German Dax down for the second consecutive day
The European shares are closing mostly lower. the one exception is the UK FTSE 100 which is closing up marginally.
The provisional closes are showing:
- German DAX, -0.1%
- France’s CAC, -0.3%
- UK’s FTSE 100, +0.3%
- Spain’s Ibex, -0.65%
- Italy’s FTSE MIB, -0.8%
Looking at other markets as London/European traders look to exit:
- Spot gold is trading down five dollars or -0.28% at $1782.
- Spot silver is trading down $0.20 or -0.86% at $23.63
- WTI crude oil is trading up $0.19 or 0.28% at $67.58
- The price of bitcoin is trading down 100 dollars at $45,830
In the US stock market, the major indices are all trading lower with the NASDAQ index had the hardest:
- Dow -261 points or -0.73% at 35363
- S&P index -28.63 points or -0.64% at 4451.24
- NASDAQ index -140 points or -0.95% at 14652.94
In the US debt market, yields are higher after starting the New York session negative. The 10 year yield is currently trading at 1.268% (up 1.1 basis point).
What to expect going into the US July retail sales report later
Risk is leaning towards the softer side in European morning trade, as delta variant concerns continue to make headway with New Zealand entering a fresh lockdown today.
US futures are marked down by around 0.5%, European indices are also down between 0.3% to 0.9% mostly, while 10-year Treasury yields are down 3 bps to 1.225%.
It’s a classic risk off day in the market but can it last through to the end of US trading?
That certainly feels like a tall order these days given the unrelenting dip buying in US stocks over the past few weeks. However, I reckon a lot will rest on the shoulders of the US retail sales report later at 1230 GMT.
While dip buyers managed to carve out victories on Friday and in trading yesterday, another dampener from the US retail sales report today may be one too far to ask for.
That especially since broader markets are also depicting more sour tones today. That said, the BofA fund manager survey clearly shows how investors are feeling about everything else despite delta variant concerns:
Equity allocation continues to hold up despite a worsening outlook and that reaffirms that the Fed and easy money is still the biggest factor driving sentiment.
I’d be wary that a poor US retail sales report later could sound some alarm bells on risk trades, especially with some looking more vulnerable than others – particularly in FX when it comes to the kiwi and aussie today.
That could trigger broader and deeper risk aversion in the market but when the dust settles, dip buyers will arguably do what they do best and drive stocks higher again.
Even more so if the Fed shows any form of reluctance to take a step towards tapering at Jackson Hole next week.
Latest data released by Eurostat – 17 August 2021
- GDP +13.6% vs +13.7% y/y prelim
The preliminary report can be found here. No change to the quarterly reading as compared to the initial estimate so there isn’t much to extrapolate from the report today. This just reaffirms a modest bounce back in the economy in Q2 as restrictions ease.
This chart is a gem
Here’s the 30 minute chart of the cash S&P 500 index. You can see the big drop at the open today, some choppy trading for the next hour and then utterly relentless buying.
It’s the kind of pattern we’ve seen play out so many times, though not always as picturesque as today’s chart.
The message for me is that the bulls are completely undaunted. Nothing matters so long as rates are ultra-low, the Fed is feasting on bonds and the fiscal taps are open.
One chart that’s more-concerning is the Russell 2000. It’s been moving sideways since January and is more-similar to the yen crosses and EM currencies, highlighting the uncertainty in markets.
NASDAQ and Russell 2000 close lower
It’s a new week. It’s a new day. Ttrue to the pattern of late, the S&P and Dow both closed at new record levels while the NASDAQ index closed lower but off it’s lows.
the final numbers are showing:
- Dow industrial average rose 109.36 points or 0.31% at 35624.74
- S&P index rose by 11.67 points or 0.26% at 4479.67
- NASDAQ index felt -29.14 points or -0.20% at 14793.76
The S&P posted its 49th record close for the year. The Dow posted its 35th record close for the year.