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September 19, 2017

Time (GMT) Currency Event Previous Forecast
01:30 AUD Monetary Policy Meeting Minutes
09:00 EUR German ZEW Economic Sentiment 10.0 12.3
12:30 CAD Manufacturing Sales m/m -1.8% -1.4%
12:30 USD Building Permits 1.23M 1.22M
12:30 USD Current Account -117B -113B
12:30 USD Housing Starts 1.16M 1.18M
12:30 USD Import Prices m/m 0.1% 0.4%

 

Global Commentary

Asian investors brushed aside the potential for escalating tensions with North Korea for the time being, sending markets broadly higher across Asia on Monday. The gains began right at the start of trading as investors chose to follow Wall Street’s strong lead from Friday. South Korea’s Kospi was the strongest performer, adding 1.35%, although Hong Kong’s Hang Seng wasn’t far behind with a 1.27% gain. Australia’s S&P/ASX 200 ended the day 0.45% higher, supported by gains from the banks, while weakness from mining shares kept a cap on the market. Japan’s Nikkei remained unchanged as Japanese markets were closed for a public holiday.

European markets moved higher on Monday as geopolitical tensions ebbed, with investors putting aside their fears over North Korean escalation of aggression. Financial shares did well, as did the industrial sector, with the Stoxx Europe 600 ending the day 0.33% higher. In addition, the DAX in Germany advanced 0.32%, while the CAC 40 in France added 0.30%. While North Korean tension may remain a distraction for markets, investors seem content to ignore the situation for now. London’s FTSE broke a four session losing streak, gaining 0.52% as the Pound dropped versus the USD following comments from Bank of England governor Mark Carney that refuted speculation that the BoE would be raising interest rates sometime later this year.

Markets in the U.S. followed the global rally, gaining broadly, although they did finish off their daily highs as the technology and biotech sectors sold off late in the session. Still, the Dow finished at a record high for the 40th time this year as it tacked on 0.28% thanks to strength from the financial and industrial sectors. The S&P 500 also finished at a new record high, adding a more modest 0.15%, while the Nasdaq rose just 0.10% due to the tech selloff late in the day. The market could turn a bit more cautious in the next day or two as the two-day Federal Reserve monetary policy meeting kicks off Tuesday, although there are no expectations for any policy change from the Fed.

 

FOREX

Bitcoin – After the massive selloff late last week that took Bitcoin briefly to the $3,000 level, the cryptocurrency has been making a recovery early this week. Bitcoin was up 11% by the end of the trading day Monday, although it does seem to be hitting some resistance as it tries to get through the $4,000 level. Trading volumes have been lighter than normal, no doubt due to all of the sellers leaving the market. This leaves the way clear for additional gains, but it appears traders are a bit skittish after the mini-crash and it could take a few days before we get a confirmed uptrend in the cryptocurrency.

USD/JPY – The lack of any additional aggressive behavior from North Korea over the weekend drained a good bit of risk aversion from markets, sending this pair up by 34 pips as it gapped higher at the open. With the gap taking the pair above the 111.00 level traders seemed encouraged to sell more Yen and buy more USD, and the pair continued to climb throughout the day, settling well above the 111.00 level and paving the way for further gains, with the pair likely to test the 112.00 level on Tuesday.

 

Commodities

Metals – Precious metals continued falling Monday as the risk-on sentiment in markets kept traders out of haven assets. Gold for December delivery declined for the fifth time in the past six sessions, falling $14.40, or 1.1%, to settle at $1,310.80 an ounce, while December silver dropped $0.545, or 3.1%, to finish at $17.156 an ounce, its lowest level in more than three weeks. In other metals trading, December copper added $0.02, or 0.7%, to end at $2.969 a pound. October platinum finished at $961.10 an ounce, down $10.70, or 1.1%, while December palladium added $8.70, or 0.9%, to settle at $930.45 an ounce.

Oil – Crude finished Monday little changed as traders are playing a tug-of-war between rising U.S. inventory levels, and falling U.S. rig counts. The resistance for U.S. WTI crude at the $50 level is also becoming increasingly robust the longer it takes for the contract to top that level. October West Texas Intermediate crude tacked on $0.02 to settle at $49.91 a barrel, while November Brent crude the global oil benchmark, lost $0.14, or 0.3%, to $55.48 a barrel.

 

Indices

Dow Industrials – The Dow rose 0.28% on Monday, notching its 40th record close of the year, with gains supported by a rally in the financial and industrial sectors. Leading the charge higher were shares of Caterpillar and General Electric, which were 2% and 2.2% higher respectively. Investor confidence has been growing, and the lack of increased aggression from North Korea has allowed risk appetite to return to markets, which could give equities a strong rally heading into the final quarter of 2017.

DAX – Germany’s DAX climbed to a one-month high on Monday, with gains led by the technology, industrial and food & beverage sectors. While the index dropped off its daily high, it still finished the day with a 0.32% gain as investors ignored North Korean threats and a rising Euro. One positive for investors on Monday was Eurozone inflation, which came in as expected at 1.5% for August. Overall the German market remains bullish, and should continue to gain barring any negative geopolitical events.

Hang Seng Index – Hong Kong’s benchmark index powered to a 27-month high on Monday, slicing through the 28,000 level as Chinese property developers and brokerages rose on hopes for more market-friendly policies from mainland China. Shares of Tencent, the most heavily weighted Hang Seng component, also rose to a new record high as it added 2.1% on Monday, giving it a gain of 82.4% year-to-date. Shares of Apple suppliers also rebounded from their slump of the previous week.


Stocks

Caterpillar – Shares of the industrial equipment manufacturer began their rally at the beginning of the summer, while most of the market was in the doldrums, and the gains have continued until now, with the stock coming from a low under $95 a share to Monday’s record close above $121 a share. And now analysts at UBS are forecasting growth in the mining and construction sector for the U.S., which should serve to increase Caterpillar’s business and share price even further. UBS believes business conditions are as strong as ever for Caterpillar, and have increased their price target to $140 a share, which might even be a low estimate if their call on the improvement in construction and mining spending proves correct.

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