US stockmarkets rallied on Monday, underpinned by tech sector merger activity (Nvidia (+6%) bought Arm Holdings) and by some positive vaccine news, with AstraZeneca announcing that it has resumed its Covid-19 vaccine trials in the UK, prompting some fresh buying of health stocks. Also underpinning the markets on Monday was the announcement by Oracle, confirming that it is part of the proposal submitted by ByteDance (owner of Tiktok) to the US Treasury Department, in which Oracle will serve as the “trusted technology provider”. In return, the Treasury said that it will review the agreement in order to revamp TikTok’s US operations, with the aim of avoiding a ban because of its Chinese ownership.
The FX markets saw the US$ end a little lower against all the majors, albeit without breaking out of their recent ranges, but weighed down somewhat by diminishing defensive needs of traders as the renewed vaccine hopes for a Covid cure fueled risk-friendly sentiment. The Euro is mildly higher, led by Sterling, which has seen traders take some profits on short positions ahead of a string of UK data, Thursday’s BOE Meeting and ongoing Brexit developments. US$Jpy broke below last week’s low – and the daily cloud – base amid the broader dollar weakness, as well as the transition of Japan’s leadership to the new PM, Yoshihide Suga, on Wednesday which is seen continuing outgoing PM Abe’s policies. The Aud and the Kiwi both remained underpinned in choppy trade ahead of today’s RBA Minutes, which will be the main economic event in Asia.
The precious metals put on some minor gains, underpinned by the softer US$, while Iron Ore remains particularly strong (US$130 per tonne), which will continue to underpin the Aud$. Oil was a little lower on Monday, albeit without trading down to the lows of last week, after some negative news from OPEC on the outlook for global demand weighed on prices. In its monthly report OPEC cut its forecast for global oil demand this year by another 400,000 barrels per day to an average 90.2 million bpd, weighed down by the struggle to recover from the Covid-19 pandemic.
In terms of data, the Eurozone July industrial production rose by +4.1%mm (est. 4.2%mm).
Tuesday will have a fair bit on the agenda, starting in NZ with the release of the August REINZ House Price Index and the WBC NZ Consumer Survey for Q3 (exp 102.4; Previous 97.2), and from Australia, the RBA Minutes. These are unlikely to contain any surprise although the Governor, Philip Lowe, did note at the last meeting that the Bank will continue to consider further monetary measures in order to support an economic recovery. In other words, they are looking at easing policy, but without using negative rates, which they have already said will not be on the agenda.
The RBA Minutes will be followed by the August China Retail Sales (exp -0.1%yy), Fixed Asset Investment (exp –0.4%yy) & Industrial Production (exp +5.1%yy) figures for August. Europe will feature the UK August Unemployment (exp 3.9%, CC +100K), and the German/EU ZEW Economic Sentiment Survey, which are expected to be marked down quite aggressively from the previous months outcome (exp EU Sentiment; 62.8, prior 62: German Sentiment 58, prior 71.5), while the US will look to the August Capacity Utilisation (exp 71.2%) and Industrial Production (exp +0.8%) for guidance (both August). The New York State Empire Mfg Index, API Weekly Crude Oil Stock Inventory and Global Dairy Trade Index will also be released through the session. Have a good day.
Economic data highlights will include:
Tue: NZ REINZ House Price Index, WBC Consumer Survey, RBA Minutes, House Price Index, China Retail Sales, Industrial Production, Fixed Asset Investment, NBS Press Conference, UK Unemployment, German/EU ZEW Economic Sentiment Survey, US New York State Empire Mfg Index, Import/Export Index, Industrial Production, Capacity Utilisation API Weekly Crude Oil Stock Inventory, Global Dairy Trade Index
Market moves, in brief:
FX: DXY 93.07 (-0.21%)
Bonds: US10Y; 0.674% (+1.48%), German 10Y; -0.481% (-0.21%), UK 10Y; 0.195% (+7.64%), Australian 10Y; 0.879% (-4.47%), NZ 10Y; 0.607% (-1.29 %), China 10Y; 3.160% (+0.53%)
Stock Indices: DJI; +1.18%, S+P; +1.28%, NASDAQ; +1.87%, EUStoxx50; +0.03%, FTSE100; -0.10%, Shanghai Composite; +0.57%, ASX200SPI: 0.00%
Metals: Gold $1956 oz (+0.82%), Silver $27.13 oz (+1.46%), Copper $3.0665 lb (+0.86%), Iron Ore $129.52 per tonne (NYMEX) (+0.09%),
Oil: WTI $37.23 pb (-0.17%)
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Trend Table: September 15, 2020
With most pairs treading water ahead of the Fed I am standing aside for now as I think slow moving range trading conditions will largely dominate until Wednesday/Thursday.
US$Jpy may be about to break out of its recent consolidation – see chart below.
|1 Hour||Turning Neutral||Possible Basing Formation||Neutral – Turning Lower?||Turning Neutral||Turning Neutral||Turning Neutral|
|4 Hour||Neutral – Turning Higher?||Neutral – Turning Lower?||Turning Higher||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Day||Turning Neutral||Turning Neutral||Turning Lower?||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Week||Possible Topping Formation||Turning Neutral||Neutral – Turning Lower?||Possible Basing Formation||Up||Possible Topping Formation|
|1 Hour||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Neutral – Turning Higher?||Neutral – Turning Higher?||Turning Neutral|
|4 Hour||Neutral – Turning Lower?||Turning Higher||Neutral – Turning Higher?||Turning Neutral||Turning Neutral||Turning Higher|
|1 Day||Neutral – Turning Higher?||Turning Lower||Neutral||Turning Neutral||Turning Lower?||Neutral – Turning Lower?|
|1 Week||Possible Basing Formation||Overbought – Turning Lower?||Turning Neutral||Overbought – Turning Lower?||Up – Overbought||Turning Neutral|
|1 Hour||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Turning Neutral||Neutral – Turning Lower?||Possible Basing Formation|
|4 Hour||Turning Neutral||Turning Lower||Turning Higher||Turning Neutral||Turning Neutral||Neutral – Turning Lower?|
|1 Day||Turning Lower?||Neutral – Turning Higher?||Turning Lower||Turning Neutral||Turning Neutral||Turning Neutral|
|1 Week||Turning Higher||Turning Neutral||Turning Neutral||Possible Topping Formation||Turning Neutral||Possible Topping Formation|
US$Jpy – Daily