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August 24, 2017

Time (GMT) Currency Event Previous Forecast
08:30 GBP Second Estimate GDP q/q 0.3% 0.3%
08:30 GBP Prelim Business Investment q/q 0.6% 0.2%
12:30 USD Unemployment Claims 232K 237K
14:00 USD Existing Home Sales 5.52M 5.55M
Tentative USD Mortgage Delinquencies 4.71%
Day 1 ALL Jackson Hole Symposium
11:30 JPY National Core CPI y/y 0.4% 0.5%
11:30 JPY Tokyo Core CPI y/y 0.2% 0.3%

 

Global Commentary

Markets across Asia looked strong at the open Wednesday as investor risk appetite improved in response to the overnight gains on Wall Street, but caution descended later in the session, sending many Asian markets skidding.  The Nikkei in Japan finished off its daily highs, but still managed to break its five session losing streak as it ended 0.26% higher on the back of a weaker Yen.  In Australia the S&P/ASX 200 reversed early gains and fell 0.23%.  South Korea’s Kospi eked out a 0.05% gain, and in Hong Kong markets were closed as trading was halted due to the approach of Typhoon Hato.  Finally, the Shanghai Composite on mainland China edged lower by 0.08% as iron ore futures declined.

European markets were unable to follow-up the gains from the previous session, falling instead in a risk-off atmosphere.  The cautious sentiment developed after U.S. President Donald Trump indicated he is will to do anything to win funding for his border wall project; including allowing a shutdown of the Federal government.  The Stoxx Europe 600 responded by falling 0.60% on the session, while Germany’s DAX was 0.45% lower, and the CAC 40 in France fell 0.32%.  Also pressuring equities was further gains for the Euro, which the EUR/USD trading back above the 1.1800 level and the GBP/EUR dropping nearly to the 1.0800 level.  The gains for the shared currency came in response to strong preliminary PMI data from across the European Union, indicating that growth remains strong in the Eurozone.  In London, the FTSE managed a very slight 0.01% gain as the Pound slipped lower against rival currencies, although sentiment among investors remained quite weak.

Major U.S. indices ended lower on Wednesday as investor sentiment turned more negative ahead of the Jackson Hold symposium of central bankers.  The S&P 500 was off by 0.35%, the Nasdaq fell 0.30%, and the Dow lost 0.40%.  Also losing ground on investor caution ahead of Jackson Hole was the U.S. dollar, which softened broadly against rivals.  There was also risk aversion injected into markets after U.S. President Trump claimed he was willing to shut down the government in order to win funding for his controversial border wall.  In addition, Trump also warned of the possible termination of the North American Free Trade Agreement during a rally in Arizona.  Trading volumes were light, as they have been recently due to the August slump that occurs when investors head away from markets on their final summer vacations.

 

FOREX

USD/JPY – The jump in risk aversion caused by U.S. President Trump’s comments regarding funding for the government sent the safe haven Yen soaring higher against the USD on Wednesday, causing the pair to break back below the 109.00 level during the North American session.  Japanese investors will likely be in a risk-off mood when Asian markets re-open, sending the pair lower still.  If the pair closes below the 108.60 level we will likely get a more significant move lower, with a possibility that the pair will try to test 2016 lows below the 102.00 handle.

Ripple – The alternative digital currency surged higher on Wednesday, gaining more than 50% as heavy volumes came from South Korean exchanges.  The South Korean exchanges caused Bitcoin Cash to surge higher this past weekend, but with that digital currency falling out of favor this week it appears that the South Korean traders chose to move into Ripple as an alternative.

 

Commodities

Metals – Precious metals reversed their decline from the previous session and finished higher on Wednesday as the U.S. dollar declined and political risk level increased following comments on shutting down the U.S. government and exiting the North American Free Trade Agreement from U.S. President Donald Trump at an Arizona rally.  Gold for December delivery rose $3.70, or 0.3%, to settle at $1,294.70 an ounce, while September silver gained $0.064, or 0.4%, to finish at $17.046 an ounce.  Meanwhile, September palladium was up $0.65, or less than 0.1%, settling at $933 an ounce.

Oil – Crude gained on Wednesday as U.S. inventory levels fell for an eighth consecutive week, but gains were capped by U.S. production levels climbing to a more than  two year high.  October West Texas Intermediate crude tacked on $0.50, or 1.1%, to finish at $48.33 a barrel.  October Brent crude in London added $0.57, or 1.1%, to end at $52.44 a barrel.

 

Indices

Dow Industrials – The Dow fell on Wednesday, losing 0.40% as risk aversion rose among investors ahead of the Jackson Hole summit.  Leading the way lower were Dow components Johnson & Johnson, lower by 1.41%, Walt Disney, which was off by 1.24%, and Cisco Systems, which fell 1.12%.  All three have been under pressure since the second quarter earnings results were released.  In addition, the loss marked the longest streak in which the Dow hasn’t risen by at 1% or more in more than 10 years.  It has now been 84 days since the Dow last saw a daily percentage increase in excess of 1%.

FTSE 100 – London’s benchmark index edged up by 0.01% on Wednesday, extending its winning streak to a second consecutive session.  Strength from the mining sector still led the index, but a weaker Pound weighed on the broader market, offsetting gains from the likes of BHP Billiton, which was up by 1.2%, and Antofagasta, which gained 2.3%.  There was also speculation that the Brexit position of the U.K. is softening somewhat, which could mean the British government will not be able to get some of the terms that were set out in January.

Nikkei – The Japanese benchmark index was up by as much as 0.6% in early trade, but saw gains fizzling out as the Yen began to recover from an overnight dip versus the U.S. dollar.  By the close the index had pared gains, but still remained 0.26% higher, halting a five day slide as technology and insurance stocks led the way higher.  The Japanese markets are likely to remain quiet on Thursday as investors turn increasingly cautious ahead of the start of the three day Jackson Hole summit of central bankers.


Stocks

Walt Disney Co. – Shares of the entertainment and media giant fell nearly 10% after it disappointed investors in its latest revenue report.  The fall put Disney shares officially in a downtrend, but recently it looks to be trying to climb out of that hole.  It needs to get back above the $110 level to snap the downtrend, but faces resistance between $106.50 and $108 that could derail its efforts, and would likely mean that the stock will print a new low beneath the $100 a share level.  Disney continues to struggle with subscriber losses from its flagship ESPN networks, and is planning on offsetting that by creating its own streaming services – one for sports, and another for its branded content.

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