CURRENCY MARKET WRAP
As of Fri Jul 26th, Singapore Time zone UTC+8
Dollar Index +0.06%, 97.79
USDJPY, +0.40%, $108.62
EURUSD, +0.05%, $1.1147
GBPUSD, -0.20%, $1.2455
USDCAD, +0.15%, $1.3160
AUDUSD, -0.32%, $0.6952
NZDUSD, -0.52%, $0.6663
In U.S. New orders for durable goods jumped 2.0% m/m in June (consensus 0.8%). Excluding transportation, new orders rose a healthy 1.2% (consensus 0.2%). Treasuries started the day on their highs, but backtracked after the release of a stronger than expected Durable Orders report for June. Yesterday’s $32 bln 7-yr Treasury note auction was received with soft demand, representing the third consecutive weak note auction. The 10-yr yield rose two basis points to 2.07%. U.S. Dollar Index rose 0.06%, at $97.79.
The European Central Bank revamped its interest rate guidance on Thursday and asked its staff to prepare options for more policy easing, explicitly opening the door to a rate cut as well as more bond buying as soon as September.
In a statement, the ECB said it was “determined to act” to prop up inflation rates that have persistently undershot the central bank’s target of just below 2%, which the economic slowdown puts further out of reach. It said it was expecting to keep its key interest rate at minus 0.4% or lower through the first half of 2020.The economic outlook “is getting worse and worse,” especially in manufacturing, Draghi said at a press conference on Thursday. “Basically we don’t like what we see on the inflation front.”
The ECB said it had asked staff committees to examine policy options including the possible design of a new bond-buying program. It has previously used such language to signal that fresh action is imminent. Investors initially cheered the news, sending bond prices up and some yields to fresh lows, while also lifting European bank stocks and selling the euro. But those moves all reversed as it became clear that Draghi would present no details of the stimulus package for now.
In a speech on Thursday, RBA Governor Philip Lowe said the RBA was prepared to provide additional policy stimulus if needed. “On current projections, it will be some time before inflation is comfortably back within the target range,” Lowe said in Sydney. “Whether or not further monetary easing is needed, it is reasonable to expect an extended period of low interest rates.” The RBA is traditionally seen as reluctant to commit to long-term guidance on policy so Lowe’s reference to an “extended period” was seen as a dovish concession to markets.
STOCK MARKET WRAP
S&P500, -0.53%, 3,003.67
Nasdaq, -1.01%, 7,929.87
Nikkei Futures, -0.33%, 21,598.0
Stock market ended Thursday near session lows after spending the day in negative territory. The Dow (-0.5%) and S&P 500 (-0.53%) posted comparable losses while the Nasdaq (-1.01%) underperformed throughout the session.
Quarterly earnings were in focus today, and while the market received a fair share of above-consensus results, individual names did not respond nearly as well. For instance,Facebook (FB 200.71, -3.95, -1.9%) beat earnings and revenue expectations, but cautioned that its revenue growth will slow. Similarly, Xilinx (XLNX 127.59, -4.55, -3.4%)beat quarterly estimates, but issued cautious guidance. The stock was among the weakest performers in the PHLX Semiconductor Index (-1.7%), which was also pressured by a defensive outlook offered overnight by South Korean manufacturer of RAM and flash memory SK Hynix.
Tesla (TSLA 228.82, -36.06, -13.6%)slid toward its July low after reporting a loss that was three times larger than what analysts had expected. The company also announced that CTO JB Straubel is leaving his role but will continue serving in an advisory capacity.
Elsewhere, industrials (-0.2%) and consumer staples (unch) held slim gains in early trade, but could not stay above their flat lines through the close. Conglomerate 3M (MMM 178.13, -1.29, -0.7%)started with a sharp gain after beating Q2 expectations, but the stock faded from its early high to end near its session low.