Recent gains for global share markets reflect expectations that central banks will actively support weakening economies. Stronger than expected data undermines the case. Positive surprises in US data overnight added to concerns raised by better China numbers on Monday, and markets reversed many recent moves. The US dollar rose and shares fell as economic good news became market bad news.
Growth of 0.4% in US retail sales in June outstripped forecasts of a 0.2% gain. Although industrial production remained flat, a 0.4% jump in manufacturing undermined the idea that the trade dispute was hitting hard. Short-term interest rate markets are still pricing a July interest rate cut, but yield curves steepened as bonds sold off. Gold edged lower as investors contemplated better prospects.
In currency markets the British Pound hit two-year lows ahead of inflation data tonight, and the Euro slipped as German sentiment surveys showed a stronger than estimated decline. Bitcoin dropped below $10,000. Technical traders cited a bearish “double top” chart formation.
Goldman Sachs shares jumped 4% on a trading inspired earnings report. Seven of nine S&P500 companies beat consensus forecasts, a condition that would usually drive share market gains.
BHP’s full year production report this morning showed higher copper and iron production, although coal deliveries will decline. Outages negated the impact of cost cutting measures over the period. Upward revision of 2020 estimates may see upgrades and share price support.
Crude oil prices slumped as nervous traders dumped longs ahead of tonight’s US inventory report. This may add weight to selling in Asia Pacific markets this morning. Futures are pointing to negative starts across the board.