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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 15 February 2018 at 8:00 GMT

Morning Markets: Equities rebound, gold and oil boosted by weak dollar

Senior Editor / Saxo Bank
Denmark

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Watchlist

  • Japan: Machinery Orders (already released)
  • Australia: Unemployment (already released)
  • France: Unemployment (06:30 GMT)
  • Spain: CPI (08:00 GMT)
  • Greece: CPI (10:00 GMT)
  • Ireland: CPI (11:00 GMT)
  • US: Initial jobless claims (13:30 GMT)
  • US: EIA Natural Gas Storage (15:30 GMT)


There were welcome signs of a relief rally in Asian markets today, thanks to solid gains on Wall St and in Europe. But stock exchanges in Shanghai and Shenzhen have closed for the week-long Lunar New Year. So we won't know if China's stocks are going to join the rebound party until next week.


But the markets' chief concern Thursday is the still-weakening US dollar which is failing to revive despite higher bond yields. This weakness saw the greenback droop to a new 15-month low against the yen, touching ¥106.39, its lowest point since November 2016. The dollar index (a measure of its value against a basket of peers) also wilted, dropping 0.3% in overnight trade. This renewed weakness followed the release yesterday of unexpectedly strong US inflation figures and lower-than-expected retail sales, an unfortunate combination that between them may spell the ugly word "stagflation".


But the weak dollar is benefitting some corners of the market, notably gold and crude oil, which have both notched strong overnight gains. Gold is gaining additional support from heightened inflation expectations, worries about the US fiscal deficit and ongoing geopolitical tensions.


Elsewhere, the South African rand is broadly stronger after the country's long-time president Jacob Zuma finally caved in to demands to resign in a move that paves the way for the succession of Cyril Ramaphosa and, hopefully, the beginning of the end of corruption scandals and the start of economic renewal.

Market signals

Asian session

  • A Florida high-school shooting left at least 17 dead
  • Headline inflation in the US came in 2.14%, above the 1.9% forecast
  • US retail sales fell 0.3% in January; a 0.2% drop had been expected
  • Gains on Wall St, European bourses helped restore calm in Asian markets
  • Lunar New Year closures mean we won't know yet if all of Asia is joining the rebound
  • The Shanghai Stock Exchange has closed for the Lunar New Year
  • The Hong Kong Stock Exchange will close from February 16 to 19
  • The US has imposed anti-dumping duties on cast iron pipe fittings from China
  • Protection talk from Washington could spark a wider trade war between the US and China
  • Lower than expected US inventories and weaker dollar buoyed crude prices
  • Spot gold prices soared 1.7% higher overnight on Wednesday
  • Japan's machinery orders tumbled by 11.9% in December compared to November
  • Australia's unemployment rate held steady at 5.5% in January but full-time jobs fell
  • The Commonwealth Bank of Australia banned Bitcoin transactions on its credit cards
  • The S&P/ASX200 surged higher, helped by hefty gains for leading miners
  • Australia's deputy PM is under pressure to resign over an affair with a staffer
  • Australia's PM has announced a ban on sexual relationships between ministers and staff

Forex ahead

  • Authorities in Beijing are considering taking steps to curb the appreciation of the yuan
  • The US dollar hit a 15-month low against the yen
  • The Australian dollar has crept back above 0.79
  • SA rand headed for highest against USD in almost three years as Zuma resigned

From the Floor

About-turn. "The reaction to US CPI was mind-blowing, US stocks plunged but then rallied strongly," says Garnry.


Rising returns. "Watch yields. The US 10-year is approaching that magic 3%," says Garnry.


Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Asian advance
Markets in Asia ran with the US-led rally, the yen extending gains against the dollar, writes the team at Saxo APAC Sales Trading.


US dollar dumped
Weaker than expected retail sales for January may explain why US dollar buyers suddenly turned into USD sellers, says Michael O'Neill


Opec's market hopes
Saudi oil minister Khalid Al-Falih described volatility in the oil market as “unfortunate” and that Opec and its partners are trying to stabilise the market, says Saxo Capital Markets Australia.


Behind the USD dive
The US dollar has been unable to gain traction lately because the money markets, not the Federal Reserve, are behind the curve, says Max McKegg.

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The exodus from cities such as Xi'an begins today, as millions head home for China's Lunar New Year; stock markets and factories have closed for the week-long break. Photo: Shutterstock

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