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August 21, 2017

Time (GMT) Currency Event Previous Forecast
04:30 JPY All Industries Activity m/m -0.9% 0.5%
08:30 GBP Public Sector Net Borrowing 6.3B 0.4B
Tentative EUR German Buba Monthly Report
12:30 CAD Wholesale Sales m/m 0.9% 0.6%
21st-25th USD Mortgage Delinquencies 4.71%

 

Global Commentary

Overnight weakness on Wall Street and deteriorating investor confidence following the terror attack in Barcelona and signs of turmoil in the Trump administration sent Asian markets broadly lower on Friday.  Japan’s Nikkei led the way lower, falling 1.18% as it also came under pressure from a stronger Yen.  In Hong Kong, the Hang Seng finished the day 1.08% lower due to weakness from technology and financial shares.  Australia’s S&P/ASX 200 found some support from mining shares, but falling financial shares led to a 0.56% loss for the benchmark Australian index.  In South Korea the Kospi had a modest 0.14% loss, while mainland China’s Shanghai Composite bucked the falling trend by edging higher by 0.02%.

European investors turned increasingly cautious in the wake of the Barcelona terror attack, leading to broad based losses for European equities.  The pan-European Stoxx Europe 600 was 0.71% lower, with airline and hotel stocks bearing the brunt of the selloff as investors saw the terror attacks as a negative weight on tourism across the region.  In Germany the DAX had a more modest loss of 0.31%, but the CAC 40 in France fell 0.64%.  Spain’s IBEX 35 was 0.56% lower in the wake of the terror attack.  The drop in travel related stocks put heavy pressure on London’s FTSE 100, with the U.K. benchmark index finishing the day 0.86% lower, and trimming its weekly advance to just 0.2%.

U.S. markets began the day depressed, but got a reprieve mid-day as investor sentiment inexplicably turned positive following news that White House advisor Steve Bannon would be released.  The rally was short-lived however, with major indices poking into positive territory, only to drop back in the afternoon.  At the close the Nasdaq eased lower by 0.09%, while the S&P 500 was 0.18% lower and the Dow lost 0.35%.  It was the fourth consecutive losing week for the Nasdaq, marking its longest weekly losing streak since May 2016.  The losses were broad based, with eight of the eleven S&P sectors ending in the red.  The energy sector gained on a strong rally in crude, and the defensive utilities sector was higher as well.

 

FOREX

Bitcoin Cash – While everyone has been focusing on Bitcoin’s rise to record highs above $4,000, it’s close cousing Bitcoin Cash has been making astounding gains itself.  Since its introduction on August 1, Bitcoin Cash has gained 374%.  And on Saturday the cryptocurrency soared higher by 86%, nearly hitting $1,000 before settling back modestly.  The surge higher came after news that miners had successfully mined an eight megabyte Bitcoin Cash block.  Larger block sizes translate to faster transaction speed, which is exactly why Bitcoin Cash was split off from Bitcoin, which currently yields just 1 megabyte blocks.  Bitcoin Cash is now considered to be much more profitable for cryptocurrency miners, which should lead to increased interest in the digital currency, and correspondingly higher prices.

USD/JPY – The pair sliced down below the 109.00 level in the same manner it did the previous Friday, only to once again find support as it reached the 108.50 level and snap back near starting levels.  While the pair was modestly lower for the day, it was a small drop compared with the large daily range traced by the pair.  It does look like the pair wants to rise, so if we could get a break in the constant geopolitical risks plaguing markets we might see the pair recover back above the 110.00 level.

 

Commodities

Metals – Precious metals rallied strongly on Friday as risk aversion climbed in markets.  The gains didn’t hold however as both gold and silver fell sharply in afternoon trade.  There was no discernable catalyst for the fall, other than the possibility of traders taking profits as gold hit $1,300 an ounce for the first time this year.  December gold fell $0.80, or less than 0.1%, to settle at $1,291.60 an ounce.  Meanwhile, September silver edged down by $0.053, or 0.3%, to end at $17 an ounce.  Elsewhere on the Comex September copper ended little changed at $2.940 a pound, but it saw weekly gain of 0.9%, while palladium rose to a new 16 year high, with the September contract adding $0.95, or 0.1%, to $927.10 an ounce.

Oil – Crude soared higher on Friday on rumors that the second largest U.S. refinery may have been shut down.  West Texas Intermediate crude for September delivery jumped $1.16, or 2.5%, to $48.25 a barrel after trading as low as $46.78.  October Brent rallied $1.46, or 2.9%, to $52.49 a barrel.

 

Indices

Dow Industrials – The Dow finished Friday 0.35% lower, marking the second consecutive weekly loss for the index.  It was also the largest two week loss for the Dow since September 2016 as weakness has been unabated for the most part.  It is possible this is just the normal August weakness that is often seen in markets as trading volumes remain unusually low.  Or, we could be beginning a correction, as some technical indicators have hinted.

FTSE100 – The London benchmark index fell 0.86% on Friday as travel related shares were heavily sold following Thursday’s terror attack kin Barcelona.  EasyJet PLC lost 0.9%, shares of International Consolidated Airlines Group SA, which runs British Airways, dropped 2%, while in Ireland Ryanair Holdings PLC fell 2%.  In the hotel space shares of InterContinental Hotels Group PLC retreated 1.6%.

Nikkei – Japan’s benchmark equity index fell to a three month low on Friday, pressured not only by weakness from U.S. equities and geopolitical risks, but also by a stronger Yen.  The stronger Yen hurts Japanese export company’s profits.  The Nikkei ended the day 1.18% lower, with the greatest losses coming from the financial sector where life insurer Dai-ichi Life fell 2.7% and T&D Holdings was 2.6% lower.


Stocks

ACCORHotels – Shares of the French multi-national hotelier fell 0.71% on Friday in the wake of the Barcelona terror attacks, extending the downtrend in the stock that began in early June.  The stock remains 9% higher year-to-date, however the Hotel Stock Index has a 17.6% gain in the same period, making ACCORHotels a laggard.  The company did report decent first half performance last month, but it failed to give the stock a boost.  Investors continue to worry about the trend towards self-stay such as Airbnb, which has definitely weighed on hotel performance.  ACCORHotels does lead in the luxury lodgings space however, and this could end up being a saving grace for the company if luxury spending picks up.

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