U.S. equities rise as Trump delivers unusual address to United Nations assembly, dollar falls marginally, gold remains flat

Sep 20 • Morning Roll Call • 1319 Views • Comments Off on U.S. equities rise as Trump delivers unusual address to United Nations assembly, dollar falls marginally, gold remains flat

President Trump delivered a jaw dropping first address to the U.N. assembly on Tuesday, in which he lashed out at just about everyone and everything, whilst voicing his overused and meaningless mantra; “to put America first”. From threatening to “totally destroy North Korea”, to insisting that the Iran truce, so delicately put together by the Obama administration, was the “worst deal in USA history”, hardly any enemy, invented or otherwise, was spared his invective.

Within the address he also bizarrely delivered an irrelevance; promising to rebuild America’s middle class and reaffirmed his belief that the American economy was in its best ever shape. Whether that’s delusional, or playing to the gallery, the claim simply doesn’t stand up to close scrutiny, as certain data published on Tuesday revealed. Housing starts delivered a negative reading, missing the forecast of a 1.7% rise, to come in at -0.8% MoM for August. Both import and export prices increased, perhaps illustrating that the delicate balance, induced as a consequence of the dollar collapsing in value in 2017, is finally beginning to tip against the USA economy.

The USA’s Q2 current account deficit worsened to -$123.1b, from -$113b in Q1. The govt debt v GDP of the country is just over 106%, when traditionally the alarm bells are supposed to ring when 100% is approached and there’s a raft of other hard data that could be highlighted, suggesting that the USA economy is mired in debt and not as strong as Trump believes/broadcasts. For example; the $20 trillion debt ceiling issue, only kicked into the long grass (once again) in late August and the $4.5 trillion balance sheet, which the Fed have created in order to simply buy growth in the USA. That ballooned balance sheet is one of many elephants in the maze of rooms, which the FOMC may announce they’re finally addressing, when they reveal their interest rate decision on Wednesday evening.

In an interesting comparison, the Eurozone has a similar level of population, but on Tuesday the Eurostats agency published the E.Z. current account balance for July. For a single month it came in positive at $25.1b improving from €22.8b in June, quite a stark contrast to the USA’s $-123b deficit for Q2. There was other positive data published by the Eurozone on Tuesday, as the ZEW economic sentiment survey readings, for both Germany and the E.Z., came in ahead of forecasts.

STOXX 50 closed up 0.13%, FTSE 100 closed up 0.30%, DAX up 0.02% and CAC up 0.16%. EUR/USD ended the day up circa 0.5% at 1.1998, breaking through R2. The euro enjoyed gains versus the majority of its peers, throughout Tuesday’s trading sessions. GBP/USD ended the day resting on the daily pivot point, close to being flat on the day, at 1.3572. Sterling experienced a neutral day versus its peers, despite the chaos surrounding the UK’s government concerning Brexit, once again coming to the fore, in the form of a foreign secretary being deliberately mischievous and clumsy, as he amateurishly positions himself to challenge for the premiership.

The MSCI All-Country World Index increased by 0.3% to the highest level on record. The DJIA was up 0.18% and the SPX up 0.11% on the day, also (once again), setting new record highs. Whilst USD/JPY held above the 111 handle at 111.50, up circa 0.2% on the day, the dollar index rose by circa 0.1%. Gold stayed above the $1300 per ounce handle, up circa 0.2% on the day at $1311, resting on the daily pivot point. WTI oil remained close to the critical psyche level of $50 a barrel, down circa 0.1% on the day.

Significant economic calendar events for September 20th all times quoted are London GMT time

08:30, currency impacted GBP. Retail Sales (YoY) (AUG). The forecast is for a fall to 1.4%, from the 1.5% recorded in July.

14:00, currency impacted USD. Existing Home Sales (MoM) (AUG). The prediction so for a return to growth of 0.4%, from the -1.3% registered in July.

14:30, currency impacted USD. DOE U.S. Crude Oil Inventories (SEP 15). The expectation is for a fall to -2211.57k, from 5888k registered the week before.

18:00, currency impacted USD. Federal Open Market Committee Rate Decision (SEP 20). The forecast is that the FOMC will reveal a decision to keep the key rate at 1.25%.

22:45, currency impacted NZD. Gross Domestic Product (YoY) (2Q). The prediction is that the GDP of N.Z. will remain at 2.5% YoY.

 

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