Risk on returns, U.S. equities enjoy a relief rally as Irmageddon is avoided and North Korean tensions reduce

Sep 12 • Morning Roll Call • 43 Views • No Comments

Global equities enjoyed a relief rally on Monday with certain global indices reaching record highs. Hurricane Irma avoided Miami, whilst the potential catastrophic damage, which some mainstream media commentators were terming “Irmageddon”, failed to materialise to its full predicted extent, as the eye of the storm and the projected direction, was nudged off course. The storm also lost much of its power and missed the majority of the major towns and cities in Florida. As a consequence many of the insurance, financial and other storm related equities, recovered much of the lost ground witnessed late last week. Allied to this palpable relief, tensions versus North Korea appeared to take a back seat. Both elements combined to create a sense of optimism amongst investors and on Wall Street, as the risk on mood returned.

The MSCI All-Country World Index climbed by 0.8% on Monday, to reach the highest level on record. U.S. equities rose, as did the U.S. dollar versus the majority of its peers, whilst the dollar index rose by approx. 0.4%, marking its first appreciation in just over a week. EUR/USD fell by circa 0.6%, breaching S2, to close the day out at circa 1.1957. GBP/USD was close on flat, remaining close to the daily pivot point, at 1.3166.

The DJIA ended the day up circa 1.21%, SPX up 1.05% and the Nasdaq closed up 1.07%. As the risk on mood returned, investors divested of their safe haven assets; gold lost circa 1.5%, falling to $1329 per ounce and breaching S2, potentially ending a rally that began on August 9th, when price was at approx. $1260 per ounce. Yen also lost its safe haven appeal on Monday, falling versus many of its peers; USD/JPY rose by circa 1.5% to 109.36, breaching R2. WTI oil recovered as disruption concerns abated, rising by circa 1% on the day, to $48.5 per barrel. In terms of economic calendar news it was a relatively quiet day for North America, the only significant reading coming courtesy of Canada’s housing starts for August; beating the forecast of 216k, by rising to an annual rate of 223.2k, ahead of the 230k recorded for July.

European equities also rallied during Monday’s sessions; STOXX 50 closing up 1.38%, DAX up 1.39%, CAC up 1.24%, with the UK’s FTSE 100 rising more moderately at 0.49%, Brexit issues and the U.K. govt trying to get their latest bill through parliament, is concentrating investors’ minds. Similar to the USA, there was precious little European economic data to analyse during Monday’s sessions; Italian industrial production looks healthy, beating the forecast by rising 4.4% YoY, the same metric for Slovakia, revealed a stunning 9.2% YoY rise. The ECB’s senior official Mr. Coeure, gave a speech in Frankfurt, in which he delivered no drama, relating to the euro’s value.

Significant economic calendar events for September 12th, all times quoted are London (GMT) time.

08:30, currency impacted GBP. Consumer Price Index (MoM) (AUG). The forecast is for the UK’s CPI to have grown by 0.5% in August, from the -0.1% negative reading, recorded in July.

08:30, currency impacted GBP. Consumer Price Index (YoY) (AUG). The prediction is that CPI will have increased to 2.8% annualised, from the 2.6% level registered in July.

08:30, currency impacted GBP. House Price Index (YoY) (JUL). The expectation is that the UK’s house price inflation will have moderated to 4.8%, from the 4.9% level recorded in June.

08:30, currency impacted GBP. Producer Price Index Input n.s.a. (YoY) (AUG). The anticipation is that input PPI will have risen to 7.3% in August, up from the 6.5% figure published in July.

14:00, currency impacted USD JOLTS Job Openings (JUL). Although a low impact event, with an estimated 5950m openings, versus the elevated 6163m recorded for June, coming after a disappointing NFP result, this number may be carefully monitored by investors and analysts for signs of job openings and recruitment weakness.

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