DJIA reaches a new record high, oil slumps, gold rises to seven week high, euro and sterling rise versus several peers

Aug 2 • Morning Roll Call • 1502 Views • Comments Off on DJIA reaches a new record high, oil slumps, gold rises to seven week high, euro and sterling rise versus several peers

Just as it was highly likely that the DJIA would be drawn to the 22,000 handle, it was somewhat inevitable that price would reject the level, given the cluster of orders located close to this critical psyche level. A record intraday high of 21,990 was reached, with the index of the USA largest firms closing out at 21,963 up 0.33%. The SPX reached a record intraday high, closing out up 0.24% on the day, with the tech heavy NASDAQ index closing up 0.23%. Similar to Monday’s trading session, there was little in the way of extremely positive fundamental data to propel the indices to fresh record highs (with several Asian markets also reaching ten year highs), the rises owe more to a global sense of optimism that central banks and governments appear to be ahead of the curve, in relation to their monetary policies.

In terms of economic calendar news, the USA published divergent results and readings on Tuesday; personal spending and income missed forecasts, both coming in flat for the month of June, at 0.0%. Whilst PCE (personal consumption expenditure) came in ahead of forecast, at 1.4%. The ISM manufacturing reading for July missed the expectation of 56.4, coming in at 56.3, whilst the ISM prices paid reading came in at 62, versus the prediction of 55.8. ISM new orders fell considerably, the employment metric fell from 57.2 to 55.2 and construction spending fell by 1.3%, in June, versus the forecast of a 0.4% rise. As is a consistent theme; it’s increasingly difficult to judge how such mixed hard and soft data results from the USA, a pattern repeated over the past twelve months or so, have resulted in the DJIA rising by circa 22.4% YoY.

WTI oil fell considerably during the trading sessions, Monday’s spike, relating to potential disruption supplies caused by Venezuela’s political issues, appear to have (perhaps only temporarily) subsided. Oil fell by circa 2.5%, to $48.74 per barrel. Gold whipsawed throughout the trading day; initially falling to S2 shortly after the New York open, the precious metal rose to an intraday high of $1274 per ounce, pushing through R2, to then give back some gains, closing out the day at approx $1270. EUR/USD closed out down approx. 0.2%, at circa 1.1802, GBP/USD flat at 1.3204, USD/JPY down circa 0.2%, at 110.37.

European equity market investors also indulged in the “risk on” environment, STOXX 50 closing up 0.81%, DAX up 1.10%, FTSE up 0.70% and CAC up 0.65%. Several Eurozone Markit PMIs delivered mixed results; some missing forecasts, some beating. Whilst GDP growth for the single currency bloc came in as forecast, at 2.1% annualised and 0.6% for Q2. German unemployment numbers fell, but the rate remained unchanged at 5.7% of the workforce. The UK’s Markit manufacturing PMI beat the forecast, coming in at 55.1, calming fears that the recent spurt of activity, due to the low value of the pound, would grind to a halt due to input costs rising significantly.

Economic calendar events for August 2nd, all times quoted are London (GMT) time

08:30, currency impacted GBP. Markit/CIPS UK Construction PMI (JUL). The forecast is for a reading of 54 to be published, a drop from the 54.8 recorded in June.

11:00, currency impacted USD. MBA Mortgage Applications (JUL 28). Mortgage applications rose by 0.4% in last week’s data, a similar rise is anticipated.

12:15, currency impacted USD. ADP Employment Change (JUL). The prediction is for a rise to 190k jobs created in July, a rise from the 158k created in June.

14:30, currency impacted USD. DOE U.S. Crude Oil Inventories (JUL 28). The expectation is for a fall in inventory of -3100k, versus the -7208k fall recorded last week.

15:00, currency impacted USD. Fed’s Mester Speaks to Community Banking Conference.

19:30, currency impacted USD. Fed’s Williams Speaks in Las Vegas on Monetary Policy.

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