U.S. equity indices recover, oil slips as tension eases while USD slumps
After beginning the New York session in negative territory the main U.S. equity indices recovered towards the end of the session, to register closing gains on Thursday July 18th. The DJIA closed up 0.03% with the SPX up 0.35% and the NASDAQ up 0.17%, ending a three-day losing streak. Moving aside the fears that the China tariff issue was set to be reignited by the Trump administration, stock values had fallen over recent days due to the earning reports for several major firms missing the forecasts by some distance.
Netflix, one of the famed FAANG stocks, fell by circa -11% as new member numbers disappointed. The markets collectively seemed spooked by the miss as the NASDAQ opened down. However, sentiment improved as speculation mounted that an interest rate cut in July is odds on. The Philadelphia Fed outlook reading for July also helped to restore faith as the metric came in at 21.8 ahead of the June reading of 3 and the forecast of 5. Such a stunning beat of the forecast could suggest that activity in industrial areas of the USA (nationwide) could be experiencing significant growth.
The U.S. dollar sold off sharply during the day’s sessions after a Fed official Mr. Williams delivered a dovish speech raising suspicions that the FOMC will cut the key interest rate below 2.5%, at the culmination of their two-day meeting on July 31st. At 21:00pm U.K. time on Thursday the dollar index, the DXY, traded down -0.53% falling through the 97.00 handle to 96.70. USD/JPY traded down -0.63%, USD/CHF down -0.60% and USD/CAD down -0.10%.
The Eurozone’s and the leading U.K. indices closed down sharply on Thursday. The FTSE 100 closed down -0.56%, Germany’s DAX down -0.76% and France’s CAC down -0. 26%. The euro registered gains versus the U.S. dollar but ceded ground against its other main peers. At 21:15pm U.K. time EUR/USD traded up 0.46% while EUR/GBP traded down -0.52%. The euro registered losses versus: JPY, CHF, AUD and NZD.
Sterling base pairs experienced rises across the board during Thursday’s sessions. Both the House of Lords and the House of Commons, the two chambers of parliament, have voted through motions to prevent the Tory government and new prime minister leaving the European Union on a no-deal basis. This development provided a significant boost to the value of GBP as pairs such as GBP/USD traded up for the first time in several sessions. At 21:30pm GBP/USD traded up 0.94% at 1.254, printing a three day high and breaching the third level of resistance, R3. Sterling could react to the government borrowing figures published at 9:30am U.K. time on Friday if the borrowing figures have deteriorated or improved.
The U.K.’s latest retail sales figures published by the U.K. official statistics agency the ONS for June, helped to boost sentiment and indirectly the value of sterling. Rather than contracting by -0.3% as predicted by analysts retail sales growth came in at 1%. The bullish data failed to boost the retail sector or the FTSE 100 particularly, as online retailer ASOS saw its share fall by up to -23% after publishing its third profits warning since December 2018. Analysts for the retail sector also appeared suspicious and unimpressed by the ONS retail figures, coming after the British Retail Consortium issued dire warnings over June’s retail sales. The ONS referred to charity and antique shopping apparently boosting sales as department store sales crashed.
WTI oil continued its recent slump as tensions with Iran in the straits of Hormuz appeared to relax. After Trump and his Iranian counterparts suggested negotiators could discuss the relaxation of certain sanctions and resolve any impasse in the Hormuz, oil has fallen by over -7.36% weekly. On Thursday WTI oil traded down -1.95% at $55.78 per dollar down circa -19.71% yearly. Gold, XAU/USD, traded up 1.43% as the precious metal printed a fresh six year high of $1,433 per ounce, registering a yearly rise of 18.40%.
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