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July 20, 2017

Time (GMT) Currency Event Previous Forecast
01:30 AUD Employment Change 42.0K 14.4K
01:30 AUD Unemployment Rate 5.5% 5.6%
Tentative JPY Monetary Policy Statement
Tentative JPY BOJ Outlook Report
Tentative JPY BOJ Policy Rate -0.10% -0.10%
06:30 JPY BOJ Press Conference
08:30 GBP Retail Sales m/m -1.2% 0.4%
11:45 EUR Minimum Bid Rate 0.00% 0.00%
12:30 EUR ECB Press Conference
12:30 USD Unemployment Claims 247K 245K
12:30 USD Philly Fed Manufacturing Index 27.6 23.4

 

Global Commentary

Asian markets struggled for direction early in the session as investors prepared for monetary policy statements from Japan and the European Union on Thursday. By late in the day the tone was decidedly more positive however, with markets across the region finishing broadly higher.  Mainland China’s Shanghai Composite had the best performance, surging 1.42% higher, with the Hang Seng in Hong Kong extending its own rally and adding 0.56%.  In Japan, where equities have suffered recently due to a stronger Yen, the Nikkei managed to turn higher by the close to finish up by 0.10%.  Australia’s S&P/ASX 200 posted a 0.79%, mostly on strength from the banking sector following news that capital requirements for banks would be raised.  South Korea’s Kospi had a modest 0.16% gain, and in Singapore the Straits Times Index rose 0.57% by the close.  In Europe, markets got a boost from a slate of good earnings results from across the Eurozone.  The pan-European Stoxx Europe 600 ended the day 0.77% higher, with the German DAX adding 0.17%, and the CAC 40 in France advancing 0.83%.  London’s FTSE posted a 0.55% gain as well, even though the mining sector was notably sluggish.  Markets in the U.S. got off to a somewhat rocky start after bell weather blue chip stock IBM reported disappointing earnings results, however investor sentiment improved later and markets ended the session broadly higher.  At the close, the S&P 500 was up by 0.53%, the Dow gained 0.26%, and the Nasdaq advanced 0.64%.

 

FOREX

EUR – The Euro pulled back off the 14 month high against the U.S. dollar Wednesday, and finished the day broadly softer in general as traders took some profits ahead of the European Central Bank monetary policy decision due Thursday.

GBP – The Pound remained weak for the third session in a row Wednesday, ending the day softer versus the USD and Yen, but rising against the Euro.

USD – The USD stabilized on Wednesday, firming against the Euro and Pound, and even though it was softer versus the Yen, it ended the session well off its daily lows versus the Japanese currency.

JPY – The Yen firmed broadly on Wednesday ahead of the Japanese central bank monetary policy decision.

TRY – The Lira finished the day firmer against most major currencies on Wednesday, although it was softer versus the Yen as the Japanese currency was exceptionally strong on Wednesday.

RUB – The Ruble benefitted from the uptick in risk appetite and the continued rally in crude, finishing the session broadly firmer versus major currencies.

 

Commodities

Metals – Precious metals gained for the fourth session in a row Wednesday, pulling out of negative territory late in the session.  August gold edged up by $0.10 to settle at $1,242.00 an ounce.  September silver rose $0.029, or 0.2%, to finish at $16.297 an ounce.

Oil – Crude gained on Wednesday after the U.S. reported a sizeable drop in crude inventory levels for the third week in a row.  The August contract for West Texas Intermediate crude tacked on $0.72, or 1.6%, to finish at $47.12 a barrel.

 

Indices

S&P500 – The S&P got off to a rocky start Wednesday morning as investors digested the latest earnings reports.  By late morning the markets settled down and the S&P began a steady climb higher.  At the close the index had added 0.54% as it closed at its session high, and at a new record closing level.

DAX – The DAX opened higher, but was soon flirting with unchanged levels.  The index had a choppy session, bouncing off the unchanged line several times before getting a boost late in the day by strength from Wall Street.  The final hour of trading saw the DAX dropping off its session highs and finishing with a modest 0.17% gain.

Nikkei – The Nikkei began the day in negative territory, but climbed towards unchanged levels throughout the morning.  The market retreated in early afternoon trade, dipping back into the red, but then recovering leading into the close for a modest 0.10% gain on the session.


Stocks

Morgan Stanley – The investment banking group was hurt by weak earnings from Goldman Sachs, JPMorgan Chase and Citigroup, but Morgan Stanley rectified that on Wednesday as it reported revenues and earnings that beat expectations.  The strong second quarter results came as a result of the company’s growing wealth management business, and investors rewarded the stock with a 3.28% pop higher for the day.  This puts the stock less than $1 below its 52 week high of $47.33 a share, and with the strong momentum generated by the earnings we believe that the stock can break through that level moving forward.  Additionally it would put the stock back at levels not seen since the 2008 financial crisis.  Results were fairly rosy for the investment bank, and given its large lending business any uptick in interest rates will also help the bottom line further.  In short, we like Morgan Stanley long term, and barring a bear market think that the stock can continue climbing higher through the end of the year and into 2018.

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