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USA equities recover in late trading surge, European markets slump, FX major pairs trade in a narrow range, gold’s safe haven status disappears

Feb 7 • Morning Roll Call • 241 Views • No Comments

U.S. equities oscillated between significant losses and equally solid gains during Tuesday’s session. The DJIA fell by circa 500 points shortly after the New York open, rose quickly by circa 350 points, then slumped to a post loss on the day, threatening to close the day out near flat 2.33% on the day. The wider share index SPX, closed up 1.74%. Both indices are now up year to date; DJIA up 0.78% and SPX up 0.81%.

It was European equity markets that fell sharply, catching the contagion from Monday’s Wall Street sell off. Due to being closed as the DJIA, SPX and NASDAQ sold off, both U.K. and Eurozone equity markets immediately slumped upon Tuesday’s open, but recovered to stabilize. As an example, at one stage in the London session, the U.K. FTSE 100 fell by circa 5% to then recovered, and finally closed down 2.64% (the index is down 7.11% in 2018). Financial and utility equities were two of the sectors hit hardest in the U.K., down circa 5% on the day.

Germany’s DAX closed down 2.32% with overall risk off sentiment weighing heavily and overpowering any positive economic calendar data; Germany’s factory orders smashed forecasts, with MoM the December rising by 3.8% and YoY by 7.2%, Germany’s construction PMI rose to 59.8 for January, from 53.7 in December. Eurozone retail PMIs matched forecasts, indicating that consumer confidence has been maintained. The euro experienced mixed fortunes versus its main peers; closing down versus USD and up versus GBP and CHF.

Investors may have taken their eye of the ball, in relation to the latest monthly U.S. balance of trade deficit figure published on Tuesday, with December’s trade balance coming in at a $53.1 billion deficit. The U.S. trade deficit increased more than 12 percent in 2017, to $566 billion, which is the worst figure published since the depths of the 2008 financial crisis, according to figures released on Tuesday by the Commerce Department. The trade deficit with China rose to a record $375 billion in 2017, trade deficits with fellow NAFTA members (Mexico and Canada) and Japan also increased. Based on recent months’ figures, the 2018 figure as a whole is projected to breach $600 billion. Jolt job openings in the USA also disappointed by missing forecasts, countering the optimistic NFP print published on Friday 2nd. The U.S. dollar gained circa 0.1% versus yen.

EURO

EUR/USD whipsawed in a wide range, with a bias to the downside, during Tuesday’s trading sessions; initially rising through the daily PP, the major currency pair crashed down to S1, then rose back through the PP, then fell back to close out the day down circa 0.1%, at approx. 1.237. EUR/GPB traded in a wide bullish range; breaching R2, to then give up the majority of the gains, closing out up circa 0.2% on the day at 0.887. EUR/CHF traded in a tight bullish range, rising up 0.3% on the day, to remain close to the first level of resistance, at approx. 1.159.

STERLING

GBP/USD traded in a narrow range with a bearish bias; falling through S1 midday, breaching the critical 1.400 handle, ending the day down circa 0.2% at 1.395. GBP/CHF also traded in a narrow range, with a bias to the upside, closing out the day up circa 0.2% at 1.307. GBP/CAD whipsawed in a wide (approx 1%) range, oscillating between a bullish and then bearish tendency, threatening to breach R1, before reversing direction to fall through S2, to then recover above the daily PP, before falling back to close out down circa 0.2%, at 1.745.

U.S. DOLLAR

USD/JPY initially fell in the Asian session, to then recover ending the day close to flat, close to the daily PP at circa 109.4. USD/CHF traded in a bullish range throughout the day, breaching R1 shortly before New York opened, then rising by approx 0.5%, price then retraced to close out up circa 0.3% at 0.936. USD/CAD traded in a tight (approx 0.2%) during the day, with a slight bias to the upside, closing out the day up circa 0.1% on the day at 1.251.

GOLD

XAU/USD traded in a wide range, slumping during the day, falling by approx 0.8% through S2, printing a low of 1,320 close to the third level of support, a price level not posted since January 23rd. The intraday high of 1,346 was reached in the futures market early in morning during the Asian session.

INDICES SNAPSHOT FOR FEBRUARY 6th.

• DJIA closed up 2.33%.
• SPX closed up 1.74%.
• FTSE 100 closed down 2.64%.
• DAX closed down 2.32%
• CAC closed down 2.35%.
• EURO STOXX closed down 2.41%.

KEY ECONOMIC CALENDAR EVENTS FOR FEBRUARY 7th.

• EUR German Industrial Production n.s.a. and w.d.a. (YoY) (DEC).
• EUR ECB’s Nouy and Lautenschlaeger Curncy Speak in Frankfurt
• EUR European Commission Economic Forecasts.
• CAD Building Permits (MoM) (DEC).
• USD Fed’s Dudley Speaks in Moderated Q&A.
• USD Fed’s Evans Speaks on Economic and Policy Outlook.
• NZD RBNZ Official Cash Rate (8 FEB).
• USD Consumer Credit (DEC).
• NZD RBNZ’s Spencer news conference on policy statement.
• USD Fed’s Williams Speaks in Hawaii.

CALENDAR EVENTS TO LOOK OUT FOR ON WEDNESDAY FEBRUARY 7th.

Several ECB and Fed officials are holding court at various conferences throughout Wednesday, and due to the sell off and subsequent recovery in equity markets earlier this week, many investors will be monitoring these various appearances for signs of judicious management from well placed officials. The European Commission also publish their economic statement, which could also help soothe frayed investor nerves, the detail and content of which could impact on the value of the euro.

The outstanding economic calendar event on Wednesday occurs late evening and involves the RBNZ announcing their decision on the current interest rate for New Zealand. Currently at 1.75% the general consensus from the economists polled, is for no change. However, the accompanying statement from the RBNZ will most likely determine the direction of NZD versus its peers, during the Asian and Sydney session.

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