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Morning Call: Softer dollar boosts commodities, stocks

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.

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Article / 01 August 2017 at 7:01 GMT

Morning Markets: Upbeat China manufacturing data spreads cheer

John G Acher

Consulting editor / TradingFloor

Norway

MM TABLE TUESDAY

Watchlist

Australia: PMI (published)
Japan: Manufacturing PMI (published)
China: Manufacturing PMI (published)
Australia: RBA cash rate decision (published)
Japan: Auto sales (published)
Australia: Commodity prices (published)
France: Manufacturing PMI (0750 GMT)
Germany: Manufacturing PMI (0755 GMT)
Germany: Labour market statistics, incl. unemployment (0800 GMT)
EU: Eurozone manufacturing PMI (0800 GMT)
UK: CIPS/Markit manufacturing PMI (0830 GMT)
Eurozone: GDP (0900 GMT)
US: Personal income and outlays, PCE price index (1230 GMT)
Canada: Manufacturing PMI (1330 GMT)
US: ISM manufacturing report on business, manufacturing PMI (1400 GMT)
US: API weekly statistical bulletin, incl. crude oil stocks (2030 GMT)
US: Auto & Light Truck Sales (TBD)

A surprisingly upbeat reading for China's independent Caixin manufacturing PMI, up to 51.1 in July from 50.4, lifted Chinese stocks and spread cheer across Asian markets, though a sub-50 Nikkei ASEAN manufacuring PMI showed manufacturing is contracting in most of Southeast Asia.

Japan's Nikkei 225 rose 0.3%, and the Shanghai Composite was up almost 0.4%.

The Reserve Bank of Australia kept its cash rate unchanged at 1.50%, as expected and provided no new insight into the direction of monetary policy. The Australian dollar stayed firm at levels above 0.80.

The US dollar remained soft, with EURUSD up through 1.18. The USD in July had its longest losing streak since 2011, even though Wall Street scored a fourth consecutive month of gains.

Oil prices firmed, with WTI crude above $50/barrel.

The firing on Monday of White House communications director Anthony Scaramucci after just 10 days on the job accentuated a picture of dysfunction in Washington, though some reports say it shows the new chief of staff, retired Marine Corps general John Kelly, will impose "military discipline".

Markets await key US PCE inflation data, the Fed's favourite inflation measure, at 1230 GMT, and they are looking ahead to US July nonfarm payrolls on Friday.

Market signals

Asian session

Trump fired communications director Anthony Scaramucci after just 10 days on the job
Japan lodged a protest with China about drilling rigs in a disputed gas field
China's Caixin manufacturing PMI picked up to 51.1, from 50.4 previously
Shanghai Composite was up 0.23% to 3,280.69 at 0532 GMT
Nikkei 225 gained; up 0.23% to 19,971.21 at 0512 GMT
Hong Kong stocks notched up their seventh straight month of gains in July
Hang Seng added to recent gains; it was up 0.62% to 27,494.70 at 0534 GMT
Nikkei ASEAN manufacturing PMI fell to just 49.3 in July, showing contraction
Manufacturing expanded in the Philippines and Vietnam but shrank in the rest of ASEAN
Iron ore prices jumped to their highest level since April
Australia's CBA/IHS Markit PMI slipped to 54.4 in July, down from 56.2 in June
Australian annual house price growth has soared to 10.5%; it hit 15.9% in Melbourne
RBA kept rates on hold at 1.5% in its announcement, as expected
Markets are awaiting the RBA quarterly statement on monetary policy, due out on Friday
S&P/ASX 200 headed sharply higher; it was up 0.78% to 5,765.50 at 0534 GMT

Forex ahead

USD has hit a 2.5 year low against the euro; the euro was worth $1.1829 at 0531 GMT
USD hit a more than six-week vs JPY; it was worth just ¥110.1750 at 0531 GMT
AUD held above 0.80 following today's RBA interest-rate announcement
USD weakness helped buoy AUD; it was worth 0.8026 at 0530 GMT

From the Floor

Nadir? "I am wondering if we have seen Trump hit some kind of rock-bottom, if that is even possible," says Hardy.

Good vibes. "Positive sentiment [in equities] is carrying over this week, especially out of Asia," says Garnry.

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

In opinion

1..2..3
Confirmation of the bullish outlook for the Eurozone is expected in the release of second-quarter GDP data, writes James Picerno.

Ore soars
The local market was lifted by a 7.2% jump in the iron ore price after the release of strong Chinese manufacturing data, writes the team at Saxo Capital Markets (Australia).

In the zone

The Asian markets looked to be enjoying strength in commodities and an expectation of good data from Japan and China - and equities rose, says Saxo's Asia team in Singapore,

Chinese manufacturing plant

Made in China. A blast of manufacturing data is slated for Tuesday, including PMIs from China, Japan, France, Germany, the Eurozone, Canada and the US. Photo: Shutterstock

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