Despite trading in USA equity markets being approx 10% below the thirty day moving average, both the DJIA and SPX closed up on Monday, the DJIA pushed through R2 to close at a new record high and is now ominously closing in on the next major target, the 22,000 handle, which would represent an approx. 20% increase year on year. The reasons given by many analysts, for the significant rise in USA equities involve: improved corporate results, confidence in the global economy,p and encouraging U.S. hard data. But with China’s manufacturing PMI missing the forecast of 51.5, by coming in at 51.4, that confidence in global trade could be ‘oversold’.
However, when companies such as Amazon are trading at approx 113 times earnings, you may be forgiven for judging that we’re living through an equity bubble, not witnessed since the dot com bubble of 1999-2000, which then spectacularly burst. In less positive news for the USA economy and residents who don’t have the spare funds to speculate on the markets, the U.S. dollar has lost circa 2.5% of its worth in July, versus a basket of its major peer currencies.
The DJIA closed up 0.28% on the day, the SPX was flat and the NASDAQ closed down 0.42%. WTI oil breached the 200d SMA on Friday, sited at $49.17 (which was also S1 on Monday) price reached a daily low of 49.21, before reversing the intraday trend and breaching R1 and the $50 a barrel handle. Gold closed virtually flat at $1269 per ounce. USD/JPY ended the day down circa 0.3%, at 110.28. EUR/USD was up approx 0.8% at 1.1832, GBP/USD ended the day up circa 0.6% at 1.3195.
In terms of USA economic calendar news, pending home sales rose by 1.5% for June, the Dallas Fed manufacturing index beat the forecast, by rising to 16.8 for July, whilst the Chicago purchasing manger index fell to 58.9 for July, from 65.7 in June.
With the exception of the UK’s FTSE, which was effectively flat on the day (up 0.05%), European indices slumped on Monday; DAX closed down 0.37%, CAC down 0.73% and STOXX 50 closed down 0.53%. The euro enjoyed gains versus the majority of its peers, rising through R2 versus AUD, CAD, NZD and USD. Sterling enjoyed similar gains versus identical currencies. Germany’s retail performance missed the predictions of 2.7% growth, registering a 1.5% YoY rise in June, far short of the 4.9% recorded in May, whilst Eurozone CPI came in higher than expected, at 1.2% YoY for July. From the UK consumer credit rose by £1.5b in June, lending secured on dwellings rose by £4.1b and mortgage approvals fell to 64.7k.
Economic calendar events for August 1st, all times quoted are London (GMT) time
07:55, currency impacted EUR. German Unemployment Change (JUL). Unemployment is forecast to fall by -5k, from an addition of 7k in June.
07:55, currency impacted EUR. German Unemployment Rate s.a. (JUL). The rate is expected to remain unchanged, at 5.7% for July.
08:30, currency impacted GBP Markit UK PMI Manufacturing SA (JUL). The reading is expected to rise to 54.5, from 54.3 in June.
09:00, currency impacted EUR. Euro-Zone Gross Domestic Product s.a. (YoY) (2Q A). GDP for the single bloc currency is expected to to rise to 2.1%, from 1.9% in Q1.
12:30, currency impacted USD. Personal Consumption Expenditure Core (YoY) (JUN). PCE is forecast to remain unchanged at 1.4%.
13:30, currency impacted CAD. Markit Canada Manufacturing PMI (JUL). The PMI is expected to come in at a level similar to June, of 54.7.
14:00, currency impacted USD. ISM Manufacturing (JUL). The reading is expected to come in at 56.4, a fall from 57.8 registered in June.
14:00, currency impacted USD. ISM Employment (JUL). June’s reading of 57.2 is expected to be matched.
22:45, currency impacted NZD. Unemployment Rate (2Q). The unemployment rate in NZ is expected to fall to 4.8%, from the 4.9% recorded in Q1.
