Summary:
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US stocks trade lower after respecting resistance zone
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GDP comes in inline with forecasts
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EURUSD near lowest level since May 2017
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GBP bounces after soft start
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FTSE near 2-month high
There’s been more selling seen in US stocks this afternoon with the market moving lower once more after yesterday’s gains. After trading higher this morning the markets have steadily declined since the Wall Street open with the S&P500 moving back to trade near 2965 on the European close. Some of the selling can be attributed to reports that the US is unlikely to extend the temporary waiver to supply Huawei in what looks like more bad news on the trade front.
The US economy continues to grow at a relatively good clip according to the latest data. Being the third of three looks at US economic growth, the final GDP print rarely provides large market moving news, but it should not be discounted too readily nonetheless. For the 2nd quarter, the world’s largest economy grew 2.0% in annualised terms, as was widely expected and also in keeping with the prior read. While there wasn’t much doing with the headline, there were some notable developments under the hood with the components providing a more in-depth view of the economy. The main two to highlight here are the fall in business investment, which was closest to its lowest level in a decade as well as the rise in core PCE.
The Euro is coming under some pressure today, dipping to trade as low as 1.0922 and in doing so reaching prices not seen since May 2017. The move seems to be a combination of a strengthening in the US dollar and and softness in the single currency although neither currency itself is having a particularly decisive move. This evening there’s 4 Fed speakers to keep an eye on with Daly and Clarida (both at 4:45pm BST), Kashkari (7pm) and Barkin (9:30pm).
The pound has recovered throughout the session after falling lower with the GBP/USD rate dropping to its lowest level in a fortnight amidst a heavy backdrop of Brexit related news. Developments on this front have been the single largest driver of sterling since the referendum back in 2016 and politics remains very much at the forefront of the mind as far as investors are concerned. With MPs returning to Westminster there has been the expected barrage of cross-party criticism and petty squabbling but the big picture remains unchanged.
One beneficiary of the pullback in the pound is the FTSE 100(UK100 on xStation) with the benchmark pushing to the upside and trading close to levels not seen since the start of August. The region from 7375-7400 has provided some technical resistance and capped any advances in the past 8 weeks and how the market now reacts around this level could prove pivotal going forward. The breadth of the gains are also worth mentioning with only 10 stocks failing to join in the broader rally at the time of writing.
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Daily summary: Weak US data drags markets down, precious metals under pressure again!
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