Morning Roll Call

Aug 22 • Morning Roll Call • 2161 Views • Comments Off on Morning Roll Call

Can the Jackson Hole Symposium stop digging the USA economy into an early grave?grave-american-flag

The markets reacted predictably to the FOMC minutes published on Wednesday. The DJIA falling 105 points to fall through S2 and critically crash through the psyche barrier of 15,000 to finally close at 14,897. The SPX 500 followed suit by closing down 0.58%. The NASDAQ closed down 0.38%.

The severity of the recent two week market fall, due to rampant speculation regarding tapering, should not be underestimated given that the DJIA was printing yearly and historical highs of 15658 early in the month of August. This slump cannot be considered a technical retracement, or a fall in line with sentiment wave patterns. It’s quite simply an example of the fall that’ll become apparent once the Fed’s stimulus bowl is finally removed from the top investment bankers’ table. A close on 800 points fall inside two-three weeks is not unprecedented, but it will have left many latecomers to the preceding secular rally exposed and very nervous…

European markets saw red with very few exceptions during Wednesday’s trading sessions. The STOXX closed down 0.48%, the UK FTSE closed down a significant 0.97%, the CAC down 0.34%, the DAX down 0.18%. The odd index out was the Athens main exchange which defied the odds by closing up 0.85% on the day. Investors are  confident regarding the upcoming visits by the troika and members of the Eurogroup, who are looking to justify further tranches of bailout money should they be satisfied with Greece’s enforced austerity reforms.

 

Equity index futures

Looking at the equity indices futures the DJIA is currently down 0.12%, the SPX down 0.-3% and the NASDAQ down 0.03%, suggesting that USA markets will be negative when New York opens in the afternoon session. Similarly European equity index futures are down and quite significantly. The UK FTSE equity index future is down 0.75%, the CAC down 0.37%, the DAX down 0.9%. Once again it’s the Athens exchange that’s breaking the mould; currently up 2.64%.

 

Commodities suffered significant losses in the two trading sessions on Wednesday

ICE WTI oil closed down 1.2% at $103.85 per barrel, NYMEX natural closed down 0.12% at $3.46 per therm. COMEX gold closed down 1.01% at $1356 per ounce whilst silver closed down 1.76% on COMEX at $22.60 per ounce.

 

Forex in focus

The loonie depreciated 0.8 percent to C$1.0474 per U.S. dollar late in Toronto after touching C$1.0483, the weakest level seen since July 10th. One Canadian dollar buys 95.48 U.S. cents. Futures on crude oil declined for a third day in succession after sliding 2 percent yesterday, the most since June 20th. They fell 1 percent on Wednesday to $103.86 a barrel in New York, the lowest since Aug. 9th, after reaching a 16-month high of $109.32 in July.

Sterling was little changed at $1.5673 late in the London session after rising to $1.5701, the highest level seen since June 18th. The U.K. currency advanced 0.5 percent to 85.22 pence per euro after appreciating to 85.05 on Aug 15th, the highest since July 3rd. Sterling rose to a two-month high versus the dollar before the Federal Reserve released its minutes.

The U.S. Dollar Index, which tracks the greenback versus 10 major peers, rallied 0.6 percent to 1,026.73 late in the New York session, the biggest gain on a closing-basis since Aug 1st.

The dollar rose 0.4 percent to 97.68 yen after gaining 0.7 percent, the biggest advance in a week. The U.S. currency gained 0.5 percent to $1.3355 per euro, halting a two-day decline. The euro was little changed at 130.46 yen.

 

Fundamental policy decisions and high impact news events that could affect sentiment on Thursday August 22nd

PMIs published courtesy of Markit Economics dominate the high impact news events on  Thursday. The first publication (in the overnight Asian session) will be HSBC’s flash manufacturing PMI predicted to print at 48.3.

In the morning European session both the French service and manufacturing PMIs are published, as is the German data for both PMIs. Europe’s flash PMIs for both sectors are also published with the market looking for growth above the line of 50 separating growth from contraction. The USA completes the PMIs for the day with the flash manufacturing data predicted to print at  54.1.

Once into the New York session the latest unemployment claims numbers will be published, the expectation is for a number of 329K, however, there may be some adjustment to the previous number which could affect sentiment.

The Jackson Hole Symposium will begin day one of the three day meeting, the treasury secretary Lew will hold court. The Economic Symposium, held in Jackson Hole, Wyoming, is attended by central bankers, finance ministers, academics, and financial market participants from around the world. The meetings are closed to the press but officials usually talk with reporters throughout the day. Comments and speeches from central bankers and other influential officials can create significant market volatility.

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