quantitative easing program. Bloomberg News reported the ECB sees its June 14 meeting as a live one, which could end with the central bank ceasing its asset purchases.

The USD lost steam falling back to the EUR and cutting a strong lead to the CAD. The GBP had a strong session due to better than expected Services PMI. Better than expected ISM Non-Manufacturing PMI failed to hold USD demand.  “The story of U.S. data outperforming data around the world, especially in Europe, the UK, and Japan remains intact for now,” said Brad Bechtel, managing director, at Jefferies in New York.

But he noted that external factors that have influenced the dollar such as the Italian political crisis and trade tariffs have already built into the currency price. “The U.S. dollar is going to be a bit range-bound for now with a firm undertone,” said Bechtel.

The Japanese Yen retreated to most of the major’s only holding gains to the USD and AUD, traders looking past safe havens moved to the GBP and EUR spurred by more positive influences. Gold spent most of the night edging between slight gains and losses. Price found demand into the U.S. session as selling dried up. Buyers made a strong move testing 1300.51 to the upside before settling $4.43 higher at 1296.10.

Good trading from Eightcap.

Sources; CNBC All times are AEST

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