Despite global risk mounting with hurdles abound, US equity markets managed to eek out small wins after spending most of the session struggling in the red. The major indexes struggled to find traction as the ongoing slowdown in global growth data, escalating trade war rhetoric, and a nervy Brexit meeting around the corner continued to weigh on investor sentiment. But it was the impervious FANG technology stocks to the rescue, led by Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL) and Google parent Alphabet (NASDAQ:GOOGL) climbing more than 1%.that lifted investors spirits off the mat yet again.
And despite the reluctant rally, the unyielding US economic power plant continues to churn out robust economic data and yet again sets the global high bar. The US economy has been on a relentless run through 2018, and the overnight ISM Manufacturing didn’t fail: the headline number defied gravity, coming in at 60.2 (vs 58.5 forecast)
But with darkening skies rolling in and the perfect storm -cloud of risk accumulation brewing, it’s been a robust start to the week for the US dollar as investors look for refuge ahead of the July 4th US holiday.
Oil market
Oil prices have shaded back to the downside as increased market chatter suggests higher production numbers from Russia and Saudi Arabia as more estimates of June output circulate. But the market remains supported by a production outage in Libya and the overhang from recent US supply data which suggest US supplies are running very tight.
The Libyan power struggle between the Tripoli-based National Oil Corp. that is internationally recognised and controls the export sales and the NOC-East group based in Benghazi that currently has physical control of the infrastructure is particularly disruptor removing 850,000 barrels from the supply chain and all but wipes out the planned increase from the OPEC+ coalition.
Again this disruption merely highlights just how tight this global supply and demand balancing act is.
Gold market
All that glitters positively isn’t Gold as the not so shiny metal is plumbing 2018 lows and moving within striking distance of the critical December lows of 1236.50. Its all about the USD demand rather than any news specific as the markets insatiable demand for USD to ride out yet another building perfect storm has the USD glittering. As such Gold is especially vulnerable in such an environment
Currency market
EUR: German CSU leader says the migrations clash with Merkel resolved, which caused the EUR/USD to knee-jerk higher to 1.1648
JPY: Given the market continues to slip up on virtually every other headline, USD/JPY does look high but remains stuck between general USD strength and risk-off sentiment.
AUD: China economic engine is slowing down as the Chinese authorities remain committed to financial deleveraging.Should continue to weigh negatively on the AUD
Asian Markets
Not a great start to the second half of year for regional risk assets as the USD continues to grind higher against the local basket of currencies.
CNH: The market is looking beyond trade wars and checking under the hood to see if its a case of adding oil or the mainland economic engine is in need of a rebuild. Beyond the potential credit- crunch mainland authorities have been dealing with, the latest run of economic data and indeed this weekends PMI’s didn’t help matters. With an asset bubble and waning growth momentum staring traders in the face, USDCNH has been in huge demand since yesterday open. But keep in mind, a PBoC advisor said last week 6.70 is a level for watch watchers so this could this level could be a line in the sand which may prompt authorities to take action. Indeed Big Trouble in Big China.
MYR: Very much a locally driven markets in the absence of offshore inflows which have the currency and bond markets trading in very tight ranges. While Oil prices remain supportive, Asia EM sentiment should continue to dictate the price action.