Here’s the morning market update from Greg McKenna at GlobalFX.
– Stocks and bond rates up, gold lower and pressure off the Aussie Dollar as traders were relatively more hopeful while all remains quiet on the Syrian front.
– On the 50th anniversary of the March on Washington and Martin Luther Kings famous speech’, it was unlikely hostilities were going to break out that quickly, but it seems Britain is certainly keen for an intervention in Syria. Perhaps the mere threat of missiles coming through the palace window might encourage the Assad regime to negotiate, but as we have seen in the past, these things tend to generate their own momentum, so the risks remain of military intervention as a consequence market dislocation.
– At the close, the Dow was 49 points higher or 0.33%, the Nasdaq up 0.40% and the S&P finished mid-range on the day, up about 5 points to 1634. Some of this rally could be squarely placed at the feet of the much weaker housing data that was released overnight and the impact on Taper talk. Pending homes sales fell 1.3% in July against expectations of a rise of 0.2%.
– Across the Atlantic in Europe – which is all that closer to the Syrian conflict and potential conflagration – stocks were less ebullient. The FTSE was 0.17% lower, the DAX fell heavily, down 1.03% and the CAC was 0.22% lower.
– The ASX will open better today and will most likely retain a bid tone until we see what Capex does to expectations about rates.
– Proving that the rally in US Treasuries and other interest rate markets the night before was pure “fear based”, 10′s sold off to 2.77% for a rise of 6 points. Bunds rose 3 points to 1.88% and Gilts were up 2 points.
– Speaking of Gilts, BoE Governor Mark Carney went a couple of steps further with the evolution of forward guidance, saying that if the market unwinds his stimulus efforts either with higher rates or indeed a stronger Pound, he would act. This will cap Sterling, which last night printed in the low 1.54 region and looks biased into the 1.53′s. Then we’ll really see how low it is going.
– On other FX markets, the Aussie came under heavy pressure yesterday, trading briefly below 89 to 0.8887 before rallying back to 0.8936 at present. Euro (1.3339) fell to 1.3303 from a high just under 1.34 yesterday. The Yen (97.627) lost a little ground after USDJPY traded down to a low of 96.83. All in all, like other markets, Forex is going to be hostage to the potential Syrian escalation for a little while yet with Aussie and Yen the obvious loser and winner if something more serious breaks out.
– On Commodity markets, Nymex crude rallied up above $112 bbl yesterday before settling back overnight as tensions eased a little and there was a big build in US Crude stocks last week. Gold finally hit the top of the trend channel and reversed a little from its $1432 high (MT$ Terms) and is back at 1417 this morning. Silver was down 1.05%, Dr Copper fell 3 cents to $3.32 lbs. The Ags can’t help themselves, but were relatively quiet overnight with only Soybeans moving more than 1%.
– On the data front today we see Korean current account, Japanese retail trade and foreign investment, new home sales and private capital expenditure in Australia (HUGE for the AUD and interest rate futures) before a raft of European data, the most important of which is German unemployment and CPI. In the US, it is the next release of GDP for Q2 and then initial jobless claims, personal consumption and a speech from Fed President Bullard.
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