European stocks finished largely lower yesterday, despite the fact the indices were mostly in positive territory in the latter half of the morning.
US Treasury Secretary, Steven Mnuchin, said the US and China were 90% complete on the trade talks, and that was a factor in the positive run stocks enjoyed towards the end of the morning. On closer examination of what Mr Mnuchin actually said, traders began to unwind some of their long positions. The US Treasury Secretary said the word ‘were’ and traders know full well that the US-China trade spat has gotten worse since then.
The S&P 500 and the Dow Jones enjoyed a bullish move initially but volatility was lacking and they finished fractionally lower on the day. The G20 summit which kicks off tomorrow is on traders’ minds. On Saturday, the meeting between China’s Xi Jinping, and Donald Trump could determine the next big move in global equity markets. The Huawei ban and the question of intellectual property protection is likely to be a sticking point from the US side. Equity markets in Asia posted modest gains overnight as traders in the Far East seem to be hopeful ahead of the US-China trade talks.
Gold posted its first negative day in seven sessions as traders banked their profits on the impressive run that the metal has enjoyed in June. The messages from the Fed’s James Bullard and Jerome Powell on Wednesday suggested the policymakers weren’t as dovish as the markets were pricing in, and that put pressure on gold on account of the slightly firmer US dollar.
Oil surged on the back of the enormous drop in US oil stockpiles. The Energy Information Administration report showed that oil inventories plunged by over 12 million barrels, and the consensus estimate was for only a decline of 2.54 million barrels. It is worth noting the previous report showed a decline of 3.1 million barrels. Gasoline inventories fell by over 996,000 barrels, and that added to the upward move in the energy market.
Yesterday was a reminder of late 2017 as Bitcoin had a monster rally, and in terms of price action, it blew every traditional markets out of the water. It flew past $13,000 in the evening, and racked up an 18 month high.
Spanish CPI will be released at 8am (UK time) and the consensus estimate is 0.8%, which would be a slight decline from the 0.9% reading in May. At 1pm (UK time), the German CPI reading will be revealed and it is tipped to hold steady at 1.3%. The cost of living in the eurozone as a whole has been in decline recently, and it suggests that demand is dwindling, and if that is the case, it could lead to lounder calls for looser monetary policy from the European Central Bank.
Italian consumer confidence will be reported at 9am (UK time) and economists are expecting a reading of 111.3, which would be a slight dip from 111.8 registered in June. It is worth remembering the German Gfk consumer climate report fell to its lowest level in over two years yesterday, and it might mean a softer consumer climate across the currency bloc.
At 1.30pm (UK time), the final reading of the US first-quarter GDP will be announced and traders are expecting it to remain at 3.1%. The jobless claims report will be posted at the same time, and the forecast is 220,000.
EUR/USD – has been largely pushing higher since late May, and a break above 1.1400 might bring 1.1448 into play. A move back below 1.1200 might pave the way for the 1.1110 area to be retested.
GBP/USD – has been driving lower since mid-March, and if the bearish move continues it might encounter support at 1.2476 region. The 1.2800 area might act as resistance.
EUR/GBP – has rebounded for over one month, and if it holds above 0.8800, it might bring 0.9000 into play. A move to the downside might bring the 200-day moving average at 0.8781 into play.
USD/JPY – has been in a down trend since late April, and if the bearish move continues it might target the 106.00 mark. Resistance might be found at the 50-day moving average at 109.62.
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