US equities extend higher but Europe mixed; USDBRL hits ATH

Summary:

• Wall St. near record highs after US data

• US small-caps looking to break higher

• USDBRL hits all-time highs, hurts Coffee

• Pound drifts as Tory poll lead narrows 

A batch of second tier economic releases from the US have failed to give a clear indication on the whole with some good and some bad news leaving an overall mixed to negative picture. 

The data itself was as follows:

• Conference Board Consumer Confidence: 125.5 vs 127.0 exp. 126.1 prior (125.9 originally)

• Richmond Manufacturing Index: -1 vs +6 exp. +8 prior 

• New Home Sales: 733k. 709k exp. 701k prior. 

The clear standout positive was the rise in new home sales which rose more than expected, but on balance this was probably outweighed by the other two releases. Consumer confidence according to the CB measure was worse than expected, even though a positive revision to the prior takes the edge off the miss. Perhaps the worst news was the manufacturing figure from Richmond with an unexpected decline the 3rd in 5 months and suggesting that the pick-up in this sector for the US may not be as strong as some had hoped for.

The US30 made a new all-time high overnight at 28150 but has since pulled back a little. The market has shown little clear reaction to the US data but on the European close trades just 75 points from the record peak.

Latin American currencies are clearly struggling this year with the Brazilian real being the latest victim of a sell-off. USDBRL has leaped nearly 1% already today and trades at 4.25 – the highest level in history. As investors wonder if president Bolsonaro is able to fix public finances the economy seems to get hurt from crises in Argentina and Chile. Weak BRL is a headwind for a rally in coffee prices. Coffee is down by 1.5% but still up 18% over the past month!

A couple of polls showing a narrowing in the lead for the Conservatives over Labour has seen a little bit of downward pressure in the pound, as sellers step back in. The shift in the polls is far from dramatic and given their inherently volatile nature it would be presumptuous to believe that this is the beginning of a major shift, but it could at least start to raise a little doubt on the notion that a Conservative majority is a strong probability and in doing so weigh on the pound.