US equities have closed higher, getting a late push into the close after a post-meeting press conference with President Trump and the EU’s Juncker, the bonhomie between the two also evident earlier as the talks began with flattering comments from each. The USD has been softer pretty much across the board and softened further after the rose garden presser, with late-session support for the Euro and others as stocks have rallied into the close. Yields pushed up too. After dipping after yesterday’s CPI, the AUD was been brought along for the ride overnight and sits this morning around 0.7450.
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For anyone following my Platinum Service it made 142 points yesterday and is now ahead by 1075 points for July, having made 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, 879 points in January and 946 points in December. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Adding earlier to risk on sentiment was a report in the Washington Post that had earlier reported the US Commerce Department was considering a range of options to address Trump’s concern about car imports, even though it was understood that Trump’s advisors believed his preference was to use tariffs. Meanwhile, EU Trade Commissioner Malmstrom warned that the EU was preparing a list of US goods worth $20 billion for retaliatory tariffs, if Trump goes down the route of imposing auto tariffs.
The rise in equities came despite sharp falls in US car manufacturers GM and Fiat Chrysler after both companies downgraded their earnings estimates for the remainder of the year. GM cited higher raw material costs, and in particular the higher cost of steel and aluminium as a result of tariffs, for its profit downgrade.
It was the post meeting press conference that provided a further late session spark to risk appetite. Earlier press backgrounding had suggested that the Europeans were giving concessions on lowering industrial tariffs and buying more US soybeans among other concessions. The rose garden press conference came with statements that they will work to resolve steel and aluminium and retaliatory tariffs, a new phase in US-EU relations, a ‘’close relationship’’, ‘’strong trade relations’’, and more. They stated that they will work together toward zero tariffs, zero non-tariff barriers, zero subsidies on non-auto industrial goods. That is the sort of news that is music to the market’s ears, with little doubt that this is also tilted from the US across the Pacific to China.
Economics
The main three pieces of fundamental news were a weaker than expected US Home Sales Report for June (suggesting activity might be fading), a somewhat stronger than expected German IFO, but the US EIA reporting a much larger than expected drawdown in US crude inventories did impact the market. The still pretty upbeat nature of the German Ifo survey added to signs from Tuesday’s PMIs that the German economy is still making solid growth progress and came notwithstanding the potentially destabilising trade war/tariff news and the possibility of the US imposing auto tariffs. It is also some growth comfort ahead of today’s ECB meeting.
Currencies
The AUD initially softened yesterday after headline CPI inflation came in marginally lower than expectations. Both the RBA’s core measures of inflation met expectations (1.9% y/y%) and with inflation still bumping along below the bottom of the 2-3% target band and the unemployment still pointing to some spare capacity, the market came to the conclusion that the RBA remains firmly on hold for an extended period.
The AUD reversed course thought the afternoon session and overnight, the market paying more attention to the growth-supportive nature of targeted easing measures in China and helped by the positive spill-over from the Juncker-Trump talks. Also, the PBOC was reported to have eased counter-cyclical capital requirements for banks in an attempt to boost lending.
Bonds
Bond yields were reasonably stable for the second day running but yields pushed higher late session from the US-EU trade news. The 10 year Treasury yield is up 2.6bps to 2.9746%, the 2s-10s yield curve back out to 31bps. There were limited moves in Japanese government bonds ahead of the Bank of Japan’s Monetary Policy meeting next week.
Commodities
The larger news on the commodity front was a lift in oil prices, WTI up $0.74 to $69.26/bbl after a 6.147mbbl draw in US crude inventories, much larger than the 2.234b expected drawdown.
This morning on the Economic Front we have German GFK Consumer Confidence at 7.00 am. This is followed at 12.45 pm by the ECB Meeting and the Dragi press conference at 1.30 pm. Also at 1.30 pm we have US Wholesale Inventories, Trade Balance, Durable Goods Orders and the Weekly Jobless Claims. Finally at 4.00 pm we have the Kansas Fed Manufacturing Index.
September S&P 500
The relentless move higher in the S&P continued with the market just missing my 2809 buy level with a 2814 low pring before rallying to a high of 2847. Weak earnings from Facebook knocked their shares off 20% which saw both the NASDAQ and S&P open weaker on the Re-open of the Futures Market. I am still flat and today I will now raise my buy level to 2818/2826 with a 2810 stop. I still do not want to be short the S&P at this time.
EUR/USD
For the second consecutive trading session the Euro again juts missed my 1.1640 buy level before rallying. I am still flat and ahead of the ECB Meeting this afternoon I am not going to chase this market higher and I will again leave my buy level unchanged from 1.1600/1.1640 with the same 1.1565 stop.
September Dollar Index
I am still flat the Dollar and today I will again lower my buy level slightly to 93.20/93.60 with a 92.80 stop.
September DAX
My DAX plan worked well with the market selling off aggressively to my 12545 buy level. As I wanted to bank some points for yesterday’s session I covered this long position way too early at my revised 12562 T/P level and I am now flat. Subsequently the DAX rallied back above the 12700 following the Trump/Juncker press conference. Today I will again look to buy the DAX on any dip lower to 12490/12565 with a 12430 stop.
September FTSE
The FTSE market struggled all day yesterday with the market trading lower to my 7590 buy level. Again as I did not like the price action I covered this position at my revised 7600 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 7530/7570 with a 7495 stop.
Dow Rolling Contract
The Dow which just missed my 25080 buy level with a 25109 low print rallied over 300 points into the close. This move higher saw me go short the market in small size at 25430. I am still short and today I will now only add to this position on any move higher to 25600 with a higher 25670 stop. I will now raise my T/P level on this position to 25370 and if my second sell level is filled I will then raise my T/P level to 25490. If any of the above levels are hit I will be back with a new update for my Platinum Members.
September NASDAQ
My NASDAQ plan worked very well yesterday with the market trading higher to my 7515 sell level. Subsequently the miss on earnings from Facebook knocked 20% off their share price in after- hours trading. When the Futures market re-opened the NASDAQ was trading at 7410 which generated a huge 115 point profit on my 7515 short position and I am now flat. Today I will again look to sell the market on any rally higher to 7500/7540 with a 7575 stop. Meanwhile I will leave my buy level unchanged at 7300/7340 with the same 7255 stop.
September BUND
No change as my only interest in selling the Bund is still on a rally higher to 162.70/163.10 with a 163.45 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1212/1220 with a higher 1204 stop.
Silver Rolling Contract
Silver rallied to my revised 15.60 T/P level on my latest 15.50 long position and I am now flat. Today I will again look to buy the market on any dip lower to 15.20/15.50 with a 14.90 stop and a 15.75 T/P level. If any of the above prices are hit I will be back with a new update for my Platinum Members.
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