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Equity markets edge higher as US dollar retreats

A trader looking at the latest price movements on his PC screen

After the surprise of last Friday’s bumper US payrolls report, bond yields have slipped back a touch and European markets have edged higher.


The more positive tone appears to have been attributed to a positively received set of July trade numbers from China. Exports rose by 18%, well ahead of expectations, however one should be a little bit cautious about attributing this outperformance to a pickup in global economic activity.

A lot of this rebound is likely to be down to clearing backlogs, while the imports data pointed to continued weak domestic demand. This suggests that the Chinese economy remains a long way from being even close to firing on all cylinders.

Nonetheless the FTSE100 has recovered back above 7,500, and a two-month high, driven by gains across the board, with the exception of the more defensive sectors of health care and telecoms which have dragged. The DAX has also had a positive session, wiping out its Friday losses in the process.

The best performer on the UK blue-chip index is Hargreaves Lansdown after getting an upgrade from Deutsche Bank, following on from the positive reaction to its numbers at the end of last week.

Rolls-Royce shares are also higher as it looks to recoup the losses we saw in the aftermath of its H1 numbers last week.   


US markets have opened modestly higher as we start a new week, helped by a number of high-profile M&A deals, as rising confidence encourages some companies to put some of their excess cash to work.   

We’ve seen several high-profile deals announced today, specifically in healthcare. Pfizer has announced it will be paying $5.4bn for Global Blood Therapeutics, a company which specialises in blood disorders, including sickle cell anaemia, as they look to spend some of those covid-19 windfall profits.

CVS Health is also reported to be planning a bid for Signify Health, as it looks to boost its position in home health services.

Whirlpool also announced that it has reached an agreement to buy InSInkErator, which is a manufacturer of food waste units, and hot water dispensers, from Emerson Electric for $3bn.

The continued resilience in crypto prices is giving a lift to the likes of MicroStrategy, Riot Blockchain and Marathon Digital, as well as Coinbase, which received a boost last week on the back of its plans to partner with BlackRock to target institutional investors.

There’s also been a boost in some companies in the renewables sector after the new US climate bill passed through the Senate, with incentives for companies in that sector to help boost capacity in renewable electricity. Companies like First Solar, Maxeon and SunRun are all seeing decent gains in early trade.

On the downside Nvidia shares have dropped sharply after they announced that Q2 revenues were likely to come in short at $6.7bn, well below the $8.1bn forecast. They also said that gross margins were likely to fall to 43.7% from 65.1%, potentially impacting profits as well. The final numbers are due to drop on 24th August. The main culprit appears to be a big drop in gaming revenue which is down 44% from Q1, to just over $2bn.

Palantir shares are under pressure in early trading after the company, which is a key US military contractor, reported a quarterly loss, and lowered its full year guidance for 2022. Revenues for the year were expected to be $1.98bn, but were downgraded to $1.9bn, with the company losing $179m in the current quarter.  


The US dollar is broadly weaker today, giving back some of its Friday gains, with markets predominantly focussed on this week's US CPI report for July.

The Australian dollar is outperforming after the latest Chinese trade data showed that copper imports rose by 9.3% from a year before. Prices of copper have been rising over the last 3 weeks, after hitting 18-month lows in July, against a backdrop of declining inventories.   

The Japanese yen is lagging the rest due to the belief that the Bank of Japan will continue to move in the opposite direction to everyone else when it comes to monetary policy. The euro isn’t doing much better due to a belief that its ability to raise rates will be hugely constrained by concerns of pushing yields higher in the weaker members of the bloc.   


Crude oil prices have continued to languish close to six month lows, after the latest China trade numbers showed that demand in the world’s 2nd biggest economy remained weak in the month of July. With prices back near pre-Russian invasion of Ukraine levels, the weakness does pose the question as to why pump prices haven’t fallen equally as quickly. The fall in prices has been more notable in the US where gasoline prices have fallen for 50 days in a row.

Gold prices are getting a lift as US 10-year yields retreat from their Friday peaks, ahead of this week’s US CPI report.   


The USD/JPY trade continues to see elevated levels of price action, with that hawkish tone from the Federal Reserve and more upbeat employment data out of the US continuing to lend support. The pair is still holding below recent highs, but any further deterioration in the Taiwan situation could deliver fresh momentum here. Daily vol sat at 17% against 11% on the month.

Activity in commodities was limited but lumber prices moved down to lows not seen since last August as the US housing market continues to cool. Prices are now off by almost two thirds from the highs seen in the peak of the pandemic and given the looming recession, further downside could still be seen here. Daily vol on lumber sat at 156% against 144% for the month.

US renewable energy stocks continued to drift higher into the weekend break and this is a theme that’s likely to prevail following that optimism that the US build back better bill is on track to be passed into law before the midterm elections. That has been driving interest in CMC’s proprietary basket of green tech stocks, where the underlying sits at levels last seen in November and daily vol printed 71.6% against 62.7% on the month.

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