Market Roundup
• BoE's Carney: Sterling's fall should ease big UK current account gap.
• U.S. on track to grow 2.3% Q2 vs +2.4% July 6 estimate.-Atlanta Fed
• Fed's Bullard keeps single-hike view, says QE gives Fed ammo for any downturn.
• US JOLTS job openings +5.5m vs forecast 5.7m, previous revised up to +5.845m.
• US May wholesale inventories +0.1% vs forecast +0.2%, sales +0.5% vs forecast +0.6%.
• British parliament to debate petition calling for second EU vote.
• UK trade talks scope limited until EU divorce triggered-Foreign Minister.
• Moody's says Brexit will have a minor impact on EU countries.
• China Foreign Minister: South China Sea ruling to worsen tensions.
• OPEC: Brexit to weigh on global economy but tighter oil market in 2017.
• Brazil May ret. sales drop 1.0% m/m, confounding forecast for rise.
• Chile analysts see central bank holding benchmark rate into 2017.
Looking Ahead - Economic Data (GMT)
• --:-- China Exports YY Jun forecast, -4.10%, -4.10%- previous
• --:-- China Imports YY Jun forecast, -5.00%, -0.40%- previous
• 04:30 Japan Capacity Utilization Change MM May -1.00%-previous
Looking Ahead - Events, Other Releases (GMT)
• 02:30 US Cleveland Fed President Mester speaks on economic outlook, monetary policy at Australian Business Economists Luncheon
Currency Summaries
EUR/USD is likely to find support at 1.1000 levels and currently trading at 1.1062 levels. The pair has made session high at 1.1102 and hit lows at 1.1060 levels. The euro declined against US dollar on Tuesday as hopes of more stimulus in Japan and the UK increased investor appetite for risker assets. Investors' appetite for equities has increased after robust economic data, including a stronger-than-expected U.S. jobs report for June last Friday, and low yields on government bonds. Easing political uncertainty in Britain and Japan has reduced some global uncertainties. Major U.S. stock indexes set record intraday highs on Tuesday as optimism about the world economy and upbeat corporate results from Alcoa boosted risk appetite, while European shares rose for a fourth straight day. On the data front, U.S. wholesale inventories barely rose in May as automobile stocks recorded their biggest drop in more than 2-1/2 years, suggesting inventory investment likely remained a drag on economic growth in the second quarter. The Commerce Department said on Tuesday that wholesale inventories edged up 0.1 percent after increasing 0.7 percent in April.
GBP/USD is supported in the range of 1.3120 levels and currently trading at 1.3257 levels. It reached session high at 1.3296 and hit low at 1.3132 levels. Sterling rose sharply against dollar on Tuesday after the anointing of interior minister Theresa May as British prime minister helped investors regain some risk appetite across markets. Following rival Andrea Leadsom's withdrawal from the race on Monday, May was left as the only candidate to be leader and will take over on Wednesday. The pound rose towards $1.3296 , pulling further away from a 31-year low of $1.2798 set last week, though investors remain uncertain about May's approach to negotiating Britain's departure from the EU. Against the safe-haven Japanese yen, the Sterling surged almost 4 percent to 138.66 yen .That put it on track for its best daily gains since April 2013. This week's main economic event is a Bank of England policy meeting on Thursday which many analysts and investors expect will yield a cut in interest rates to shield the economy from the immediate shock of the Brexit vote.
USD/CAD is supported at 1.2953 levels and is trading at 1.3031 levels. It has made session high at 1.3060 and lows at 1.2980 levels. The Canadian dollar firmed against its U.S. counterpart on Tuesday as the loonie was helped by higher oil prices and improved global risk sentiment as political tensions eased in Britain, Japan prepared more stimulus, and U.S. stocks hit a record high. However, loonie underperformed against some of its other key currency counterparts, though, including sterling and the Australian and New Zealand dollars. Oil prices surged 5 percent, handing U.S. and benchmark Brent crude prices their largest daily percentage gains in more than three months, as investors' covering of short positions and a technical rebound helped lift the market off two-month lows. Meanwhile, Canadian monetary policy will be in focus on Wednesday, with the Bank of Canada due to decide on interest rates and update its outlook following last week's weak jobs and trade data.
USD/JPY is supported around 103.45 levels and currently trading at 104.70 levels. It hit session high at 104.96 and made session lows at 104.12 levels. Japanese yen declined to hit its lowest level in more than two weeks against the dollar and euro, as a weekend election victory by Japan's ruling coalition paved the way for more stimulus, rekindling investor appetite for stocks and risk assets worldwide. The selling in yen and low-yielding government debt was underpinned by an upbeat June U.S. jobs report on Friday and promise from Japanese Prime Minister Shinzo Abe on Monday to stimulate the Japanese economy. Japanese Economy Minister Nobuteru Ishihara said on Tuesday he would start discussions on the stimulus package's size, which may be more than 10 trillion yen, and the government may issue construction bonds, which are earmarked for public works projects. The Japanese yen hit its lowest in more than two weeks against the dollar of 104.97 yen on the global risk appetite and anticipation of more Japanese stimulus.
Equities Recap
European shares rose on Tuesday, with Italian bank stocks outperforming on expectations of measures to tackle their bad debts, while better earnings also helped carmakers' shares.
UK's benchmark FTSE 100 closed down by 0.1 percent, the pan-European FTSEurofirst 300 ended the day up by 1.14 percent, Germany's Dax ended up by 1.4 percent, France’s CAC finished the day down by 1. 6 percent.
The S&P 500 and the Dow hit record intraday highs on Tuesday, while the Nasdaq turned positive for the first time this year, buoyed by rising prospects of global economic health and with Alcoa getting the U.S. earnings season off to a promising start.
Dow Jones closed up by 0.66 percent, S&P 500 ended up by 0.70 percent, Nasdaq finished the day up by 0.68 percent.
Treasuries Recap
U.S. Treasury yields rose on Tuesday as expectations of new stimulus in Japan boosted stocks and reduced demand for safe-haven bonds, and after the Treasury Department saw the weakest demand for 10-year notes at an auction in seven years.
Benchmark 10-year notes ended down 24/32 in price to yield 1.513 percent, up from 1.434 percent late on Monday.
Commodities Recap
Gold saw its biggest one-day fall in three weeks on Tuesday as global equities rallied on easing political uncertainty in Britain and hopes for more economic stimulus, which in turn curbed demand for assets perceived as safe havens.
Spot gold fell as much as 1.9 percent to $1,329.75 an ounce and was down 1.6 pct at $1,332.86 by 2:20 p.m. EDT (1820 GMT).
The most-active U.S. gold futures for August delivery settled down 1.6 percent at $1,335.30 per ounce.
Oil prices surged 5 percent on Tuesday, the biggest daily gain since April, as investors' covering of short positions and a technical rebound helped lift the market off two-month lows.
Brent crude futures settled up $2.22, or 4.8 percent, at $48.47 per barrel.
U.S. crude's West Texas Intermediate futures rose $2.04, or 4.6 percent, to settle at $46.80.
