Detailed market overview

Mihir Kapadia – CEO and Founder of Sun Global Investments, has said:   

The US dollar fell again as fresh problems in the Trump White House pointed to growing disarray. The dollar Index has fallen through 2017, though the Trump administration will not be
too unhappy about this, as it improves the country’s export competitiveness. However, this has clearly been a negative factor for overseas investors in US assets, increasing their costs or reducing their profits . The next key factor for the US dollar will be the US July non-farms payrolls report which will be released on Friday. 

In the U.S. markets, the Dow industrials finished at an all-time high on Monday, but the S&P and Nasdaq were held by losses in Technology Stocks. The highflying FANG stocks were all down between 2% and 3%. The fall in technology stocks may be due to end-month profit taking by Hedge Funds and others after the tech-Heavy Nasdaq had risen an almost unprecedented 10 days in a row in late July. The next key factor for these stocks will be Apple results which are due today.    

In overnight trading in Asia, Stock indices are mostly higher on the first day of August. South Korea led the way with Kospi stock benchmark currently up 0.84% and a near 20% gain in 2017 as it has hit a series of record highs.Australian stocks were also strong today boosted by continuing gains in commodity prices. The S&P/ASX 200 is currently 0.91% higher with miners and oil firms gaining more than 1%. There are more modest gains in indices inChina, Japan and Hong Kong while Indian indices are broadly flat. 

Global bonds yields have risen a little in the last two days. The yield on the 10-year U.S. Treasury Bond is 1bp higher at  2.301%. Yields in most government bond markets in Europe are also slightly high.

A private survey of China’s factory activity rose for a second straight month in July and hit its highest level in four months. This is in contrast to official data which showed renewed weakness in production and demand. The Caixin China manufacturing purchasing managers’ index rose to 51.1 in July from 50.4 in June. Sub-indexes of output and new orders expanded at its fastest pace since February, thanks to a solid upturn in new export sales. 

South Korea’s headline consumer-price index rose 2.2% from a year earlier in July, with inflation accelerating at a faster pace than expected. The July reading was higher than the previous month’s 1.9% gain and above the forecast 2.0%. 

is trading higher in Asia with the WTI rising decisively above $50 a barrel for the first time in two months, lifted by growing optimism that the supply in the market is tightening. Data in the past two weeks has indicated a trend toward declining US. inventories and slowing production. WTI is currently 0.26% higher at $50.29 at the time of writing.

The dollar has come under increased strength recently following a string of poor US data. With the likelihood of another US rate hike before the end of the year diminishing, investors are not being encouraged by sustained political uncertainty due to policy. The greenback started to decline after the release of US data, with the Chicago PMI down from 65.7 to 58.9 in July ,its lowest level in three months, while Pending Home Sales increased in June by 1.5% (up 0.7% y/y).

Sterling hit a 10 month high yesterday, as investors anticipate this week’s Bank of England “Super Thursday” for a steer on whether record-low interest rates could soon be lifted for the first time in more than a decade. The pound has recently been supported by expectations that the bank might finally be ready for a hike further to a series of hawkish comments from policymakers, although Governor Mark Carney and most of his top officials seem set to remain in wait-and-see mode. Data already indicates Britain’s housing market lost a small amount of momentum last month, as mortgage approvals dropped to a nine-month low and unsecured lending growth slowed further, which had little impact on the currency. The numbers added to a run of weak data which, along with deep uncertainty about the impact of Brexit on the economy, have cooled the speculation that the BoE is poised to start removing its crisis-level stimulus. Sterling has now recovered almost half of its post-Brexit-vote falls against the dollar, down 12 percent compared with as much as 23.5 percent during a “flash crash” in October.
We do not expect a rate increase especially as Kirstin Forbes who was one of the three members who voted for a rate increase last time is longer a member of the MPC.

The Euro rallied on Monday on month-end portfolio adjustments and expectations for a more hawkish European Central Bank. A flash estimate of Eurozone inflation showed that consumer price rises in July were level with the previous month, standing stable at 1.3 percent and in line with forecasts.

The Czech Republic may kick off Europe’s monetary-tightening cycle this week, jumping ahead of its peers after three years of stimulus fuelled price growth that’s sputtered on the rest of the continent. Economists are almost evenly split, saying the Czech National Bank would raise its benchmark to 0.25 percent at its Aug. 3 meeting from a record-low 0.05 percent – the rest predicted no change. If there’s a hike, it will be the first in more than nine years, and it would boost the appeal of koruna assets as other rate setters stay put and the European Central Bank holds off on announcing curbs to its quantitative-easing program until fall.”