While a new all-time high for the Dow on the last day of the month would often be cause for celebration, bad breadth and a lack of confirmation from other indices may be seen as cause for trepidation. Only one index confirmed the breakout with a new high of its own, the Hang Seng, and on top of that, the NASDAQ 100, Nikkei and Dax continue to send out bearish signs and look vulnerable. On top of this, breadth remains a problem with only four stocks accounting for most of the Dow’s gain; Boeing, Home Depot, Chevron and JPMorgan Chase.
Today’s US economic data was mixed. Chicago PMI fell off even more sharply from last month than the street had feared, although pending home sales and the Dallas Fed report were a bit better than expected. The USD fell again on this news, particularly against EUR, GBP and JPY. Gold held steady despite growing political turmoil in North Korea, Venezuela and elsewhere, and the Yen’s mixed performance against other majors suggests currency traders remain complacent.
The RBA is holding its monthly meeting today. While no change is expected to the 1.50% cash rate, the statement could hold a number of surprises which may move the markets. AUD has moved up several pennies in the last month, and appears to be sitting just above the $0.8000 level trying to avoid the ire of Governor Lowe. It’s possible the RBA could try to talk the dollar back down in the statement. Comments on the potential direction of Australian interest rates may also attract attention as the big jump in Melbourne Institute inflation to 2.7% and the Bank of Canada having raised rates at its last meeting could increase pressure on Governor Lowe to take a more hawkish tone this time around.
Tuesday brings manufacturing PMI reports from around the world, the first look at the July economy, along with US construction spending. After a one-day break, earnings season also picks up again with Apple reporting results after the US close.
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