Good Morning Community;
we’ll see now a Daily Market Update
25 August 2016
•Overnight, New U.S. single-family home sales unexpectedly surged in July, reaching their highest level in nearly nine years amid robust demand, brightening the housing market outlook and bolstering views that economic growth will pick up in Q3. Housing market strength should offset some of the drag from manufacturing, with other data on Tuesday showing production at factories remaining constrained by weak orders. The Commerce Department said new home sales jumped 12.4% to a seasonally adjusted annual rate of 654K units last month, the highest level since October 2007. It was the fifth straight monthly gain in new home sales. July’s increase, however, likely exaggerates housing market strength as it has not been matched by robust housing starts. Still, sales were up 31.3% from a year ago. Separately, data firm IHS Markit said its flash U.S. manufacturing PMI slipped to a reading of 52.1 in August from July’s nine-month high of 52.9.
•Federal Reserve Chair Janet Yellen may struggle later this week to convince financial markets she can steer a divided U.S. central bank to raise interest rates at least once in 2016 after it started the year with four hikes on its radar. Yellen will deliver the keynote speech at a global central banking conference in Jackson Hole, Wyoming, on Friday, an event that Fed chiefs have traditionally used to signal the direction of monetary policy.
•UK manufacturing export orders highest in 2-years after Brexit vote following a Brexit-induced fall in sterling, as the weaker pound also pushed up price expectations to their highest in over a year, a survey showed on Tuesday. The Confederation of British Industry said its measure of overall factory orders dipped slightly in August to -5 (vs. -9 Est.). But the export orders improved to -6 from -22, their highest since August 2014. Manufacturers were more optimistic as output expectations for the next three months rose to +11 from +6 in July.
•Surprisingly strong growth in France supported stable Eurozone private business activity during August but factories could face a tougher September as new order growth stumbled, surveys showed on Tuesday. August’s slight rise in the euro zone Composite Purchasing Managers’ Index suggests that, despite shrugging off the UK’s Brexit vote, economic conditions remain fairly subdued. Markit’s flash composite Purchasing Managers’ Index for the euro zone edged up to a seven-month high of 53.3 from July’s 53.2.
•Eurozone’s consumer confidence fell markedly gain across the currency bloc in August, a sign of low morale after the British decision to leave the EU, official data showed on Tuesday. The European Commission’s flash estimate, which defied economists’ forecasts of a rebound in confidence this month, showed euro zone consumer morale decreased to -8.5 in August from an unrevised -7.9 in July.
•Japanese manufacturing activity showed signs of steadying in August as output rose for the first time in six months, in a tentative sign that the economy may be recovering from a slump earlier this year. The IHS Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index edged up to 49.6 in August from a final 49.3 in July on a seasonally adjusted basis. The headline index remained below the 50 threshold that separates contraction from expansion for the sixth month, but the rate of decline was slight.
•Brazil’s current account deficit widened in July to $4.050 billion, a bigger shortfall than expected by economists in a Reuter’s poll. The recent appreciation of the Brazilian real has slowed the momentum of exports that benefited from lower production costs at home. The real has firmed more than 22% so far this year on the back of higher Brazilian interest rates and improving confidence. Brazil posted a current account surplus of $2.479 billion in June, and a deficit of $5.864 billion in July 2015. The market expected a shortfall of $3.6 billion for July.
•Turkey’s central bank cut interest rates for the sixth straight month despite high inflation and the threat of credit rating downgrades, saying the adverse market impact of last month’s failed coup had all but reversed. The bank cut its overnight lending rate, the highest of the multiple interest rates it uses to set policy, by 25bp to 8.5%. It left its benchmark one-week repo rate unchanged at 7.5%.The attempted coup on July 15 and its aftermath have increased uncertainty for investors and sent Turkey’s lira to record lows against the dollar, although the currency has since recovered almost to pre-putsch levels.
•Mexican retail sales rose in June, government data showed on Tuesday, pointing to solid consumer-driven growth in Latin America’s no. 2 economy. Adjusted for seasonal swings, retail sales rose 1.0% from May compared to a 1.2% expansion the prior month. Compared to the same month last year, sales rose 9.4%. Mexico’s economy shrank in the second quarter by 0.2% for the first time in three years, dragged down by the deepest slump in industrial output since 2009, and the government revised down its 2016 outlook, but the economy was not seen sliding into recession soon.
•China’s biggest cities could see a further spike in home prices after inventories of unsold homes fell sharply in July, state news agency Xinhua reported on Tuesday, citing an industry report. An acceleration in price rises would reverse a cooling trend seen in national data in recent months, and could force local governments to impose more cooling measures on the property market, despite the risk of quashing one of the few bright spots in the economy. The area of unsold new homes in first-tier cities dropped four% in July from the previous month, while that in second-and third-tier cities fell 0.5% and 1.2% respectively, property research agency E-house China R&D Institute said in the report.
•The currency market is relatively quiet with major G10 currencies traded in a tight range… The U.S. dollar having hit a five-day high of 94.958 against a currency basket on Monday, was flat at 94.533 late in the day. Yellen will speak at the annual meeting of world central bankers in Jackson Hole, Wyoming, at the end of the week. Investors are anxious to see whether Yellen will echo the hawkish views expressed by Fischer and New York Fed President William Dudley, or take a more subdued stance in line with the minutes from the Fed’s July policy meeting. Those minutes suggested the central bank was not in a hurry to raise rates.
•The dollar briefly slipped below 100 yen earlier before recovering to 100.21 yen late Tuesday, down 0.1%. The US dollar edged up 0.1% against the euro at $1.1303, traded a high of $1.1354 and failing to break the last week’s close of two-month high of $1.1366. Data showed euro zone private business activity was stable in August. The data eased concerns Britain’s vote to leave the European Union would spill over negatively into the euro zone.
•Sterling hit a three-week high against the dollar on Tuesday, rising above $1.32, with speculators cutting bets against the currency as data suggested that Britain’s economy is holding up surprisingly well in the aftermath of the Brexit vote. Sterling rose as much as half a% to $1.3210, its highest since Aug. 4. But closed a pip shy of $1.32 at $1.3199. It rose 0.3% against the euro to hit 85.85 pence, its strongest in 11 days, as speculators and hedge funds trimmed bets against the pound. Data released by the Commodity Futures Trading Commission on Friday showed positioning is stretched, with sterling net short positions reaching a record high of 94,238 contracts in the week to Aug. 16. Traders said some speculators were unwinding bets and booking profits.
•The commodity-linked Canadian dollar firmed against its U.S. counterpart as oil rallied and stocks edged higher. The oil-related news helped push the Canadian dollar through, although it pared some gains as the market turned its attention to Federal Reserve Chair Janet Yellen’s speech in Jackson Hole on Friday, said Jack Spitz, managing director of foreign exchange at National Bank Financial. The Canadian dollar ended at C$1.2910 to the greenback, or 77.46 U.S. cents, stronger than Monday’s close of C$1.2950, or 77.22 U.S. The currency’s strongest level of the session was C$1.2859, while its weakest was C$1.2947. On Monday, the Loonie touched it’s the weakest in one week at C$1.2965.
•The Australian Dollar closed NY session flat at $0.7615. It reversed the gains in the earlier session as it firmed to trade as high as $0.7655. The Australian dollar is struggling to find momentum in thin liquidity while the market eagerly awaited comments by Fed Chair Janet Yellen later this week at the annual economic symposium in Jackson Hole, Wyoming.
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