Stocks were mixed in the U.S. and Europe and bonds edged higher as traders considered the outlook for global trade and the economy as Europe's central bankers restarted stimulus. The three major U.S. equity gauges fluctuated between small gains and losses, just below record-high levels, after President Donald Trump said he will delay the next tariff increase on China by two weeks and later tweeted that China will buy more agricultural products. The European Central Bank cut its main rate to minus 0.5% as expected and said it would buy 20 billion euros ($22 billion) of bonds a month. Gold jumped. The steps by China and the U.S. to ease tensions ahead of face-to-face talks in Washington in the coming weeks are helping support sentiment as investors await monetary decisions from more of the world's major central banks. The ECB stimulus will run until shortly before the next rate increase, and President Mario Draghi painted a gloomy picture of the region's economy at a press conference after the decision.
The technology, energy and industrial sectors led U.S. stocks higher after shares advanced broadly in Europe and Asia. The dollar strengthened, while benchmark Treasury yields lingered near one-month highs. After a rotation earlier this week from growth to value shares, the Nasdaq Composite rose for the first time in four days as Apple's cheaper priced iPhone gave analysts reason to cheer. President Donald Trump urged the Federal Reserve to cut interest rates to "zero, or less," in a tweet, while China moved to lessen the trade war's repercussions by announcing a range of U.S. goods to be exempted from 25% extra tariffs put in place last year. Equities are rebounding in September on hopes for fresh monetary stimulus from the European Central Bank on Thursday and the Fed next week, while market-supportive measures by China helped lift sentiment. Strong monetary easing is not a given, though, with some investors dialing back their expectations of accommodation and bond traders pulling back from the more bullish sentiment of August.
Technology, health care and consumer shares led U.S. equities lower. Yields on most Treasury notes rose.
The three main U.S. indexes opened with modest declines. The Stoxx Europe 600 Index dropped a second day, led by food and beverage and health-care shares. The pound fluctuated as embattled British Prime Minister Boris Johnson insisted he won't ask for another Brexit delay, while U.K. wage and unemployment data beat estimates. Most euro-zone sovereign bonds nudged lower as European Central Bank officials prepare to meet. Treasuries added to declines from Monday.
U.S. stocks were mostly higher, led by gains of financials, energy and consumer services companies. Sovereign bond yields rose in North America and Europe. A dollar gauge continued slipping from Friday, when Federal Reserve Chairman Jerome Powell stoked expectations of another interest-rate cut at his next policy meeting. The Stoxx Europe 600 Index swung between modest losses and gains and euro-area bonds fell as investors showed less conviction that the European Central Bank's policy meeting Thursday will result in bold steps toward easier policy, and after German exports showed a surprise increase. Central banks are striding back into the spotlight as protectionist moves between the two biggest economies cast shadows across the global growth outlook. More high-level Sino-U.S. trade talks are not expected until next month. Traders have been kept somewhat on edge after data over the weekend showed China's exports unexpectedly contracted in August, and last week's U.S. employment report was weaker than many forecast. Elsewhere, oil advanced after Saudi Arabia's new energy minister signaled that OPEC and its allies will continue with production cuts, as the group prepares to gather in Abu Dhabi.
Stocks rallied for a second day after the U.S. and China locked in another round of trade talks, while Treasuries extended losses as a gauge of hiring in the private sector showed the biggest rise in four months. The dollar declined. The S&P 500 gained for the fifth time in six sessions after Chinese officials said the two sides would sit down next month to try to resolve the trade war between the world's largest economies. Tech led equity gains as trade-sensitive chipmakers surged, while banks boosted benchmarks amid rising rates.
Steve Brown, Senior Corporate Trader | Stevebrown@vbce.ca
The USD was the best performing currency on the week with the CAD close behind. USDCAD initially climbed from 1.3290 up to recent resistance at 1.3320 before falling to 1.3224 in early Tuesday trade. The break below notable support at 1.3251 was short-lived and the pairing rallied back to 1.3300 the same day. USDCAD remained range-bound between 1.3270 and 1.3320 Wednesday and Thursday as U.S. Q2 GDP came in as expected. On Friday, Canadian GDP (Q2 and June) beat expectations sending USDCAD down to 1.3247. The move was short-lived with 3% drop in oil prices and broad-based USD strength into month-end sending USDCAD back up to a weekly high of 1.3333. The pairing finished the week at 1.3310 – a close above 1.3300 for the first time since June. The GBP broadly weakened after UK PM Johnson chose to prorogue UK Parliament until Oct. 14th. As the Brexit deadline is Oct 31, the move increases the odds of a "nodeal" Brexit. The JPY broadly weakened as concerns over the U.S. China trade war eased as global equity markets moved higher.
As expected, Bank of Canada maintained its target for the overnight rate at 1.75% and said that the current degree of monetary policy stimulus was appropriate. The USD/CAD pair tumbled to fresh session lows, breaking below the 1.33 handle, or weekly lows in a knee-jerk reaction to the latest BoC monetary policy update. Having consolidated in a narrow range trading band through the mid-European session, the pair met with some aggressive supply in the last hour after the announcement.
Stocks fell as trade talks between the U.S. and China struck another stumbling block, while Treasuries turned higher and the dollar erased gains after American factory data signaled contraction for the first time in three years. The S&P 500 declined for the first time in four sessions as Chinese and American officials struggled to agree on a schedule for negotiations after Washington rejected Beijing's request to delay tariffs that took effect over the weekend, according to a Bloomberg report. Semiconductor shares weighed on benchmarks after Huawei Technologies accused the U.S. government of harassing workers and attacking its internal network.
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Yesterday, USDCAD tested the weekly highs near 1.3314/19 before falling back to 1.3273/78, A subsequent top-side test stalled at 1.3312/17 and the pairing eased lower to hold near 1.3295/1.3300 for the balance of the day. Overnight, USDCAD climbed briefly to 1.3312 before falling to 1.3275 ahead of the Canadian GDP data release. Better than expected results saw USDCAD fall to 1.3247 – near the weekly low of 1.3224. Oil prices are down sharply this morning – down 3% in the past 2 hours. USDCAD has subsequently climbed to North American session highs near 1.3300.
Garo Mavyan | Retail FX & Precious Metals Trader
It feels as though for the majority of 2019, many have been quietly whispering to themselves that things could not possibly get any worse. Between Hurricane Trump in the White House and the political farce that is Brexit, the world seems to be heading in the wrong direction. Around the globe, central banks—ever the valiant defenders of economic stability—all seem to be dealing with the impacts of lingering global uncertainties. US Federal Reserve Chairman Jerome Powell is now facing a re-escalation of trade tensions between the US and China, Bank of England Governor Mark Carney is contemplating how to save the British economy from a potential no-deal Brexit, and the European Central Bank is in the midst of dealing with an economic contraction in Germany. Interest rates around the world appear to only be heading downwards as these central banks ponder if this is the new normal. If asked, I'd wager they would agree that things have been a smidge stressful.
Yesterday, USDCAD climbed from 1.3278 up to 1.3318 before falling back to 1.3287. The pairing then eased higher to hold near 1.3305/10 for the balance of the session. Overnight, the pairing tested weekly highs near 1.3319 before falling to 1.3273 ahead of the 2nd quarter U.S. GDP data. The commodity bloc received a boost and out-performed during the European session as global equity markets and commodities moved higher on the back of positive U.S. / China trade comments. USDCAD has since reversed back up to 1.3317 and subsequently fallen back to 1.3290 as North American equity markets trade near 2 week highs. Oil prices are up near 1 week highs as well. Tomorrow, Canada will release Q2 GDP expected in at 3.0% - up from 0.4% on a quarterly basis.
Yesterday, USDCAD broke below recent support at 1.3250 trading down towards a 2 week low at 1.3224. The move lower completely reversed during the North American session as equity markets erased earlier gains with the DJIA giving up as much as 350pts. U.S. 10 year yields dropped towards new 3 year lows near 1.44%. USDCAD climbed all the way back to 1.3300 before settling near 1.3280. Despite a surge in oil prices, (API data out yesterday afternoon indicated an 11 million barrel draw) USDCAD pushed higher overnight towards 1.3318. EIA data this morning confirmed a significant 10 million barrel draw from inventories with oil prices now up nearly 7% on the week. USDCAD dropped back to 1.3287 but has moved back up towards 1.3300. The GBP is the worst performing currency on the day as UK PM Johnson looks to prorogue UK Parliament until Oct. 14th. As the Brexit deadline is Oct 31, the move increases the odds of a "no-deal" Brexit. Tomorrow, U.S. Q2 GDP will be released with the market expecting a slight decline from 2.1% down to 2.0% on an annualized basis. On Friday Canada will release Q2 GDP expected in at 3.0% - up from 0.4% on a quarterly basis.
Yesterday, USDCAD climbed from 1.3290 up to 1.3320 before falling back towards 2 week lows @ 1.3245 amidst a rebound in positive market sentiment after last Friday's tumultuous day. The 1.3316 level was tested in all three sessions yesterday with the failure to break above leading to the move just below last week's low of 1.3251. USDCAD has run into strong resistance in the 1.3330-45 range this month – an area that has been tested about a dozen times. Positive market sentiment and stability continued in the overnight session taking USDCAD down to 1.3228. After touching 1.3224 in early North American trade, the trend abruptly changed sending USDCAD back up to session highs at 1.3283. Oil prices have given up earlier gains (~2%) as have most U.S. stock indices.
On Friday, USDCAD climbed from 1.3290 up to 1.3339 before falling back to 1.3277. A second attempt higher stalled at 1.3328 and the pairing settled near 1.3280 to close the week. Early Asian markets were unsettled by the escalation of the U.S. / China trade war and subsequent market sell-off on Friday. Risk aversion drove the JPY higher and the AUD & NZD lower in early trade (JPY hitting near 3 year highs vs the CAD and USD while the AUD dropped towards a 9 year low) USDCAD gapped higher from Friday's close testing 1.3315/20 before falling back to 1.3290. Flows reversed partway through the session with oil prices climbing nearly 4.5% from the lows while North American equities have gained ground. USDCAD has fallen from 1.3316 to session lows near 1.3270 this morning.
Yesterday, USDCAD climbed from 1.3285 up to 1.3316 before falling back to 1.3275. A second attempt to break 1.3316 failed and the pairing settled near 1.3290 – unchanged on the day. The CAD weakened in early Asian trade on headlines that the European Union was banning some Canadian fruit imports. Markets moved into negative territory overnight as China announced further tariffs on U.S. goods while oil prices plunged 3.5% in minutes taking USDCAD up to 1.3339. The 1.3330 – 1.3345 area has been tested about 10 times these past few weeks and has not been breached since mid-June. Canadian retail sales came in better than expected sending USDCAD down to 1.3310. The pairing bounced back to 1.3330 before falling to session lows @ 1.3277 after U.S. Fed Chairman Powell's speech. He commented that the Fed "will act as appropriate to sustain the expansion" also noting that the economy faces "significant risks."
Stocks drifted higher Thursday morning as investors considered corporate earnings, digested European and domestic economic data. Market participants this week have been waiting to hear from Fed Chair Jerome Powell, who will deliver remarks at the central bank's annual Jackson Hole symposium Friday. Investors widely hope that Powell's rhetoric will lay the groundwork for rate cuts after the central bank's next few meetings. As of Thursday morning, markets priced in a 98.1% probability of a 25 basis point ease after the September meeting, as well as a 68.1% probability that rates would be another 25 basis points lower after the October meeting, according to CME Group.
U.S. stock indexes on Tuesday opened lower as investors appeared to await guidance from the Federal Reserve on monetary policy--a key catalysts for a market that has been beset by worries about an impending economic recession. Investors were watching quarterly reports from major retailers including Home Depot Inc.HD, +4.40% and Kohl's Corp. KSS, -3.53%. Meanwhile, President Donald Trump on Monday said the Fed should cut benchmark rates by 1 percentage point from its current range of 2%-2.25%, which is viewed as aggressive policy for a U.S. economy considered slowing but not in the throes of a recession. A slide in bond yields, as prices gain, has been also unsettling investors. The 10-year Treasury bond yields TMUBMUSD10Y, -3.31% 1.55%, off more than 4 basis points.
Stocks climbed after the Trump administration signaled progress on trade negotiations and speculation grew that major central banks will keep shoring up their economies. The S&P 500 index extended gains into a 3rd day as U.S. Commerce Secretary Wilbur Ross said the nation will delay restrictions that the Trump administration has imposed on some business operations of China's Huawei Technologies Co. Long-dated bonds are moving the Treasury yield curve away from inversion, as the U.S. government considers borrowing for a century. Bunds tumbled as Germany was said to be preparing fiscal stimulus measures. Crude rallied after a drone attack on Saudi Arabian oil field. Besides trade, Investors will be sifting through Federal Reserve Jerome Powell's remarks on Friday about the challenges for monetary policy at the central bank's annual Jackson Hole symposium.
Yesterday, USDCAD dipped from 1.3320 down to 1.3285 before climbing to 1.3339 – briefly gaining on Wednesday's high of 1.3326 but short of the August high of 1.3345. After 3 attempts to break above 1.3339, the pairing eased lower towards 1.3309 to finish the day unchanged. Global equity markets have stabilized today and are on the rise causing broad JPY and USD weakness. USDCAD has fallen from 1.3325 down to 1.3285 – matching yesterday's low. Earlier this morning an OPEC report suggested a "somewhat bearish" outlook for oil markets over the balance of this year. Oil prices (WTI) saw a quick 2.5% drop to session lows but prices have bounced back into positive territory. USDCAD bounced to 1.3310 before declining back towards 1.3289.