February 22, 2018

Time (GMT) Currency Event Previous Forecast
05:15 USD FOMC Member Quarles Speaks
09:30 GBP Second Estimate GDP q/q 0.5% 0.5%
12:30 EUR ECB Monetary Policy Meeting Accounts
13:30 CAD Core Retail Sales m/m 1.6% 0.1%
13:30 USD Unemployment Claims 230K 230K
16:00 USD Crude Oil Inventories 1.8M
17:10 USD FOMC Member Bostic Speaks
23:30 JPY National Core CPI y/y 0.9% 0.8%

 

Global Commentary

Asian investors ignored the fact that Wall Street had its first down day in seven overnight, sending markets across the region broadly higher. Japan’s Nikkei continued climbing modestly higher, gaining 0.21% as the Yen was modestly weaker against rival currencies. In Australia, the S&P/ASX 200 managed a slight 0.05% gain. Hong Kong’s Hang Seng outperformed, gaining 1.81%, although volumes there remained thin as mainland Chinese investors are still away celebrating the Lunar New Year holiday. Mainland Chinese markets will resume trade on Thursday. In South Korea the Kospi added 0.60%, and in Taiwan investors returned from the week-long Lunar New Year holiday to send the Taiex soaring 2.81% higher.

European markets ended mixed as investors in the Eurozone digested disappointing data on manufacturing and services activities. The pan-European Stoxx Europe 600 ended the day with a modest 0.16% gain, but in Germany the DAX retreated 0.14%. Spain’s IBEX 35 suffered a 0.73% loss, which was somewhat offset by the 0.23% gain from the CAC 40 in France. Losses from the poor manufacturing and services data was somewhat offset by a weaker Euro and falling bond yields, which led to the mixed performance for European equities. In London, the FTSE outperformed as it added 0.48%, mostly on the back of gains from the miners and banks after Glencore PLC and Lloyds Banking Group both delivered better than expected quarterly earnings results.

U.S. markets rallied for most of the day, but fell sharply in volatile trade late in the day after the release of the latest Federal Reserve meeting minutes. The S&P 500 finished the session 0.55% lower, while the Dow Industrials fell 0.67% and the Nasdaq retreated 0.22%. Investors were struggling to digest the meeting minutes, which highlighted the strength of the U.S. economy, but also pointed to an increased likelihood of more interest rate hikes in the coming months. The U.S. dollar rallied in response to the meeting minutes and U.S. Treasury yields jumped to a four year high, both of which put pressure on equities. One notable exception to the selloff was the financial sector, where banks are expected to benefit from the rising interest rate environment.

 

FOREX

Cryptocurrencies – Cryptocurrency markets were firmly and broadly in the red Wednesday, with Bitcoin looking to post its worst performance in two weeks as it fell 11.1% , dropping back below the $11,000 level that it had just topped several days ago. Other coins were also firmly in negative territory, with Ethereum falling 9.0%, Litecoin losing 14.9%, and Ripple dropping 10.3%. Analysts are calling the drop unsurprising as Bitcoin price has nearly doubled over the past two weeks. Some of the selling is likely profit taking, and some can be attributed to new Bitcoin owners who got into the previous rally late, buying between the $12,000 to $17,000 level. That range could prove problematic for Bitcoin going forward as many of the new investors will be looking to get out at their purchase price as Bitcoin tries to move back to its all-time high near $20,000.

USD/CAD – The pair has scored five consecutive rising sessions, trading up to resistance at the 1.2700 level on Wednesday. Further gains are expected as the USD has strengthened on expectations of more interest rate hikes in the U.S., and crude has been struggling after topping the $60 level. With a move above the 1.2700 level imminent we could see the pair trading back to the resistance at the 1.2900 level in the coming days, where it will face very stiff resistance that stopped and advance three times recently, in October, November and December.

 

Commodities

Metals – Precious metals gained on Wednesday, with gold rebounding from its worst one day loss in 14 months in the previous session, although traders were still cautious ahead of the release of the latest Federal Reserve meeting minutes. April gold added $0.90 to $1,332.10 an ounce, while March silver outperformed as it climbed $0.17, or 1.1%, to end at $16.61 an ounce. In other metals trading, March copper gained $0.02, or 0.8%, to $3.21 a pound, April platinum shed $7.40, or 0.7%, to $996.60 an ounce, and March palladium dropped $4.65, or 0.5%, to $1,022.50 an ounce.

Oil – Crude futures edged lower on Wednesday as traders were bracing for the release of U.S. inventory and production data later in the day. West Texas Intermediate crude for April delivery fell $0.21, or 0.3%, to $61.58 a barrel. Brent crude, the global benchmark, was off $0.02 at $65.23 a barrel.

 

Indices

S&P500 – The S&P 500 was trading broadly higher early in the day and into the afternoon, but gave back all the gains to end lower by 0.55% after the latest Federal Reserve meeting minutes caused worries over rising interest rates and a jump in inflationary pressures. By the close all eleven of the S&P subsectors were in the red, although the industrial sector only fell 0.01% and the financial sector was just 0.06% lower. The industrials continue to benefit from expectations for infrastructure spending, while the financials were supported by gains from bank stocks, where the banks are expected to see increased profits if interest rates rise.

FTSE 100 – The U.K. benchmark equity index outperformed on Wednesday, gaining 0.48% as industrial, consumer services, health care and utility stocks joined the basic materials and financial sectors in gaining ground. Weakness came from the energy, consumer goods and telecom sectors, but not enough to dampen the solid gains. Equities were also helped by Pound weakness after it was initially whipped around after economic data and parliamentary testimony by Bank of England policy makers.

S&P/ASX 200 – Australia’s benchmark index continues to struggle in 2018 after a lackluster 2017. On Wednesday the index managed a slight 0.05% gain as shares of miners and resources companies weighed on the index. The weakness in the mining sector came after both BHP Billiton and Fortescue Metals reported weaker than expected quarterly earnings. Investors in Australia can’t seem to catch a break as gains from one sector always seem to be offset by losses in another. In this case it was energy and consumer stocks that did the heavy lifting as the consumer sector is seeing a solid earnings season.


Stocks

Tesla – Shares of the electric car manufacturer rose more than 1% in early trade Wednesday after Elon Musk said he was leaving the non-profit OpenAI project that he founded in 2015, citing a conflict of interest. The gains evaporated later in the day as investors sold equities broadly in response to a firmer USD and rising bond yields in the wake of the release of the latest Federal Reserve monetary policy meeting minutes. A recovery in coming sessions wouldn’t be surprising as the stock has been rising recently, with investors seeing signs that production numbers of the flagship Model 3 Tesla electric car have been rising. The stock is currently priced just over $333 a share, but a recovery to the $350-360 level is likely before the stock encounters resistance.

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