Morning Minutes

Markets Rebound as US Dollar Rally Fades For Now




What has recently appeared to be a relentless trend of soaring treasury yields and US Dollar gains steamrolling over equities, bonds, commodities and non-US currencies appears to have relented a bit for the moment. US index futures are up 1.0% to 1.5%, clawing back yesterday’s US index losses of 0.6% to 1.0%. European markets are also on the rebound with the Dax gaining 0.9% and the FTSE rising 0.4%.

The advance of treasury yields has paused to digest the gains of recent days. This seems to have sparked a correction in the US Dollar and eased some of the pressure off of other currencies and US Dollar priced commodities. This morning finds copper up 1.4%, WTI crude oil up 1.6%, and natural gas up 0.8%. In currency action, gold is up 0.8%, the Pound is up 1.0%, while the Euro and the Canadian Dollar are both up about 0.25%.

The rebound in equities started in Asia Pacific trading where the Nikkei gained 0.5%. It appears to have initially been sparked by a sense that major indices had become technically oversold and were due for a short-term bounce. Dovish comments from Chicago Fed President Evans, who raised concerns about raising interest rates too far too fast, also appear to have helped sentiment. Evans is set to retire early next year so it’s unclear if this is part of an attempt to keep market trends orderly and try to avoid a contagion after yesterday’s GBP gyrations, or a single member diverging from the party line. There are a number of central bankers speaking this week and investors may continue to monitor comments for any changes in tone based on recent market action.

US economic numbers have been mixed this morning. Headline Durable Goods orders (-0.2%  vs street -0.4%), and Nondefense Capital good Orders ex Aircraft (1.3% vs street 0.2%) beat expectations. On the other hand, US house prices continued to fall into the summer. The July Housing Price Index staged a surprise month-over-month decline (-0.6% vs street +0.7%), while the S&P/Case-Shiller House Price Index had weaker year-over-year growth in July (16.1% vs street 17.0% and previous 18.7%) than had been feared.    

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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